What Happens to Employees in Administration or Liquidation?

If your employer goes into administration, your job may continue while an administrator tries to rescue or sell the business, and if it is sold you will usually move to the buyer on your existing terms. In liquidation, the business almost always closes and staff are made redundant. Either way, if you lose your job you can claim redundancy pay, unpaid wages, holiday pay and notice pay from the government's Redundancy Payments Service up to set limits, and claim the rest in the insolvency itself.

Administration: your job does not end automatically

Going into administration does not, by itself, end your contract. The administrator, a licensed insolvency practitioner, decides which staff are needed while seeking a rescue or a buyer (see going into administration). They must tell you how your job is affected, and anyone made redundant should receive an RP1 fact sheet and a CN (case reference) number.

If you are asked to stay on, make sure you are paid: the government scheme does not cover wages, holiday pay, bonuses or commission owed between the insolvency and your dismissal. Once the administrator "adopts" your contract, which cannot happen in the first 14 days, wages for later work rank ahead of the administrator's own fees and expenses.

Liquidation: the business usually closes

Liquidation does not automatically terminate contracts either, but a liquidator's job is to close the company and sell its assets, so in all but rare cases staff are dismissed, and a dismissal caused by the insolvency is treated as redundancy. This applies to compulsory and creditors' voluntary liquidation alike; see administration vs liquidation for how they differ.

If the business is sold: TUPE and pre-packs

When an insolvent business is rescued and sold as a going concern, including through a pre-pack administration, the TUPE regulations normally apply. If you work in the part being sold, you transfer automatically to the buyer, keeping your original start date, pay and holiday terms. Two insolvency rules apply:

• Old debts are split. The Redundancy Payments Service (RPS) pays what the government scheme covers, such as unpaid wages and holiday pay within its limits, and the buyer pays anything left over (gov.uk).
• Terms can be changed, including pay, if this helps keep the business going and is agreed with a recognised trade union or employee representatives, though never below statutory rights such as the National Minimum Wage.

When the business is closing down, as is typical in liquidation, TUPE's automatic transfer generally does not apply, so a buyer of the assets can choose whether to offer you a job.

What the Redundancy Payments Service pays

The RPS is part of the Insolvency Service. For redundancies on or after 6 April 2026, a week's pay is capped at £751 in every calculation below (£719 if you were made redundant before then); gov.uk has the full rules.

• Statutory redundancy pay, for employees with at least two years' continuous service: half a week's pay per full year worked under 22, one week's pay per year aged 22 to 40, and one and a half weeks' pay per year aged 41 or over. Only 20 years count, so the maximum is £22,530.
• Arrears of pay: up to 8 weeks of unpaid wages, overtime, commission and bonuses due under your contract.
• Holiday pay: up to 6 weeks, for holiday taken but not paid and holiday built up but not taken, in the 12 months before the insolvency.
• Statutory notice pay: one week if you worked there between one month and two years, then one week per full year, up to 12 weeks. As it is compensation, any earnings during the notice period are deducted, as are benefits you received or could have claimed.

If 20 or more redundancies were proposed without proper consultation, an employment tribunal can make a protective award of up to 180 days' pay (90 days for dismissals before 6 April 2026). The RPS pays up to 8 weeks of it if you or your role is included in the judgment. Ask your union or employee representatives early whether a claim is being brought: tribunal time limits are usually six months for problems arising on or after 1 October 2026 (three months before), and Acas must be contacted first.

How and when to claim from the RPS

1. Get your CN number from the insolvency practitioner or official receiver. You cannot claim without it, or before the insolvency date.
2. Claim online for redundancy pay, arrears and holiday pay using the gov.uk claim service, which takes 25 to 45 minutes. Have your National Insurance number, bank details, employment dates, pay and holiday details to hand, plus anything you owe the employer (such as a season ticket loan), which can be deducted.
3. Say yes to notice pay in that application. This is not the claim itself: after your notice period would have ended, usually within 12 weeks, you are sent an LN reference to claim loss of notice pay online.
4. Apply within 6 months of being dismissed, or you can lose your redundancy pay altogether.

The RPS checks claims against the employer's records. Payment usually takes up to six weeks from a complete application, often as separate payments; if a claim is rejected, the RPS will explain why and you can go to an employment tribunal.

Claiming the rest from the insolvency estate

If you are owed more than the RPS pays, for example because you earned over £751 a week, had a longer contractual notice period or were promised enhanced redundancy pay, claim the balance as a creditor by sending the practitioner a proof of debt.

Some of it may be preferential, paid ahead of floating-charge lenders, HMRC's "secondary preferential" tax debts and unsecured creditors:

• unpaid wages for the four months before the insolvency, up to £800 per person;
• all accrued holiday pay owed to you;
• certain unpaid occupational pension contributions.

When the RPS pays you, the government takes over that part of your claim, including its preferential status, and the £800 limit covers both claims together. The rest is unsecured. Neither part is guaranteed: it depends on what the practitioner recovers.

What happens to your pension

• Defined contribution (a pension pot): usually run by a pension provider rather than your employer, so you will not lose your pot if your employer goes bust.
• Defined benefit (final salary or career average): if your employer goes bust and cannot pay, you are usually protected by the Pension Protection Fund. It typically pays 100% compensation if you have reached the scheme's pension age and 90% if you have not (gov.uk).

Check your payslips against your pension statements and tell the practitioner and your provider about any missing contributions. The scheme's trustees or managers (not you) can then ask the government to pay in up to 12 months of contributions deducted from pay but never passed on, plus missing employer contributions, subject to limits.

What to do now: a practical checklist

• Keep your paperwork: contract, payslips (especially the last 12 weeks), P45, holiday records, dismissal letter and anything from the practitioner.
• Find the practitioner. Search our insolvency register or browse the latest administrations and liquidations: company pages list the insolvency notices and, where available, the appointed practitioner and their firm's address. See also how to check if a company is insolvent and what insolvency practitioners do.
• Claim benefits straight away, such as Universal Credit or New Style Jobseeker's Allowance, even if you expect a refusal, and keep the evidence: otherwise benefits you could have had may be deducted from your notice pay.
• Ask Jobcentre Plus about its Rapid Response Service, available for up to 13 weeks after redundancy.

Frequently asked questions

I worked there for less than two years. Can I claim anything?

Yes. There is no statutory redundancy pay, but you can claim arrears and holiday pay, and statutory notice pay if you worked there for at least a month.

Can directors or contractors claim?

Directors can claim only if they were also employees, and will be asked for evidence. Contractors and the self-employed cannot use the scheme but can register as creditors in the insolvency.

The business has shut but nobody has been appointed. Can I claim?

Not yet for wages, holiday or notice pay, which need a formal insolvency such as liquidation, administration, receivership or an approved CVA; simply stopping trading or being struck off does not count. Statutory redundancy pay can sometimes be paid if the employer is unable to pay, but the 6-month time limit still applies.

The company went from administration into liquidation. Does that change my claim?

Your rights are the same, but the first insolvency date (the administration) counts: the government will not pay money owed for the period between then and your dismissal.

Is the money taxed?

Statutory redundancy pay under £30,000 is tax-free. Income tax and National Insurance are deducted from arrears, holiday pay and notice pay, and you may be able to reclaim any overpayment.

Does this apply in Scotland and Northern Ireland?

In Scotland, the same employee rights and the same Redundancy Payments Service apply. Northern Ireland has its own scheme, run by the Department for the Economy, with slightly different limits: see nidirect.

For advice on your own circumstances, contact Acas or an employment adviser.