What happens to staff when a company goes into administration?

Yes, at least to begin with. The appointment of administrators does not automatically end your employment. This is different from a compulsory winding-up by the court, which is treated as automatic notice of dismissal. In administration, the company carries on as a legal employer, and the administrators step into the directors' shoes.

In practice, administrators usually want to keep the business running, because a trading business is worth far more to sell than a closed one. That means most staff are asked to keep working as normal. You stay employed until one of two things happens: the administrators make you redundant, or the business is sold and you transfer to the new owner.

There is a key date in the background. If the administrators keep you on beyond 14 days from their appointment, they are treated as having adopted your contract. Nothing they do in those first 14 days counts as adoption, so the early period is a grace window while they assess the business. Once your contract is adopted, the wages you earn from then on get strong legal protection (see below).

For work you do after the administrators are appointed and have adopted your contract, your wages, holiday and pension contributions rank as an expense of the administration. That gives them super-priority: they are paid ahead of the administrators' own fees and ahead of the bank's floating charge. In a trading administration, this is why staff who keep working generally keep getting paid.

Money you were owed before the appointment is treated differently and splits into two parts:

• A preferential slice. Up to four months' unpaid wages, capped at £800, plus all your accrued holiday pay, rank as a preferential debt. Preferential creditors are paid before the floating charge and before ordinary unsecured creditors.
• An unsecured slice. Anything above those caps becomes an ordinary unsecured claim, which in most insolvencies recovers very little.

You rarely have to chase the company for these amounts yourself, because the National Insurance Fund steps in (next section) and then recovers from the insolvency in your place.

If the administrators do make you redundant and the company can't pay what it owes you, the government's National Insurance Fund pays your statutory entitlements directly. It covers five things:

• Statutory redundancy pay: if you have at least two years' continuous service. The amount is half a week's pay per year worked under age 22, one week per year aged 22 to 40, and one and a half weeks per year aged 41 or over, counting up to 20 years.
• Arrears of wages: up to 8 weeks' unpaid pay.
• Statutory notice pay: one week if you've worked one month to two years, then one week per complete year, up to 12 weeks.
• Holiday pay: up to 6 weeks of holiday accrued but not taken.
• Unpaid pension contributions: certain contributions your employer should have paid into your scheme.

Almost all of these are subject to a weekly cap on a week's pay: £719 from 6 April 2025, reviewed every April. So the most statutory redundancy can come to is roughly £21,570 (30 weeks at the cap). If you earned more than the cap, your statutory payment is worked out as if you earned exactly the cap; you can claim any shortfall above the statutory figure as an unsecured creditor, though recovery there is usually small.

You claim from the Redundancy Payments Service online, using form RP1. You'll need a case reference number (a code beginning "CN") which the administrators issue to staff once they're appointed. The administrators also send the Redundancy Payments Service the employment details it needs to process claims, so the two sides usually line up.

A few practical points. You generally can't submit the claim until you've actually been made redundant. Once a complete claim is in, payments are normally made within a few weeks. Redundancy pay and arrears are usually paid first, with notice pay following separately because it's reduced by anything you earn (or could have earned) during the notice period. Keep your payslips, your contract and your P45: they make a claim go through faster.

A common outcome of administration is a sale of the business as a going concern. When that happens, TUPE, the Transfer of Undertakings (Protection of Employment) Regulations 2006, usually applies. Staff assigned to the part of the business that's sold transfer automatically to the buyer, on their existing terms and conditions, with their continuous service preserved. You don't lose your length of service, and you don't have to reapply for your own job.

Dismissals connected to the transfer are automatically unfair unless the employer has a genuine economic, technical or organisational reason. A buyer may still make changes or redundancies after a transfer, but the protection means you can't simply be dropped because the business changed hands. Continuity of service also matters for any future redundancy claim: it counts from your original start date, not the date of the sale.

Will I still get paid if my employer goes into administration?

Usually yes, for work you do after the appointment, because the administrators need staff to keep the business running while they look for a buyer. Money you were already owed before the appointment is different: a capped amount of wage arrears and holiday pay ranks as a preferential debt, and if the company can't pay, the government's National Insurance Fund covers statutory wage arrears (up to 8 weeks), holiday pay (up to 6 weeks) and notice pay, all subject to a weekly cap.

Do I still have a job when administrators are appointed?

Yes, at least initially. The appointment of administrators does not automatically dismiss staff, unlike a compulsory winding-up. You stay employed unless and until the administrators make you redundant or the business is sold and you transfer to the buyer. Many staff keep working normally while the administrators trade the business on.

How much redundancy pay can I get?

If you have at least two years' continuous service, you're entitled to statutory redundancy pay: half a week's pay for each year under 22, one week for each year aged 22 to 40, and one and a half weeks for each year over 41, up to 20 years. A week's pay is capped (£719 from 6 April 2025, reviewed each April), so the maximum statutory redundancy is around £21,570. If the company can't pay, the National Insurance Fund pays it.

What is the National Insurance Fund and what does it cover?

It's a government fund that pays employees what an insolvent employer owes them, up to statutory limits. It covers: statutory redundancy pay; arrears of wages up to 8 weeks; statutory notice pay; up to 6 weeks' holiday pay; and unpaid pension contributions. Most payments are subject to the same weekly cap that applies to redundancy (£719 from 6 April 2025).

How do I claim, and how long does it take?

You claim online from the Redundancy Payments Service using form RP1. You'll need a case reference number (a 'CN' number), which the administrators give to staff once they're appointed. You normally can't claim until you've been made redundant. Once a complete claim is in, payments are usually made within a few weeks.

What about my notice pay?

If you're made redundant without your full statutory notice, you can claim statutory notice pay: one week if you've worked between one month and two years, then one week for each complete year, up to a maximum of 12 weeks. If the company can't pay it, the National Insurance Fund does, subject to the weekly cap and to deductions for any earnings or benefits you receive during the notice period.

What if I've worked there less than two years?

You won't qualify for statutory redundancy pay, which needs two years' continuous service. But you can still claim unpaid wages, accrued holiday pay and statutory notice pay from the National Insurance Fund regardless of length of service, up to the statutory caps.

What happens if the business is sold?

If the administrators sell the business as a going concern, TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006) usually applies. Staff assigned to the business transfer to the buyer on their existing terms, with continuous service preserved. Dismissals connected to the transfer are automatically unfair unless there's a genuine economic, technical or organisational reason.