When a company enters administration, employees are often left with urgent questions. Will they lose their jobs? Will they receive their salary? What happens to their employment contracts? Can another company buy the business and keep the workforce?
These concerns are understandable. For employees, a company’s financial difficulties can affect much more than a monthly salary. They may also affect rent or mortgage payments, family finances, pension contributions, career plans and future employment opportunities.
The good news is that a company going into administration does not automatically mean that every employee will be made redundant. Administration is a formal insolvency process in which an appointed administrator takes control of the company and considers the available options. These may include rescuing the business, selling it as a going concern, selling its assets or closing it if it cannot be saved.
The outcome depends on the company’s financial position, whether a buyer can be found, the administrator’s strategy and the circumstances of the employees concerned. Some staff may continue working. Others may transfer to a new employer. Some may face redundancy and need to claim money owed to them.
The UK government provides specific guidance for employees whose employers become insolvent, including routes to claim certain unpaid wages, holiday pay, redundancy pay and statutory notice pay where eligibility conditions are met. These payments are subject to rules and financial limits.
This article explains what happens to employees when a company goes into administration, the main employment outcomes, the financial support available and the practical steps workers should take to protect their rights.
This guide focuses on employment rights in Great Britain. Northern Ireland has a separate employment relations framework, so employees there should check the relevant local guidance.
1. What Does It Mean When a Company Goes into Administration?
Company administration is a formal insolvency procedure used when a company faces serious financial difficulties. An insolvency practitioner is appointed as administrator and takes control of the company’s affairs.
The administrator’s role is to pursue the statutory purpose of administration, which may involve rescuing the company as a going concern, achieving a better result for creditors than an immediate winding-up, or realising assets for secured or preferential creditors in the circumstances permitted by law.
During this period, the administrator decides how the business should operate and what should happen to its assets, contracts and workforce.
The administrator may choose to:
- Continue operating the business while exploring rescue options.
- Sell the company or part of its business to a buyer.
- Transfer some employees to a new employer.
- Restructure the workforce to reduce operating costs.
- Make employees redundant where their roles are no longer required.
- Close the business if a rescue or sale is not viable.
The administrator normally has control of the company during administration and may make employees redundant or cancel or renegotiate certain contracts, subject to applicable law. The process and its consequences depend on the circumstances.
The important distinction: administration is a process for dealing with a financially distressed company. It is not, by itself, an automatic dismissal of every employee.
2. What Happens to Employees When a Company Goes into Administration? Five Possible Outcomes
The position of employees generally falls into one of five broad scenarios.
1. Employees continue working for the company
The administrator may decide that keeping the business operating is necessary to preserve its value or support a potential sale.
Employees may be asked to continue performing their normal duties while the administrator assesses the business. In other cases, working arrangements or responsibilities may change.
Employees should obtain clear information about:
- Whether their employment continues.
- Who is responsible for managing them.
- Whether their normal salary and contractual benefits remain payable.
- Whether their working hours or duties are changing.
- Whether the business is being marketed for sale.
- Whether redundancies are being considered.
Employees should not assume that their jobs have ended merely because the company has entered administration. Equally, they should not assume that continued trading guarantees long-term employment.
2. Employees are made redundant
If the administrator decides that the company cannot continue with its existing workforce, some or all employees may be made redundant.
Redundancy means the employer dismisses an employee because the role is no longer required, or because the business is closing or the need for employees to perform particular work has reduced.
Employees may be entitled to statutory redundancy pay if they meet the relevant eligibility conditions. They may also be able to claim unpaid wages, holiday pay and statutory notice pay through the government’s Redundancy Payments Service, subject to the applicable rules.
Redundancy does not remove every employment right. Employees should still check how the decision was made, what payments are due and whether the employer complied with applicable consultation and dismissal requirements.
3. The business is sold to another company
An administrator may sell the business to a buyer that intends to continue trading.
Where the transaction qualifies as a relevant business transfer, the Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE, will normally protect employees when an insolvent business is being rescued and transferred.
Employees may transfer to the new employer with their employment continuity and relevant terms and conditions preserved, subject to the specific rules and exceptions that apply to insolvent businesses.
However, not every asset sale creates a TUPE transfer. The nature of the transaction matters.
4. Only part of the workforce transfers
A buyer may purchase only part of the business, such as a particular division, site, service or customer operation.
Some employees may transfer if they are assigned to the relevant economic entity or activity and the legal conditions for TUPE are met. Others may remain with the administrator’s company or face redundancy.
Employees should ask which business activity is being transferred, whether TUPE applies and how the employer has determined which employees are affected.
5. The business closes completely
If the company cannot be rescued or sold in a way that preserves employment, it may close.
Employees will generally be made redundant rather than transferred to a buyer if there is no relevant business transfer. Eligible employees can apply for certain amounts owed through the Redundancy Payments Service.
Workers should obtain written confirmation of the termination date and the information needed to make a claim.
3. Do Employees Automatically Lose Their Jobs When a Company Enters Administration?
No. Entering administration does not automatically terminate all employment contracts.
The administrator must assess the business and decide what action is appropriate. Employees may continue working while a sale or rescue is explored, or they may be dismissed if their roles are no longer needed.
For example, consider a retail business that operates 20 shops and enters administration because it cannot pay its debts.
A buyer might purchase 12 shops and continue trading. Some employees assigned to the transferred business may move to the buyer under TUPE. The administrator may close the remaining eight shops, leading to redundancies for employees whose roles are not transferred.
This is only an illustration. The legal position depends on the transaction, the employees’ roles and the applicable insolvency and employment law.
What should employees do if they are unsure whether they are still employed?
They should request written clarification from the administrator or the person managing the insolvency.
Useful questions include:
- Am I still employed by the company?
- Should I continue attending work?
- Who is responsible for paying my salary?
- Has my employment been terminated?
- Is a transfer to another employer being considered?
- What happens to my holiday entitlement and pension contributions?
Keep copies of all written communications. Do not assume that silence means dismissal, and do not resign simply because the company has entered administration without first understanding the consequences.
4. What Happens to Employees’ Wages When a Company Goes into Administration?
Unpaid wages are one of the most pressing concerns for employees when an employer becomes insolvent.
The outcome depends on when the wages became due, whether employment continues, whether the business transfers and the relevant insolvency rules.
A. Wages owed before the insolvency
Employees may be able to claim qualifying unpaid wages through the government’s Redundancy Payments Service after the required circumstances and eligibility conditions are met.
For qualifying arrears of pay, the government can generally pay up to eight weeks of money owed, subject to the weekly cap and other rules. The cap for relevant claims involving redundancies on or after 6 April 2026 is £751 per week.
Eligible contractual payments such as overtime, commission and bonuses may also qualify, depending on the circumstances and the employment contract. Not every payment described as a bonus or commission will automatically be covered.
B. Wages after the company enters administration
The position can be more complicated if employees continue working after the insolvency begins.
The government explains that employees who keep working may still qualify for certain claims if they are dismissed later. However, they cannot claim from the government for wages, holiday pay, bonuses or commission owed between the date of insolvency and the date of dismissal under the specific insolvency payment arrangements described in the guidance.
This is an important reason to obtain clear information about payroll arrangements and the date the company entered insolvency.
C. What if the employee is owed more than the government will pay?
Government payments are capped and cover only specified types of debt. If an employee is owed more than the scheme pays, they may be able to register as a creditor for the remaining amount.
Whether any further money is recovered depends on the company’s assets, the priority of claims and the outcome of the insolvency process. Full repayment is not guaranteed.
Employees should preserve payslips, employment contracts, timesheets, commission records and correspondence confirming the amounts owed.
5. Can Employees Claim Redundancy Pay if the Company Goes into Administration?
Yes, eligible employees can apply for statutory redundancy pay when their employment ends in redundancy because of the employer’s insolvency.
For statutory redundancy pay through the government scheme, the usual conditions include being an employee and having at least two years of continuous employment with the insolvent business.
The amount depends on the employee’s age, length of service and weekly pay, subject to the statutory limits.
How statutory redundancy pay is calculated
The statutory formula generally provides:
- Half a week’s pay for each full year of employment when the employee was under 22.
- One week’s pay for each full year of employment when the employee was aged 22 to 40.
- One and a half weeks’ pay for each full year of employment when the employee was aged 41 or older.
The calculation can include up to 20 years of service. Weekly pay is subject to a statutory cap.
For redundancies on or after 6 April 2026, the relevant weekly cap is £751. The maximum statutory redundancy payment available under the scheme is £22,530, subject to the applicable calculation rules.
Example of how the calculation works
Imagine an eligible employee has 10 full years of continuous service, was aged 45 throughout the relevant years for the purpose of this simplified example, and has a weekly pay above the statutory cap.
The basic formula would be:
10 years × 1.5 weeks = 15 weeks of capped weekly pay.
Using the £751 weekly cap, the illustrative calculation is:
15 × £751 = £11,265.
This is an illustration rather than a calculation for a particular employee. Actual entitlement depends on the employee’s age during each year of service, full years of service, relevant weekly pay, dismissal date and other statutory rules.
Employees can use the official GOV.UK redundancy pay calculator to estimate their entitlement.
What if the employee has worked for the company for less than two years?
They will not normally qualify for statutory redundancy pay under the standard two-year service requirement. However, they may still qualify for other payments, including certain unpaid wages, holiday pay or notice pay, depending on the facts.
The two-year rule for statutory redundancy pay should not be confused with the legal requirements for other employment claims. Some rights apply regardless of length of service.
6. What Happens to Holiday Pay When a Company Goes into Administration?
Employees may have accrued annual leave that they have not taken or may have taken leave for which they were not paid.
Eligible employees can claim qualifying holiday pay through the government’s insolvency payment arrangements.
The official guidance states that the scheme can cover up to six weeks of holiday pay, subject to the weekly cap. The relevant holiday period is restricted, including rules relating to leave taken or accrued in the 12 months before the employer became insolvent.
For redundancies on or after 6 April 2026, the weekly cap is £751.
Employees should keep records of:
- Annual leave entitlement.
- Holiday already taken.
- Accrued but unused leave.
- Holiday pay shown on payslips.
- Any outstanding payments for leave taken.
The precise amount payable depends on the employee’s entitlement and the scheme’s eligibility rules.
7. What Happens to Notice Pay When a Company Goes into Administration?
Employees made redundant may be entitled to notice pay, even if the company cannot afford to pay it.
The statutory minimum notice period generally depends on continuous service:
- One week’s notice after one month of employment but less than two years.
- One week’s notice for each full year of continuous employment between two and 12 years.
- A maximum of 12 weeks’ statutory notice after 12 or more years.
An employment contract may provide for a longer notice period.
If an eligible employee did not work their notice period, worked only part of it or worked an unpaid notice period, they may be able to claim statutory notice pay through the government scheme.
The amount is subject to statutory caps, and deductions may apply for benefits received or that could have been received in the relevant period.
What should employees check?
Compare the termination letter with the employment contract. Confirm the notice period, the last working day, any notice already worked and whether the employer has paid the correct amount.
The government has a specific process for notice pay claims. Employees normally need to apply for redundancy, unpaid wages and holiday pay first, even if no redundancy payment is due. The relevant reference for a notice pay claim is issued separately.
8. What Is TUPE, and How Does It Protect Employees When a Business Is Sold?
TUPE stands for the Transfer of Undertakings (Protection of Employment) Regulations 2006.
These regulations protect employees in qualifying business transfers. They can apply when a business, or part of it, is transferred to a new employer while continuing as an identifiable economic entity.
In an insolvency situation, the type of insolvency process and timing of the transfer can affect the protections available.
What happens when an insolvent business is rescued and transferred?
Where TUPE applies to a qualifying rescue transfer, employees assigned to the transferred business will generally move to the new employer automatically.
Their protected employment terms and continuity of employment are generally preserved. This can include:
- Their original start date.
- Contractual pay.
- Holiday entitlement.
- Other protected contractual terms.
- Certain employment-related rights and liabilities.
There are special rules for insolvent employers, so employees should not assume that every liability or every contractual term will be treated identically in all circumstances.
Can a buyer change employees’ terms and conditions?
Changes are restricted where the reason is the transfer itself. Special insolvency rules can permit certain changes in qualifying circumstances, including changes intended to safeguard employment by ensuring the business continues, subject to the relevant legal requirements and consultation arrangements.
A buyer cannot simply assume that purchasing an insolvent business allows it to disregard employment law.
What happens if the company closes rather than transfers?
If the business closes and there is no relevant transfer, employees generally will not transfer to a new employer under TUPE. They may instead be made redundant and may qualify for payments under the insolvency scheme
9. What Consultation Rights Do Employees Have During Administration?
Administration does not automatically remove an employer’s responsibility to comply with applicable redundancy consultation rules.
The exact requirements depend on the number of proposed redundancies, the timing, the employer’s circumstances and whether a business transfer is involved.
Individual consultation
Where redundancies are proposed, employers should consider the applicable individual consultation obligations and the need to discuss the reasons for the proposed redundancy, alternatives and the employee’s circumstances.
The insolvency context may affect how the process can practically be carried out, but it does not mean that all consultation duties disappear.
Collective consultation
Where an employer proposes 20 or more redundancies at one establishment within a 90-day period, collective consultation requirements may apply. These can involve consultation with recognised trade union representatives or elected employee representatives.
Specific rules govern timing, notification and the circumstances in which an employer must act. Employees should seek advice if they believe collective consultation has been missed.
Can an employee challenge an unfair redundancy?
Depending on the facts and applicable law, an employee may be able to bring a claim if the redundancy selection or dismissal was unlawful or unfair, or if required consultation was not carried out.
The relevant claim, available remedy and time limit depend on the circumstances. An employee should not assume that an insolvency process makes every dismissal lawful.
10. Can Employees Claim If They Were Dismissed Unfairly?
Company administration does not automatically make every dismissal fair.
An employee may have concerns if they believe that:
- They were selected for redundancy unfairly.
- The employer failed to follow an applicable consultation process.
- They were dismissed for a discriminatory reason.
- The decision was connected to whistleblowing or another legally protected activity.
- The employer ignored relevant contractual or statutory rights.
The legal requirements for bringing a claim vary. Some claims have qualifying service requirements, while others do not. Insolvency can also affect who responds to a claim and whether a particular award can be recovered from government funds.
The Insolvency Service can pay specified types of employment-related awards in qualifying circumstances, but it does not cover every possible tribunal award. For example, some awards for injury to feelings or discrimination may not be payable by the government under the insolvency payment scheme. A claim against the insolvent employer for any remaining amount may be a separate matter.
Employees should obtain advice promptly if they believe their dismissal was unlawful. Tribunal deadlines are strict, and an internal discussion with the administrator does not necessarily stop time running.
11. What Happens to Pension Contributions When a Company Goes into Administration?
Pension contributions can become an important concern if the company has stopped paying suppliers and staff.
Employees should check whether contributions deducted from their salary have been paid into the pension scheme and whether employer contributions are up to date.
If contributions are missing, employees should contact the insolvency practitioner or official receiver and the pension scheme provider or trustees, as appropriate.
The treatment of unpaid contributions depends on the type of pension arrangement, the dates involved and the relevant insolvency and pensions rules.
Employees should keep payslips, pension statements and correspondence showing deductions or missing contributions.
The official government guidance specifically advises employees to contact the insolvency practitioner or official receiver if pension contributions are missing.
12. Can Employees Be Asked to Keep Working After Administration Begins?
Yes. An administrator may need staff to continue working to keep the business operating, protect assets, fulfil orders or support a sale.
Employees should seek clear written instructions about whether they remain employed, who pays them and what work is expected.
If employees continue working, they should maintain their own records of hours, duties and salary payments. This is especially important if payroll becomes irregular.
The government guidance also distinguishes between money owed before insolvency and certain amounts owed for the period between insolvency and later dismissal. Employees should not assume that every unpaid amount will automatically be covered by the Redundancy Payments Service.
If salary payments stop, employees should raise the issue promptly with the administrator and obtain advice before deciding to stop attending work or resign.
13. How Can Employees Claim Money from the Redundancy Payments Service?
Eligible employees may be able to apply to the government’s Redundancy Payments Service for qualifying redundancy pay, unpaid wages, holiday pay and statutory notice pay.
The process normally involves the following steps.
Step 1: Obtain the case reference number
The insolvency practitioner or official receiver should provide a case reference, commonly called a CN number, for claims relating to redundancy, unpaid wages and holiday pay.
Employees cannot submit the relevant claim without the required reference.
Step 2: Gather supporting records
Prepare the information needed to explain the claim, including:
- Employment contract.
- Start date and termination date.
- Payslips and salary details.
- Records of unpaid wages or commission.
- Holiday entitlement and outstanding leave.
- Redundancy or dismissal letter.
- Relevant correspondence from the administrator.
Step 3: Submit the claim within the deadline
GOV.UK states that eligible employees should apply for redundancy, unpaid wages and holiday pay within six months of dismissal. The government guidance should be checked carefully for the relevant deadline and the procedure applicable to the claim.
The notice pay claim has a separate stage and reference process.
Step 4: Check the calculation
The Insolvency Service assesses the information and calculates what is payable under the scheme. Payments are subject to eligibility rules, caps and deductions.
If an employee believes the calculation is wrong, they should review the explanation and contact the relevant service or insolvency practitioner.
Step 5: Consider any amount not covered
If the government payment does not cover the full debt, the employee may be able to register as a creditor for the remaining amount. Recovery depends on the company’s assets and the priority of creditors.
14. What Should Employees Do Immediately When Their Company Enters Administration?
The first few days can be confusing. Employees should focus on obtaining reliable information and protecting their records.
Use this practical checklist.
- Confirm your employment status. Ask whether you remain employed, have been dismissed or may transfer to another employer.
- Read every letter carefully. Keep documents from the administrator, HR and any potential buyer.
- Save your employment records. Retain payslips, contracts, commission statements, holiday records and pension information.
- Check unpaid amounts. Make a list of unpaid salary, overtime, bonuses, commission, expenses and holiday pay.
- Ask about redundancy and notice. Request a clear explanation of the proposed arrangements and any payments.
- Find out whether a sale is planned. Ask whether the business or your department is being transferred and whether TUPE may apply.
- Keep a record of hours worked. If you are asked to continue working, record your hours and the work performed.
- Do not miss claim deadlines. Check the government’s current rules and obtain the necessary reference numbers.
- Seek independent advice if necessary. A trade union, Acas, Citizens Advice or an employment solicitor may help you understand your options.
- Plan for your next role. If redundancy appears likely, begin updating your CV and exploring opportunities while continuing to clarify your rights.
Employees should be careful about signing settlement agreements, agreeing to changes in terms or resigning without understanding the legal and financial consequences.
15. What Should Employers and Administrators Plan for When Employees Are Affected?
A well-managed administration process should consider employees’ rights and the practical impact of decisions on the workforce.
Important areas include:
1. Clear communication
Employees need timely information about the company’s position, their employment status, payroll and any proposed transfer or redundancy.
Unclear communication can lead to unnecessary stress, confusion and disputes.
2. Payroll and employee records
The administrator should establish accurate information about wages, holiday balances, notice periods, pension deductions and contractual benefits.
Good records help determine what the company owes and what information employees need for government claims.
3. Consultation and representation
The administrator and relevant employer representatives should assess which individual or collective consultation requirements apply and how they can be complied with in the circumstances.
4. Transfer planning
Where a sale is proposed, the parties should assess whether TUPE applies, which employees may transfer, what information must be provided and how employee representatives should be informed or consulted.
5. Redundancy and claims information
Employees who are dismissed should receive clear information about the termination date, the insolvency contact, the case reference process and how to apply for qualifying payments.
6. Data protection and confidentiality
Employee records should be handled appropriately during the administration, transfer or closure. Sensitive personal information should only be shared where there is a lawful basis and a legitimate need.
Planning these areas carefully can reduce confusion and help employees understand what happens next.
16. Frequently Asked Questions
Does everyone lose their job when a company goes into administration?
No. Some employees may continue working while the administrator explores rescue or sale options. Others may transfer to a buyer under TUPE, while some may be made redundant.
Will I still get paid if my employer enters administration?
Employees who continue working should obtain clear information about payroll arrangements. If money is owed, eligible employees may be able to claim specified amounts through the government’s Redundancy Payments Service, subject to the relevant rules and caps.
Can I claim redundancy pay if my company goes into administration?
Eligible employees can usually apply for statutory redundancy pay if they are employees who have been made redundant and meet the usual two-year continuous-service requirement. The payment depends on age, service, weekly pay and statutory limits.
What happens to my employment contract if the company is sold?
If the sale qualifies as a TUPE transfer, employees assigned to the transferred business will generally transfer automatically, with protected employment continuity and terms preserved, subject to the applicable rules and exceptions.
Can the new employer reduce my salary after a TUPE transfer?
Changes made because of the transfer itself are restricted. Special rules apply to certain transfers involving insolvent businesses, and changes may be permitted in qualifying circumstances where legal requirements are met. Employees should obtain advice before agreeing to significant changes.
How much unpaid salary can I claim from the government?
The scheme generally covers up to eight weeks of qualifying arrears of pay, subject to the statutory weekly cap and other eligibility conditions. For relevant redundancies on or after 6 April 2026, the cap is £751 per week.
Can I claim holiday pay if I am made redundant during administration?
Eligible employees can claim qualifying accrued or unpaid holiday pay through the government scheme. The payment is subject to limits, including the relevant holiday period and a maximum of six weeks under the scheme’s guidance.
What if my employer has not paid my pension contributions?
Contact the insolvency practitioner or official receiver and the relevant pension scheme provider or trustees. Keep payslips and pension statements showing deductions and missing contributions.
How long do I have to claim money owed by an insolvent employer?
GOV.UK states that employees should apply for redundancy, unpaid wages and holiday pay within six months of dismissal. Notice pay has a separate process. Always check the current official guidance for your claim and act promptly.
Can I bring an employment tribunal claim if my company is in administration?
Potentially, yes. Administration does not automatically remove an employee’s statutory rights. The claim, the correct respondent, available remedies and time limits depend on the circumstances. Insolvency may also affect whether an award can be recovered in full.
Conclusion: Know Your Rights When a Company Goes into Administration
When a company goes into administration, employees may face uncertainty about their jobs, salaries and future. However, administration does not automatically mean that every employee is dismissed or that all employment rights disappear.
The main outcomes are continued employment, transfer to a new employer, redundancy or business closure. The right outcome for each employee depends on the administrator’s decisions, whether a qualifying business transfer takes place and the individual’s employment circumstances.
Employees should confirm their status, keep employment and pay records, check their entitlement to redundancy and notice pay, and understand the government’s claim process. They should also pay close attention to TUPE, consultation requirements and any potential employment tribunal deadlines.
For employers and administrators, clear communication, accurate records and compliance with employment law are essential when making decisions that affect staff.
If your employer has entered administration and you are unsure about redundancy, unpaid wages, a proposed TUPE transfer or the legality of your dismissal, consider obtaining advice from Acas, Citizens Advice, a trade union or a qualified employment solicitor. Early advice can help you understand your options before important deadlines pass.
Official and reliable sources
- GOV.UK — Your rights if your employer is insolvent
https://www.gov.uk/your-rights-if-your-employer-is-insolvent/overview - GOV.UK — What you can get if your employer is insolvent
https://www.gov.uk/your-rights-if-your-employer-is-insolvent/what-you-can-get - GOV.UK — Applying for money owed by an insolvent employer
https://www.gov.uk/your-rights-if-your-employer-is-insolvent/apply-money-owed - Acas — TUPE transfers if your employer is insolvent
https://www.acas.org.uk/tupe/advice-for-employers-and-employees/tupe-transfers-if-your-employer-is-insolvent - GOV.UK — Insolvent businesses and TUPE
https://www.gov.uk/transfers-takeovers/insolvent-businesses - GOV.UK — Putting your company into administration
https://www.gov.uk/put-your-company-into-administration - GOV.UK — Redundancy: your rights
https://www.gov.uk/redundancy-your-rights - GOV.UK — Explaining your redundancy payments
https://www.gov.uk/guidance/explaining-your-redundancy-payments
Publication note: The financial limits in this article reflect the official GOV.UK guidance available in October 2026. Recheck the relevant government pages before publication or future updates, as statutory rates, claim procedures and deadlines can change.