Pre-pack administration differs significantly from the process of traditional administration as the sale of a business and its assets is agreed upon before an administrator is appointed. When a company enters administration like this, there can be a lot of concern from parties involved in the business as to what the future will hold.
One of the main concerns surrounding this process is what happens to employees in a pre-pack administration. Whether you’re an employer unsure of the procedures you need to put in place for your employees, or an employee yourself and concerned about what the future will hold, the following guide contains everything you need to know about pre-pack administration employee rights.
Are Employees Included In A Pre-Pack Sale?
Pre-pack administration can take two forms; either a different company will purchase the business or the existing directors will set up a new company to carry on trading in place of the old one. In both cases, employees are considered part of the business and critical to the sale. This means that employees, along with their salaries and contracts, are included in the sale when pre-pack is arranged.
Employee Rights In Pre-Pack Administration
Though employee contracts and salaries are carried over in pre-pack administration, many are still left wondering exactly what their rights are. In any kind of business sale, including pre-pack administration, something called Transfer of Undertakings (Protection of Employment) regulations apply.
Also known as TUPE, these regulations protect employee rights and contract terms when employer business is transferred over, safeguarding employees from any wrongdoing. TUPE regulations cover things like holiday entitlement and any special arrangements, meaning that employees need not worry about inconsistencies when ownership changes.
Should employees be unhappy about a pre-pack sale, they also have the right to resign. Anybody that does not wish to be transferred when the sale takes place may refuse to do so and seek alternative employment instead.
What About Redundancies?
Given that employees must be carried over in pre-pack sales, this type of administration tends to be associated with saving or preserving jobs. Though pre-pack administration should bring some level of job security to any employees affected, it is important to note that the new employer can still make employees redundant. The proper redundancy process must be followed if this is the case and full employment rights from the previous employer must be honoured while this process is ongoing.
Now you understand what happens to employees in pre-pack administration, you may wish to seek further advice from experienced professionals. Whether you have any further questions or are struggling financially and considering a pre-pack sale, don’t hesitate to get in touch with our team of licensed insolvency practitioners. We can discuss the best options for your business and help you work out the right course of action for employees.
