In a ,pre-pack administration, the sale of the business and its assets is agreed before an administrator is appointed. The agreed sale will be officially implemented shortly after the administrator has been appointed. This, differs from the process of a traditional administration, in that the business is effectively sold 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 questions we get asked at Ballard Business Recovery is ‘what are employee rights 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 concerned about what the future will hold, the following guide contains everything you need to know.

Role Of Employees In A Pre-Packaged Sale

Pre-pack administration either involves a different company purchasing the business or the existing directors setting up a new, replacement company to carry on trading in place of the old one. Employees are considered part of the company’ business and critical to a sale on a going concern basis, meaning that when a pre-pack sale is arranged, the employees, along with their salaries and contracts are included in that sale. This means that by law, employees have to be transferred from the old company to the new one. So, if you’re concerned about the question of ‘what are employee rights in a pre-pack administration’, you can have peace of mind that your full employment rights will be transferred across.

What About TUPE?

,TUPE stands for Transfer of Undertakings (Protection of Employment). TUPE applies when a business is sold to another company, including in a pre-pack administration. It’s put in place to protect employee rights and the terms and conditions in their contracts when the employer business is transferred over. When thinking about ‘what are employee rights in a pre-pack administration’, the importance of TUPE should be emphasised in acting as a safeguard to ensure that contracts, holiday entitlement and previous arrangements are kept. Here, it’s important to note that as an employee you can also refuse to be transferred over and choose to resign instead.

Can Employees Be Made Redundant?

One particular concern that you may have surrounding the question of ‘what are employee rights in a pre-pack administration’ is redundancy. Whilst it is a legal requirement that all employees are transferred over to the new company, it is possible for the new company to make an employee redundant, should they no longer require their services. If the new company does decide to make an employee redundant then they must honour the full employment rights that were accumulated in the previous company. A proper redundancy process must be followed.

The Role Of Pre-Pack Sales In Preserving Jobs

As an employee of a company that is entering administration, there is always going to be concern regarding your job security. However, ,one of the advantages of pre-pack sales is that they can actually help to preserve jobs. As trading is not ceased as part of the process, a pre-packaged sale can help to reduce the risk of redundancies and to ensure continued employment.

If you have any further questions regarding ‘what are employee rights in a pre-pack administration’, please don’t hesitate to ,get in touch with our experienced team of licensed insolvency professionals. Equally, if your business is struggling financially and you are considering a pre-pack sale, our team can guide you through the process. Get in touch today to discuss the best options for your business.