What Happens to Staff When a Company Goes Into Administration?

Going into administration doesn’t automatically mean staff lose their jobs. The administrator takes over the company and decides its future direction, and what happens to employees depends entirely on which outcome that turns out to be, whether that’s a rescue, a sale of the business, or an eventual wind-down.

For employees, that uncertainty is exactly what makes administration unsettling. This guide explains what actually happens to pay, holiday entitlement and job security when a company enters administration, what TUPE means if the business is sold, and what you can claim if you are made redundant along the way.

Key takeaways

• Employees are not automatically made redundant when a company enters administration; the administrator decides the company’s future and job losses depend on that outcome.
• Wages and holiday pay that accrue once an administrator is appointed and keeps staff on are treated as preferential, paid ahead of most other creditors.
• If you’re made redundant within the first 14 days of administration, you can usually still claim statutory redundancy pay, unpaid wages and holiday pay from the National Insurance Fund.
• If the business is sold as a going concern, TUPE normally transfers your contract, pay and continuity of service to the new owner automatically.
• The administrator’s duty is to act in the interests of creditors as a whole, not to preserve every job, so outcomes vary from one case to the next.

Does going into administration mean I automatically lose my job?

No. An administrator’s first objective, where it’s achievable, is to rescue the company as a going concern. Where that isn’t possible, they aim for a better outcome for creditors than an immediate closure would produce, often through a sale of the business. Only where neither of those is realistic does the process move toward winding the company down.

In practice, many employees continue working as normal while the administrator assesses the business, particularly where trading is continuing during the process. Redundancies happen where they’re a necessary part of restructuring or because no buyer is found, not as an automatic consequence of the company entering administration.

What happens to my pay and holiday entitlement?

The timing matters here. An administrator has 14 days from appointment to decide whether to keep staff on. If you’re retained beyond that point, any wages and holiday pay that accrue from the point of appointment onwards are treated as preferential, meaning they’re paid out of company assets ahead of most other creditors, including HMRC and unsecured creditors.

Wages and holiday pay that built up before the administrator was appointed rank differently, as an unsecured claim against the company, which is why employees are also entitled to claim certain amounts directly from the government rather than relying solely on the company’s remaining assets. More on that below.

What if I’m made redundant during administration?

If you’re made redundant within the first 14 days, your claim for wages up to that point ranks as an unsecured debt, but you’re still able to claim statutory redundancy pay, and other entitlements, from the National Insurance Fund provided you meet the usual eligibility conditions.

If redundancies happen later in the process, after the 14-day window, the same National Insurance Fund claim applies for your redundancy entitlement, while any preferential wages and holiday pay owed from the point of appointment are paid from company funds ahead of most other creditors.

What is TUPE and how does it protect me if the business is sold?

If the administrator sells the business as a going concern, the Transfer of Undertakings (Protection of Employment) regulations, usually just called TUPE, normally apply. Under TUPE, your employment transfers automatically to the buyer on your existing terms: the same pay, the same continuity of service, and the same contractual rights. The buyer cannot pick and choose which staff to take on; if the sale goes ahead, the whole workforce transfers with it.

TUPE is one of the more reassuring parts of this process for staff, because a going-concern sale is often a genuinely better outcome than it might first appear. The business keeps trading, under new ownership, and jobs that might otherwise have been lost in a straightforward closure continue instead.

What can I claim, and from where?

Where you’re made redundant as part of an administration, the National Insurance Fund, administered through the Redundancy Payments Service, covers several entitlements for eligible employees: statutory redundancy pay, unpaid wages up to a statutory limit, accrued but untaken holiday pay, and statutory notice pay. These come from the government, not the company’s own assets, so the company’s financial position doesn’t affect what you’re owed.

The administrator will notify the Redundancy Payments Service and provide the reference number you need to submit a claim. We’ve covered the eligibility criteria and the claims process in detail in our guide to director redundancy claims, much of which applies equally to other employees, not just directors.

How does this differ from liquidation?

The mechanics of what you can claim, redundancy pay, unpaid wages, holiday pay and notice pay from the National Insurance Fund, are broadly the same whether a company enters administration or liquidation. The difference is in intent. Administration exists to try to rescue the business or achieve a better outcome than immediate closure, so job losses in administration are often partial, tied to restructuring, or avoided entirely through a sale. Liquidation means the company is closing for good, so redundancy there is usually total.

What should I do if my employer goes into administration?

Keep working as normal unless you’re told otherwise, and keep an eye out for communication from the administrator, who is legally required to keep staff informed of what’s happening and what it means for them. If you are made redundant, the administrator should provide the case reference you need to claim from the Redundancy Payments Service. If weeks pass without that information, it’s worth chasing it directly, since claims are time-limited.

Frequently asked questions

Will I be paid during administration?

If you’re kept on, yes, your pay continues and any wages accruing from the point of appointment are treated as preferential, paid ahead of most other creditors from company funds.

Do I get redundancy pay if a company goes into administration?

If you’re made redundant as part of the administration, you can claim statutory redundancy pay from the National Insurance Fund provided you meet the usual eligibility conditions, including at least two years’ continuous service.

What happens to my pension if the company goes into administration?

Pension contributions already made are generally protected and held separately from the company’s own assets. If the company has fallen behind on contributions, those arrears may also be claimable through the relevant protection schemes; this is a complex area and worth raising specifically with the administrator.

Can I be made redundant without any notice?

You’re still entitled to your contractual or statutory notice period, or pay in lieu of it. If the company can’t pay this itself, it’s one of the entitlements you can claim from the National Insurance Fund as statutory notice pay.

Does TUPE apply if the business simply closes rather than being sold?

No. TUPE only applies where the business, or part of it, transfers to a new owner as a going concern. If the administration ends in a straightforward closure with no buyer, TUPE has no role and redundancy follows the usual route.

How long do I have to make a claim to the National Insurance Fund?

Claims are time-limited, so it’s best to submit yours as soon as the administrator provides the case reference. Delaying risks missing the window.

Who do I contact if I haven’t heard anything from the administrator?

The administrator’s details, including contact information, are required to be made available to employees. If you’ve had no communication at all, the Insolvency Service’s Redundancy Payments Service can also advise on next steps.

This article is for general guidance only and does not constitute legal or financial advice. For advice on your own circumstances, speak to a licensed insolvency practitioner.

Written by Michael Chamberlain

Founder, The Insolvency Practitioners, regulated by the ICAEW