What happens to employees when a company enters liquidation?
Employees are usually dismissed when trading ceases or shortly after liquidation begins. The precise timing can depend on whether the company continues to trade or a business transfer is being considered. Eligible employees may claim certain statutory amounts from the National Insurance Fund, subject to the applicable requirements and limits.
6 min read · Last reviewed August 2026Potential statutory claims
Eligibility and calculation depend on employment status, dates, pay and statutory limits. Claims for certain unpaid pension contributions may be handled by the pension scheme's trustees or administrators rather than an individual employee.
- Arrears of pay
- Accrued holiday pay
- Statutory notice pay
- Redundancy pay
- Certain unpaid pension contributions
Information the company should preserve
Complete payroll and employment records help employees and the insolvency office-holder process claims.
- Contracts and start dates
- Payroll and PAYE records
- Holiday records
- Hours and normal pay
- Pension information
- Employee contact details
Communication
Directors should avoid giving assurances that cannot be supported. Employees need clear information about employment, final pay and the statutory claims process.
Common questions
Are directors eligible to claim?
A director may qualify as an employee depending on the genuine employment relationship, contractual terms and working arrangements.
Who pays redundancy claims?
Eligible statutory claims are generally paid by the Redundancy Payments Service from the National Insurance Fund.
This guide is general information only and does not constitute insolvency, legal, tax or financial advice. The position should be reviewed using the company's current facts and documents.