When a company can no longer continue trading, employees are one of directors’ biggest concerns. In a Creditors’ Voluntary Liquidation, most employees will be made redundant, but there are established routes for eligible staff to claim statutory redundancy pay, unpaid wages, holiday pay and notice pay where the company cannot afford to pay them.
Not every employee situation is identical. Some staff may continue working for a short period while the company is wound down, while different rules can apply if part of the business is transferred or taken over. Directors also need to consider consultation requirements before the formal liquidation begins, particularly where larger-scale redundancies are proposed.
Worried about what liquidation means for your employees?
We can review the company’s staffing position, unpaid wages and wider debts and explain what directors need to do before entering a CVL.
What Happens to Employees When a Company Enters a CVL?
Most employees are made redundant when a company enters a CVL because the business has stopped, or is about to stop, trading. Once the formal insolvency process begins, the insolvency practitioner will explain how staff are affected and provide the information they need to make claims for qualifying amounts owed.
Redundancy is not the only possible outcome. Some employees may remain for a short period if they are needed to help complete essential work or assist with the wind-down. Employees may also be affected differently if the business, or part of it, is sold or transferred. Staff who continue working after insolvency can still potentially claim redundancy and other qualifying amounts if they are later dismissed.
| Situation | What may happen |
|---|---|
| Company stops trading | Employees are usually made redundant |
| Limited work continues | Some employees may remain temporarily |
| Business or assets are transferred | Some employees may potentially transfer to a new employer |
| Company owes staff money | Eligible employees may be able to claim through the Insolvency Service |
A Creditors’ Voluntary Liquidation is a formal process, so directors should avoid making assumptions about what will happen to employees or what the company can still afford to pay. Employment information should be provided to the insolvency practitioner as early as possible.
What Can Employees Claim After a CVL?
Employees may be entitled to claim several different payments when their employer becomes insolvent. Eligibility depends on employment status, length of service and the amounts actually owed. Qualifying claims can include:
- statutory redundancy pay
- unpaid wages, overtime, bonuses or commission
- accrued or unpaid holiday pay
- statutory notice pay
- certain protective awards following failures in collective consultation
The Redundancy Payments Service pays eligible claims from the National Insurance Fund where the insolvent company cannot meet them. For employees made redundant on or after 6 April 2026, the weekly statutory cap is £751.
| Claim | Main statutory limit |
|---|---|
| Statutory redundancy pay | Up to 20 years’ service, with weekly pay capped at £751 |
| Unpaid wages and qualifying contractual payments | Up to 8 weeks, capped at £751 per week |
| Holiday pay | Up to 6 weeks, capped at £751 per week |
| Statutory notice pay | Up to 12 weeks, capped at £751 per week |
| Protective award | Insolvency Service payment is limited to a maximum of 8 weeks |
If an employee is owed more than the Insolvency Service can pay, the unpaid balance may still be claimed in the liquidation.
Who Qualifies for Statutory Redundancy Pay?
Statutory redundancy pay is normally available where someone was an employee, has been made redundant and had at least two years of continuous employment. The calculation is based on the employee’s age and length of service:
- half a week’s pay for each full year of employment while under 22
- one week’s pay for each full year aged 22 to 40
- one and a half weeks’ pay for each full year aged 41 or over
Only a maximum of 20 years’ service can be included. For dismissals from 6 April 2026, weekly pay is capped at £751, giving a maximum statutory redundancy payment of £22,530.
The statutory amount is separate from any enhanced redundancy entitlement that may exist under an employment contract. Where the company cannot meet additional contractual amounts itself, the Insolvency Service will only pay within the statutory rules and limits.
What Happens to Unpaid Wages and Holiday Pay?
Employees who have worked but not been paid can normally claim up to eight weeks of qualifying unpaid wages and other contractual amounts, including overtime, commission or bonuses where these form part of their employment entitlement. Payments are capped at £751 per week for dismissals from 6 April 2026.
Holiday pay can also be claimed for qualifying holiday accrued or taken but not paid during the relevant period before the employer became insolvent. The Insolvency Service can pay up to six weeks of holiday pay, again subject to the statutory weekly limit.
There is a separate question of how employee debts rank within the liquidation itself. Certain employee remuneration, accrued holiday pay and pension contributions receive preferential treatment under insolvency law. The preferential limit applying to qualifying remuneration is £800, which is different from the £751 weekly cap used when the Insolvency Service calculates statutory payments.
Our guide to who gets paid first in liquidation explains where employee claims sit alongside secured creditors, HMRC and other unsecured debts.
What Happens to Notice Pay?
Employees are normally entitled to a statutory notice period when they are made redundant. The statutory entitlement increases with length of service, up to a maximum of 12 weeks.
If the company closes without the employee working their full statutory notice, they can apply for loss of notice pay through the Insolvency Service. This is dealt with separately from the main redundancy, wages and holiday claim, and payments remain subject to the £751 weekly cap.
Employees must first complete their main claim for redundancy and other money owed. Once their notice period has ended, they are sent the information needed to make the separate loss-of-notice application. Income earned and certain benefits available during the notice period can affect the final payment.
How Do Employees Make a Claim?
Employees cannot normally submit their insolvency claim until the company has formally entered the relevant insolvency process. The insolvency practitioner provides a CN case reference number, which is required before the online application can begin.
Get the CN case reference
The insolvency practitioner handling the CVL provides employees with the case information needed for their application.
Submit the main claim online
The main application can cover statutory redundancy pay, unpaid wages, holiday pay and other qualifying amounts owed. Employees will usually need their National Insurance number, employment dates, pay details, bank information and details of holiday and money outstanding.
Apply separately for loss of notice pay
Employees who did not receive their full statutory notice pay make this application later, once the relevant notice period has expired.
The claim is checked
Information supplied by the employee is checked against information provided by the insolvency practitioner before payment is approved. The Insolvency Service aims to process claims within six weeks of receiving the information it needs, although some claims can take longer. Claims for redundancy pay, unpaid wages and holiday should generally be submitted within six months of dismissal.
Do Directors Have to Consult Employees Before a CVL?
Redundancy consultation requirements can apply before the company formally enters liquidation. Directors should therefore consider the employment position as soon as large-scale redundancies become likely rather than assuming everything can be dealt with after the liquidator is appointed.
Where fewer than 20 redundancies are proposed, collective consultation legislation does not normally apply, although individual consultation should still form part of a fair redundancy process where circumstances allow.
Where 20 or more redundancies are proposed at one establishment within a 90-day period, collective consultation is required. The employer must consult recognised trade union representatives or elected employee representatives and must also notify the Redundancy Payments Service. The minimum periods are:
- 20 to 99 proposed redundancies: consultation and notification must begin at least 30 days before the first dismissal
- 100 or more proposed redundancies: at least 45 days before the first dismissal
The government must also be notified using form HR1 before individual dismissal notices are issued.
Financial distress does not automatically remove these responsibilities. In rare cases an employer may rely on a “special circumstances” defence where compliance was not reasonably practicable, but the employer is still expected to consult as far as possible. Sudden and genuinely unexpected insolvency may be treated differently from a situation where serious financial difficulties were known about for some time.
Don't leave redundancy consultations until liquidation day
Where directors already know that significant redundancies are likely, consultation and HR1 obligations may arise before the CVL begins.
Failure to follow collective consultation requirements can result in an employment tribunal making a protective award. From 6 April 2026, the maximum protective award increased to 180 days’ full pay for each affected employee.
What Is a Protective Award?
A protective award is compensation that can be ordered by an employment tribunal where an employer has failed to comply with collective redundancy consultation requirements.
Since 6 April 2026, a tribunal can make an award of up to 180 days’ full pay for each affected employee, depending on the circumstances of the failure. Employees do not need two years’ service to qualify for a protective award.
Where the employer is insolvent, the Insolvency Service can make payment towards the award from the National Insurance Fund. Its payment is limited to eight weeks, and an employee cannot receive both arrears of pay and a protective award for the same period.
Can Employees Keep Working During a CVL?
Some employees may be asked to continue working for a period after insolvency begins. This can happen where the liquidator needs help winding down operations, collecting information, completing necessary tasks or preserving the value of company assets.
Employees who remain employed and are later made redundant can still potentially claim statutory redundancy and qualifying sums owed. However, there’s an important limitation to be aware of: wages, holiday pay, bonuses and commission arising between the insolvency date and the later dismissal date cannot be claimed through the same government insolvency payment route.
Whether staff should remain will therefore depend on the specific CVL and the liquidator’s assessment rather than being a decision directors should make independently after appointment.
What Happens if the Business or Part of It Is Sold?
Employment rights can become more complicated where some or all of the business is transferred rather than simply closed.
TUPE protections are unlikely to apply where the insolvent business is being closed down altogether. They will normally be more relevant where the business is being rescued and transferred or taken over by another employer.
Employees who transfer can therefore be in a different position from staff who are made redundant as part of the closure. The insolvency practitioner and employment advisers should establish the position where a sale or transfer is being considered.
This can also overlap with the treatment of company contracts during liquidation, particularly where customer agreements or parts of the operating business may have value.
How Can Directors Support Employees Through a CVL?
For many directors, telling employees that the company is going into liquidation is one of the most difficult parts of the process. Staff may have worked with the business for years, and concerns about wages, redundancy and finding another job can make an already uncertain situation particularly stressful.
Directors cannot remove that uncertainty altogether, but clear and honest communication can make a significant difference. Employees will usually want to know when their employment is likely to end, whether they will receive the money they are owed and how they will make a redundancy claim. Where possible, explain what is known, what is still being worked through and when they can expect further information.
Avoid making promises about payment dates, continued employment or redundancy amounts before these have been confirmed. It is better to acknowledge that some details are still being established than to give reassurance that may later prove inaccurate.
There are also practical ways to make the transition easier. Make sure employees can access payslips, employment details and other records they may need, give them the information provided by the insolvency practitioner, and keep a clear point of contact available for reasonable questions. Where appropriate, directors may also choose to provide references or allow reasonable flexibility for job interviews while the business is winding down.
At Anderson Brookes, we understand that a CVL is not only about dealing with company debts and assets. We can help directors understand what will happen to employees, what information staff will need and what should be prepared before the liquidation begins. Having the process explained clearly can make difficult conversations with employees more manageable and help everyone understand what happens next.
What Happens to Workplace Pensions?
Company insolvency does not normally mean that an employee’s existing pension fund simply becomes part of the company’s assets. However, there may be unpaid employer or employee contributions that still need to be dealt with.
Employees who believe pension contributions are missing should raise this with the insolvency practitioner. Certain unpaid pension contributions can be dealt with through insolvency arrangements, while different protections may apply to defined benefit pension schemes.
Directors preparing for a CVL should make sure the insolvency practitioner has details of the company’s pension provider and any known contribution arrears.
Can Company Directors Claim Redundancy?
A company director can potentially qualify for redundancy and other statutory payments if they were also genuinely an employee of the company.
Being listed as a director is not enough by itself. The Insolvency Service will consider whether an employment relationship existed and may ask for evidence such as employment terms, payslips, P60s, company bank statements and information about the director’s actual role.
The same core redundancy rules apply, including the usual requirement for at least two years’ continuous employment for statutory redundancy pay. There is no blanket rule requiring a director to have worked a particular minimum number of hours each week simply to be considered for a claim.
Anderson Brookes can also help directors understand their potential director redundancy claim as part of the wider liquidation process.
What Should Directors Prepare Before a CVL?
Accurate employee information can make it easier for the insolvency practitioner to deal with redundancies and verify claims.
Prepare an employee list
Include names, roles, contact details, employment start dates and whether anyone has already left or received notice.
Gather payroll information
Provide recent payslips, PAYE information and details of any wages, overtime, commission or bonuses that remain unpaid.
Record holiday entitlement
Set out each employee’s holiday year, entitlement, leave already taken and any accrued holiday that remains outstanding.
Check contracts and notice periods
Locate employment contracts and identify any contractual terms that go beyond statutory minimum notice.
Identify pension arrears
Provide details of the pension scheme and any unpaid employee or employer contributions.
Check whether collective consultation rules apply
If 20 or more redundancies are proposed at one establishment, establish the consultation and HR1 requirements as early as possible.
Give the records to the insolvency practitioner
The practitioner will use the company’s employment information to help confirm claims and explain what happens next.
Worried about employees as your company approaches liquidation?
Tell us a little about the company’s staffing position, debts and trading circumstances. Anderson Brookes can explain the CVL process and what directors need to prepare.
Employees During a CVL FAQs
Are employees automatically made redundant in a CVL?
Most employees are made redundant where the company stops trading, but this is not automatic in every case. Some employees may continue working temporarily or could be affected by a transfer of the business.
How much redundancy pay can an employee claim?
For employees made redundant from 6 April 2026, weekly pay is capped at £751 and up to 20 years’ service can be included. The maximum statutory redundancy payment is therefore £22,530.
Can employees claim unpaid wages?
Yes. Eligible employees can claim up to eight weeks of unpaid wages and certain other contractual amounts, subject to the statutory weekly cap.
Can employees claim holiday pay?
Yes. Eligible employees can claim up to six weeks of qualifying holiday pay, subject to the statutory weekly limit.
Who pays redundancy if the company has no money?
Where the employer is formally insolvent and cannot pay, eligible statutory claims can be paid through the Redundancy Payments Service from the National Insurance Fund.
Do directors have to consult staff before liquidation?
Redundancy consultation duties can still apply before a CVL. Collective consultation is required where 20 or more redundancies are proposed at one establishment within a 90-day period, with minimum 30- or 45-day periods depending on the number of proposed redundancies.
Can a director claim redundancy from their own company?
Potentially. A director must also have genuinely been an employee of the company and will normally need to provide evidence supporting that employment relationship.
Get Advice Before Making Employees Redundant
If your company has employees, the prospect of making people redundant can be one of the hardest parts of deciding to close the business. Understanding what staff are entitled to and what information they will need can make the process clearer for everyone involved.
At Anderson Brookes, we can review the company’s staffing position alongside its debts and wider finances, explain how the CVL process affects employees and help directors prepare the information the insolvency practitioner will need.
If your company is struggling to meet wages or you expect redundancies as part of a closure, speak to us before making major changes. Call Anderson Brookes on 0800 1804 935 for free, confidential initial advice.