When a company goes into a formal insolvency procedure, employees are understandably concerned about their job security and the company's ability to pay their salaries.

Importantly, however, not all formal insolvency procedures will result in employees' contracts being automatically terminated. Additionally, certain protections are afforded to employees in formal insolvency procedures, in particular they are deemed as preferential creditors at the distribution of the insolvent company's assets in respect of their remuneration (i.e. there is a greater chance that their remuneration will be paid) and there is the National Insurance Fund to provide a degree of financial protection for employees impacted by an insolvent employee.

If your employer is going through an insolvency procedure, or you are concerned about your employer potentially going insolvent, advice should be sought from a solicitor. Edward Beedham specialises in the legal and procedural aspects of corporate insolvency, including advice to employees in relation to their rights in insolvency.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.