Who Pays for Staff Redundancy When a Business Goes into Liquidation?

When a business enters liquidation, one of the most pressing and sensitive issues is what happens to employees. For many directors, concerns around staff redundancy, unpaid wages, and legal obligations can be a major source of stress, particularly when cash flow has already dried up. Employees, on the other hand, often face uncertainty about whether they will be paid what they are owed.

Understanding who is responsible for paying staff redundancy when a company goes into liquidation is essential for both directors and employees. The answer depends on several factors, including the financial position of the company, the type of liquidation, and the nature of the employees’ claims.


This article explains how redundancy pay works in liquidation, who ultimately pays it, and what directors and employees need to know under UK insolvency law.

What Happens to Employees in Liquidation?

When a company enters liquidation, it usually means the business has ceased trading or is about to stop trading. In most cases, employees are made redundant because the company can no longer continue operations.

Redundancy occurs because the employer no longer has a need for employees to carry out work. Liquidation is recognised in law as a valid reason for redundancy, provided the correct process is followed.

Once liquidation begins, employees’ contracts are typically terminated either immediately or shortly afterwards by the appointed liquidator.

Staff Redundancy Payment in Liquidation


Location: United Kingdom

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