Guide

Responsibilities to employees if you buy or sell a business

Transfers of insolvent businesses

If you are transferring a business that is subject to insolvency proceedings and you owe money to the employees to be transferred, the responsibility to pay the full amount of the money owed does not transfer to the new employer.

The new employer is only responsible for the amount left after the employees have been paid from the Redundancy Payments Service (RPS). You can call the Insolvency Service redundancy payments helpline on 0330 331 0020.

They should be able to make a claim through the RPS for:

  • arrears of pay
  • holiday pay - for days taken but not paid

They will not be able to claim statutory redundancy pay or pay in lieu of notice as - post-transfer - their job will not have ended.

Permitted variations

You or the new employer - or the insolvency practitioner - can reduce pay and establish other less favourable terms and conditions after the transfer. These are known as permitted variations.

However, certain conditions must be met when doing this:

  • the permitted variation must be agreed with you or the new employer - or the insolvency practitioner - and the appropriate representatives, ie trade union representatives if an independent trade union is recognised for collective bargaining purposes or, if not, elected employee representatives
  • the agreement must be in writing and signed by each of the representatives or other authorised persons
  • before the agreement is signed, the employer must provide all the affected employees with a copy of the agreement and any guidance the employees may need to understand it

You should also consider the following:

  • any new terms and conditions agreed in a permitted variation must not breach other statutory entitlements, eg agreed pay rates must not be set below the national minimum wage
  • any permitted variation must be made with the intention of safeguarding employment opportunities by ensuring the survival of the business - or part of it