Liquidation or administration: important questions for Carillion employees

One of the biggest construction companies, Carillion, has today gone into liquidation. Not only are they building HS2 and Battersea Power Station but they provide school dinners, prison services, hospital beds and maintain military accommodation. The headlines have reported Carillion’s demise by liberally interchanging the expressions liquidation  and administration, but there are very important differences for the many thousands of employees.

Unlike administration, where the administrator has a 14-day window to decide what to do with existing employees and consult about redundancies, the effect of compulsory liquidation is automatically to bring to an end employment contracts by operation of law. New contracts must be entered into if the employees are still needed.

Those 20,000 employees whose contracts have been abruptly ended in this way (but not those who are self employed) can then claim up to 8 weeks' back pay,  6 weeks' accrued but untaken holiday, and statutory notice from the government but this is all capped at £489 per week rather than actual pay.

The government’s advice to Carillion’s employees is ‘come to work as usual’ but those employees in this situation should be asking more questions. They should be asking who their contract is with and what guarantee they have that they will be paid going forward. Indeed, given the many school dinners, prisons and hospitals that Carillion looks after, canny employees will be asking for guarantees that their full pay for January will be guaranteed and not capped at £489 a week until today.

Without these guarantees on who their employer is and who is footing their wage bill, they will just be unsecured creditors and join the queue with many thousands of small business owed significant sums following the collapse of Carillion.