top of page

In the current economic climate with so many businesses closing down, insolvency can cast a shadow of uncertainty over employees and their livelihoods. When a company faces financial distress and is unable to meet its obligations, the impact on its workforce can be profound. As an employee navigating through such challenging times, it is crucial to understand your rights and protections in the face of insolvency.

Insolvency occurs when a company's financial obligations surpass its available resources. It may result in the company entering liquidation, receivership, or voluntary administration. When faced with these situations, it is natural to feel concerned about your job security and entitlements.

Fortunately, employment laws exist to safeguard your rights during insolvency. In New Zealand, the Employment Relations Act 2000 provides specific provisions to protect employees in such circumstances.

When a company becomes insolvent, it must provide written notice to employees if their employment is likely to be terminated. The length of the notice period depends on the length of service, ranging from one to four weeks. Additionally, employees who have worked for the company for at least six months may be eligible for redundancy compensation.

In the event of insolvency, employees are given priority status for certain unpaid entitlements. This means that outstanding wages, holiday pay, and other related entitlements must be paid before other debts are settled. However, it is important to note that these priority claims have a limit, and any unpaid amount beyond that limit may be treated as an unsecured debt.

The Ministry of Business, Innovation, and Employment (MBIE) plays a vital role in assisting employees affected by insolvency. They oversee the implementation of employment laws and offer valuable guidance and support to both employees and employers. If you find yourself in a situation of insolvency, reaching out to the MBIE can provide you with essential information and resources to help navigate the process.

In some cases, when a business undergoes restructuring or is sold as a going concern, the new employer may have reemployment obligations. This means they must consider offering employment to the existing employees, ensuring their continuous employment or providing redundancy compensation if no suitable alternative employment is available.

Given the complexity of insolvency proceedings, it is advisable to seek legal advice to fully understand your rights and entitlements. Employment law experts can help you assess your situation, review relevant documents, and advocate for your rights during negotiations or any subsequent legal proceedings.

Insolvency can be a distressing experience for employees, but it is crucial to remember that you have rights and protections under the law. The Employment Relations Act 2000 ensures that you are treated fairly and that your entitlements are protected during times of financial crisis. By familiarising yourself with your rights, seeking support from the MBIE, and potentially seeking legal advice, you can navigate the challenges of insolvency with confidence. Remember, you are not alone, and there are resources available to help you safeguard your rights and secure your future in the face of uncertainty.

bottom of page