Require Immediate Support? Free Director Helpline: 0800 644 6080

Real Business Rescue

Free Director Helpline: 0800 644 6080

How are employees affected in a CVA?


Staff and Company Voluntary Arrangements

A Company Voluntary Arrangement, or CVA, is a formal restructuring process for eligible companies experiencing significant decline. Companies wishing to enter this arrangement must be deemed viable for the future.

A licensed insolvency practitioner (IP) determines whether the company is insolvent, or contingently insolvent, which is another condition for acceptance. They’ll also ensure the business can afford to repay the CVA over its full term.

background curve

Take Our Free 60 Second Test

Get an instant understanding of your:

  • Debt and Asset Position
  • Formal Insolvency Options
  • Next steps

Plus much more ...

Start The 60 Second Test
apps on mobile screen

Given that the business may need to reduce its costs and become more streamlined to meet its new financial obligations, employees can be adversely affected in a CVA. Staff costs can represent a significant proportion of a business’ expenses, so ending employment contracts will be inevitable in some cases.

So how exactly do CVAs affect employees, and are members of staff automatically made redundant as a result of the company’s insolvent position?

Corporate Restructuring Options

When a company is in difficulty, sometimes a process of financial and/or operational restructuring is needed. From CVAs through to Administration, there are a range of rescue and recovery options to help you get back on track.
Learn more about restructuring by calling our team -  0800 644 6080

60 Second Test Find Your Nearest Office

How are employees affected by a Company Voluntary Arrangement?

Employees aren’t automatically made redundant when their employer enters into a CVA. In fact, the company may need to rely on its members of staff to ensure the business runs smoothly, and increase the chances of making repayments for the full CVA term.

If redundancies cannot be avoided, however, the company must follow statutory process to ensure they are fair and legal. The consultation process laid down in employment law must be followed without exception, for example.

Any dismissals deemed to be unfair can result in sizeable claims for compensation. This can jeopardise the success of a CVA as claims become unsecured debts within the arrangement, potentially introducing further financial uncertainty for the company.

On the other hand, rather than making redundancies, the company may be able to retain staff if they can amend their employment contracts. Again, careful adherence to employment laws is paramount here, with all the necessary consultation procedures being made in relation to any changes in working hours or other terms.

Can’t pay CBILS or Bounce Back Loan?

Don't worry - there are thousands of other company directors in the same position. If you are struggling to keep up with your Covid loan repayments, speak to a member of the Real Business Rescue team to discuss your options. It's Free & Confidential.
The team are available now -  0800 644 6080

Employees made redundant in a CVA

Employees who are made redundant as a result of a Company Voluntary Arrangement can claim redundancy pay and other entitlements if they’ve worked continuously for the company for a minimum of two years.

They may be eligible for the following payments:

  • Statutory redundancy pay
  • Up to six weeks of unpaid holiday pay
  • Arrears of wages of up to eight weeks
  • Notice pay
  • Unpaid pension contributions

Payments are made by the Redundancy Payment Office (RPO), which then becomes a creditor of the company and is repaid as part of the CVA. This helps the company spread the cost of redundancies over the full term, which typically lasts between two and five years.

How much redundancy pay for employees affected in a CVA?

The amount of redundancy pay employees can receive depends on individual circumstances. The elements that make up the calculation for redundancy pay are an employee’s age, current salary, and length of service.

The government has capped the monthly wage at £571 for the purposes of calculating redundancy pay, and the total amount of redundancy pay is capped at £16,320 for 2021/22. Additionally, length of service is calculated only in complete years.

Redundancy pay can be made up of various elements, including Notice Pay and arrears of wages, in addition to the main statutory payment. Up to £30,000 is tax free and also free of National Insurance.

Need to speak to someone?

If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080

Obtaining professional advice on CVAs

It’s crucial to obtain professional insolvency advice early on if you have employees and your business is experiencing financial distress. Acting quickly can open up significantly more options, and help to prevent a slide into insolvency.

Real Business Rescue are Company Voluntary Arrangement experts, and will provide reliable independent advice on your current situation. Please contact one of the team to arrange a free, same-day consultation – we operate an extensive network of offices throughout the UK.

reviews io logo

Real Business Rescue are here to help

Still unsure whether liquidation is right for your company? Don't worry, the experts at Real Business Rescue are here to help. Our licensed insolvency practitioners will take the time to understand the problems your company is facing before recommending the best course of action going forward based on your own unique circumstances.

  • UK’s Largest Liquidators
  • 100+ Offices Nationwide
  • 100% Confidential Advice
  • Supported 25,000+ Directors
Meet The Team
Team Of 4

Team of Qualified Experts

Trusted team of experts on hand to assist

Meet The Team
Rbr Accreditations Blue

Looking for immediate support?

Complete the below to get in touch

Here at Real Business Rescue we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY
10,000+ Tests Completed

Free 60 Second Test

For Ltd Company Directors

Get An Instant Understanding Of Your:

  • Debt and Asset Position
  • Director and Liability Review
  • Next Steps

Plus much more ...

Real Business Rescue Recommended
  • UK's leading business funders
  • Free Brokerage Service
  • Full Market Access
  • Over 30 years' experience
  • Strong relationships with HMRC
  • Support from start to finish
  • 10,000 potential buyers
  • 12,000+ Businesses Sold
  • 60+ Years Experience
Next Steps

We provide free confidential advice with absolutely no obligation.
Our expert and non-judgemental team are ready to assist directors and stakeholders today.