The first point to note is that the appointment of an administrator does not automatically terminate employment contracts. Fundamentally an administrator’s role is to try and rescue the company as a going concern. In reality however, administrations often result in the sale of the business and its assets.

It seems with Monarch that employees have already been told that they are going to be made redundant as a result of the appointment of an administrator. So what will they be entitled to and who will be responsible for paying? Ordinarily in a redundancy situation, employees with at least 2 years’ service are entitled to a statutory redundancy payment which is based on their age, gross weekly wage and length of service. In addition to this all employees are entitled to notice pay and pay in respect of any accrued untaken holiday entitlement.

The administrator will have 14 days to adopt the contracts of employment of Monarch staff. If they fail to do so the contracts will automatically terminate. In that situation the affected employees can apply to the Redundancy Payments Office (RPO), an arm of the Insolvency Service, for payment of their statutory redundancy pay, statutory notice pay and holiday pay. In order to do so they would have to complete Form RP1 which is available online from the RPO. Once the payments have been made the RPO will then submit a claim to Monarch to recover those payments. Any employees with entitlements that exceed the statutory limits will need to make a claim against the RPO for their statutory entitlement and a further claim against Monarch for the balance. In reality they will receive very little, if anything, from Monarch itself as they would rank as unsecured creditors in the insolvency.