Q: The company we are working for is winding up. What happens to our employment during this process?

A: All employment agreements terminate when a company is wound up - because there is neither an employer nor work for the employees. A liquidator may carry on some or all of the business during the winding-up process, and may ask some or all of the employees to continue to work during this time.

To avoid personal liability, liquidators will usually ensure that an employment agreement is formed to cover this extended work.

There is some protection for employees in a winding-up situation.

Under the Companies Act 1993 (section 312), once liquidation costs have been paid, preference is given to outstanding wages and salaries, including holiday pay, to a limit of $15,000 per individual.

Wages, salaries and holiday pay rank fourth in an insolvency under the Insolvency Act 1967 (section 104), again with a limit of $15,000.

- NZ Herald