Association of Chartered Certified Accountants (ACCA) Certification Practice Test

What typically happens to the employees during the administration process?

1. All are immediately laid off

2. They can be removed and replaced

3. They continue working until further notice

4. They are given permanent contracts

The correct answer is: They continue working until further notice

During the administration process, employees generally have their jobs secured to a certain extent and continue working until further notice. This continuity allows the business to maintain operations and generate revenue while the administrator assesses the viability of the company and explores options for its future. The administrator's role often includes evaluating whether to restructure the business or sell it as a going concern, which requires the presence of employees to facilitate ongoing operations. The other possible choices do not accurately reflect standard practices during administration. Immediate layoffs may occur if the financial situation is dire, but it is not a blanket policy; similarly, while employees can be replaced, the focus is typically on retaining staff to stabilize operations. Offering permanent contracts is not standard practice during administration, as the future of employment often remains uncertain until a clearer plan is established by the administrators.