The report highlighted the recent collapse of delivery firm City Link claiming the company took a “deliberate decision” not to inform employees of its likely demise.
It revealed that it could be cheaper for firms to pay a fine for breaking the rules than give workers sufficient notice of redundancy.
Chair of the Business, Innovation and Skills Committee, Adrian Bailey said the current system “fails to offer sufficient protection to workers, suppliers and contractors alike”.
He added: "Investors and directors are cushioned from the impact of failure while workers, suppliers, and contractors pay the highest price. The balance needs to be shifted so that our insolvency system is no longer skewed in favour of investors and directors."
The report recommends priority should be given to workers when money is paid out in insolvencies, whether they are directly employed or not.
It said: "While the financial calculation is simple, ignoring the consultation period has a high human cost that appears not to have featured in the decision-making process at City Link”.
Scottish Affairs Committee chair Ian Davidson said many contractors feel they were “deliberately deceived” as to the true state of the business. He added: “City Link and Better Capital are morally, if not legally, responsible for the difficulties that many of these individuals and small businesses find themselves in.”
MPs from both committees have called for a change of insolvency laws in order to better protect workers.Bailey said: “It is deeply regrettable that Better Capital felt its investors’ interests would be better served by abandoning City Link and its workers.”
