What happens if the company you work for falls into administration? It's a situation many retail workers have found themselves in in recent weeks following the troubles of Comet, HMV and Blockbuster. And it is reflected nationwide in all industry sectors.

Frustrated workers are having to grapple with their rights and entitlements – often with insolvency practitioners or public sector bodies who have replaced the familiar face of their employers.

There is a difference between an employer being in liquidation and administration. If your employer is in liquidation, there is no continuing business and you will be out of a job. Where your employer is in administration, an administrator will be appointed to see if the business can be kept alive pending a transfer in whole or part to a new buyer.

In an administration, you will not be able to make any immediate legal claim against your employer as the law imposes a "moratorium" on any such claims without the consent of either the courts or the administrator.

The administrators have a period of 14 days after their appointment to decide if they want to offload the costs of any employees by dismissing them. If they do so within the 14-day period, those former employees become "ordinary creditors" within the administration, so will line up along suppliers and other creditors.

If the administrator elects to retain you as an employee beyond the 14-day period, you become a "preferential creditor" – where you stand a better chance of recovering outstanding salary and redundancy payments if and when the time comes.

If insolvency is the only option for the business, the Insolvency Act 1986 only entitles preferential creditors to their outstanding salary (which also includes commission) for the four-month period immediately preceding the insolvency, and up to a ceiling of £800. You are also entitled to be treated as a preferred creditor for accrued holiday pay (up to six weeks) and certain occupational pension payments. Any additional amount you are owed (or relating to periods longer than four months) ranks as ordinary debt along with the bulk of other creditors.

If there are insufficient funds to pay you from the insolvent business, all is not lost. You can apply to the National Insurance Fund (NIF) for outstanding payments including salary, notice, holiday and redundancy pay. The NIF is operated by the Redundancy Payments Office and is the most useful first port of call in claiming outstanding payments, although the process can be complex and time consuming.

To qualify for NIF payments your employer must be insolvent and your employment needs to have terminated. You must also have done everything you can to get your payment, including applying in writing to your ex-employer for the payment within six months of the date your employment ended.

A claim to the NIF is also subject to ceilings. This includes a cap of £430 a week for unpaid salary up to a maximum of eight weeks; up to six weeks' holiday pay to a maximum of £800; and outstanding statutory notice, up to a maximum of £430 a week. Your statutory minimum notice is one week for every year worked, up to 12 weeks.

Of course it is always possible that a buyer for the business can be found. If the business is sold and you are transferred, your employment rights are generally protected and transferred to the new owner under the Transfer of Undertaking (Protection from Employment) Regulations. This includes your continuity of employment and any payments owed to you.

It is possible, however, that your contract may be varied to some extent by an administrator as necessary for the survival of the business. This is deemed a permitted variation. You may, therefore, find yourself being forced to accept some changes to your terms of employment – unlike in a standard business transfer situation.

If you are made redundant, the question of transfer of terms does not arise and you lose continuity of employment even if you are rehired by the new owner. You will not qualify for redundancy pay unless you have two years' qualifying service.

An insolvent employer doesn't mean you will lose all outstanding pay, but realistically there is likely to be a shortfall.

Philip Landau is an employment lawyer at Landau Zeffertt Weir Solicitors.