CITY Link workers were not offered enough protection by the current insolvency system, a new report has found.

The Business and Scottish Affairs Committees have found that the system in place heavily favours investors and not workers.

City Link bosses announced they would be entering administration on Christmas Eve last year in what a union boss branded a “carefully engineered collapse”.

Delivery service firm City Link employed 165 people in Scotland, many of whom learned the news of their uncertain future on Christmas Day, at the end of the company’s busiest month.

The report produced by MPs found that it is financially beneficial to a company to break the law and refuse workers their statutory redundancy consultation period, leading to the fines being paid with taxpayer’s money.

Ian Davidson, chairman of the Scottish Affairs Select Committee, said the system provides “perverse incentives” and that bosses and investors had an “advantage” over the workers.

Davidson said: “The rules on insolvency, on everything from how and when information is shared with employees, to the order in which creditors are paid out, are skewed too far to the advantage of investors, directors and management.

“Further, the system provides perverse incentives to withhold information or to skip proper consultation processes in contravention of the law and at a high cost to workers struggling to cope with the loss of their livelihoods.”

“It also creates incentives to use cheap, insecure forms of employment, such as bogus self-employment, which gives a worker all the responsibilities of an employee but none of their rights or protections,” he said.

Mick Cash, leader of the Rail, Maritime and Transport union described the report into the collapse of City Link as “shocking”.

He said: “Lives were wrecked, with the taxpayer footing a massive bill, while those responsible skipped away unscathed and with large chunks of their assets protected.”

“Piling scandal on top of scandal the report says the law on consulting with employees was deliberately broken with a high human cost. This allowed the bandit capitalists to cut and run while workers lives were ruined and the taxpayers were left to pick up the pieces,” Cash added.

Both committees found that the current system is set up to allow those who have given a company secure credit are “cushioned” from the consequences of insolvency in the organisation.

The brunt of the firm’s failure is therefore felt by the workers and contractors as well as the company’s suppliers. In the case of City Link, the report stated that bosses did not take into account the “high human cost” of their actions, adding that they regretted the decision to enter administration, made by owner Better Capital.

Recommendations have been made to the UK Government to encourage open dialogue between the unions and insolvency experts when a business is in trouble, sharing information and reviewing arrangements before the decision to go into administration is made.

Adrian Bailey, chairman of the Business, Innovation and Skills Committee at Westminster, said: “Our joint evidence sessions highlighted an issue which former employees of City Link will sadly know only too well – that the current insolvency system fails to offer sufficient protection to workers, suppliers and contractors alike.

“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.”

Although based in Coventry, the company had a significant Scottish workforce with depots in Aberdeen, Edinburgh, Glasgow, Glenrothes and Motherwell.

The firm had been making losses for the previous two years but the sudden announcement in December was wholly unexpected. Since the turn of the year the company have stopped accepting orders and administrators are currently selling it off piece by piece.

It was announced last week that City Link would be unable to pay back money owed to suppliers, customers and the taman. Administrators are trying to put a package together but conceded those owed may get as little as 2p for every pound they are due.

Secured creditors will have the £28.4 million debt made available by the administrative team but those with unsecured loans will have to wait until assets are sold to learn their fate.