The courier firm City Link broke the law when it went bust over Christmas – but it can only be fined a maximum of £5,000 . MPs investigating the collapse say today it ‘ is clearly in the financial interest of a company to break the law ’ . A report also said firms were incentivised to ‘ ignore the statutory redundancy consultation period , if the fine for doing so is less than the cost of continuing to trade , especially since this fine will anyway be paid by the taxpayer ’ . Scroll down for video . Courier firm City Link broke the law over job cuts when it went bust over Christmas , but can only be fined a maximum of £5,000 . File photo . The Redundancy Payments Service can fine firms up to £5,000 if they fail to register a consultation , but the financial benefit to firms of trading on regardless can be significantly higher than this fine . The report published today by Parliament ’ s Scottish Affairs and Business , Innovation and Skills Committees probed the failure of City Link . Some 2,586 workers lost their jobs , with many hearing about the impending collapse on Christmas Day . When a company intends to make more than 100 staff redundant there is a statutory period for consultation of 45 days . This did not happen in the case of City Link , owned by Better Capital and run by private equity tycoon Jon Moulton . Ian Davidson MP , chairman of the joint committee , said ignoring the consultation period had a high human cost that appears not to have featured in the decision making process at City Link . Ian Davidson MP ( pictured ) said ignoring the consultation period had a high human cost . ‘ Employees were denied a reasonable notice period in which to seek alternative employment ’ , he said . ‘ 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. ’ Moulton , who bought the troubled firm for £1 in 2013 , insisted he had tried to save the company but failed . City Link faced fierce competition from bigger rivals DHL and Fedex and the business he inherited was in a bad state . He said he personally lost £2m and his firm £20m . The committee recommended the government review the requirements for consultation on redundancies so that employees understand what they can expect and company directors have a clear understanding of their responsibility to employees . It said : ‘ The processes for company insolvency do not offer sufficient protection to workers , suppliers and contractors and the balance should be shifted ’ . The politicians called for workers should be given better rights under the Insolvency Act 1986 regardless of whether or not they are directly employed . Davidson said : ‘ We are dismayed that , although it was clear for some time that there were serious questions over the ability of City Link to continue trading after December 2014 , small businesses and self-employed drivers . . were encouraged to take on additional costs . ‘ Contractors feel they were deliberately deceived as to the true state of the business . City Link and Better Capital are morally , if not legally , responsible for the difficulties that many of these individuals and small business now find themselves in. ’ The workers can take the firm to an employment tribunal which if successful can make a ‘ protective award ’ of up to 90 days pay for each employee that was not consulted . When a company intends to make more than 100 staff redundant , there is a statutory period for consultation of 45 days . File photo . But since the businesses is no longer trading , Davidson says this either comes out of whatever funds are left , or from the taxpayer . Moulton said Better Capital only continued to trade so that parcels could be delivered in time for Christmas and that the firm had no financial benefit from continuing to trade . ‘ Better Capital does not accept that it , as a secured creditor , should have done any more than it did , ’ he said . ‘ Better Capital could have recovered much more of its investment by precipitating an earlier insolvency , but we did not do so to allow every possible solution to be considered . ’
Firm can only be fined maximum of £5,000 for job cuts when it went bust . When a company intends to make more than 100 staff redundant , there is a statutory period for consultation of 45 days . 2,586 workers lost jobs , with many hearing of collapse on Christmas Day . MPs say it is 'clearly in the financial interest of a company to break the law ’ But workers can take the firm to employment tribunal which if successful can make a ‘ protective award ’ of up to 90 days pay .