By David Blevins, Sky Correspondent
City Link employees turned up for work on Monday to be told that most of them will lose their jobs on New Year's Eve.
An internal document circulated by administrators and seen by Sky News said the majority of the 2,727 employees would be made redundant on Wednesday.
"As the Group is now insolvent it will be unable to make any termination payments to you following your redundancy," the letter explained.
"However, you may be entitled to make claims to the Redundancy Payment Service (a government department."
Workers staged a protest outside the parcel delivery firm's depot at Motherwell, North Lanarkshire but colleagues in Northern Ireland returned home despondent.
Stephen Parkes, who had worked from the County Antrim depot for three years, described the mood of the meeting with administrators as "sombre" and "disheartening."
"There are people there with families. Everybody's got bills to pay one way or another. You've been paid up until the 31st of December. You have no money coming in. What do you do? You've absolutely nothing," he said.
He said he and his colleagues had left work on Christmas Eve totally unaware that they would lose their jobs on Christmas Day and hear the news on the radio.
There are growing fears that sub-contractors for City Link could be put out of business by its collapse.
One, Lee Brown, claimed in an interview with Sky News to be owed £153,000 by the company.
Better Capital, the investment firm that bought City Link for £1 in 2013, issued a statement saying it was "disappointed" at its demise and the timing of the news becoming public.
"The directors very much regret the impact on the employees of City Link receiving such bad news on Christmas Day," the statement said.
Gordon Martin, the RMT union's regional organiser in Scotland, claimed a recent meeting with the administrators had failed to give staff the answers they wanted.
"They walked out of the meeting more disillusioned than when they walked into it, which is saying something considering the situation," he said.
A small number of employees will be retained for up to three months while the company winds down and depots opened on Monday to allow customers to collect parcels.
The founder of Better Capital, venture capitalist Jon Moulton, told the Financial Times on Monday he had lost "several million pounds" of his own money in City Link and had explored "every possible way" to save it.
But TUC general secretary Frances O'Grady said there was nothing inevitable about the company going bust and accused its bosses of using insolvency as a means to "take the money and run."
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