As holiday makers are left stranded and others are dismayed that they won’t be going on their long awaited sunshine break, reports are circulating that around 21,000 employees, 9,000 of whom are employed in the UK face redundancy. #ThomasCook, the 178-year-old holiday giant was put into compulsory liquidation this morning as attempts to save one of the best known names in travel failed.
UK Employees
Thomas Cook’s 9000 employees have been advised to contact the Insolvency Service (https://www.gov.uk/government/organisations/insolvency-service ) for redundancy and other payments. Although redundancy payments are usually paid by the government within 14 days of a claim being received, the Insolvency Service has released a statement saying “special arrangements” are being put in place to pay staff sooner if possible.
What is #compulsory liquidation?
Compulsory liquidation or “winding up” is a court-based procedure under which the assets of a company are realised and distributed to the company’s creditors. The procedure is started by the filing of a petition at court. A judge then decides at a court hearing whether it is appropriate to make a winding-up order.
The most common reason for a winding-up order is that the company is insolvent. At the end of the liquidation, the company is dissolved.
What this mean for #ThomasCookEmployees
All employees of a company are automatically dismissed if a winding-up order is made. “Former employees” may be entitled to redundancy payments depending on their length of service, and may have a claim for damages in respect of failing to give the required notice on the grounds of wrongful dismissal as well as certain other monetary claims.
What can employees claim from the insolvency Service?
What employees can claim depends on the length of service, the particulars of their employment contract and their age. Any payments are also subject to certain caps (detailed below).
Statutory redundancy payment
Payments are based on an employee’s age and length of employment.
- 1.5 weeks’ pay for each full year of employment after their 41st birthday
- a week’s pay for each full year of employment after their 22nd birthday
- half a week’s pay for each full year of employment up to their 22nd birthday
Length of service is capped at 20 years and weekly pay is capped at £525. The maximum amount of statutory redundancy pay is £15,750.
Other money
Employees can also apply for money that they are owed under their employment contract:
- Unpaid wages;
- Bonuses, overtime and commission;
- Holiday pay (accrued or unpaid);
In respect of unpaid wages and bonus etc, the maximum that can be claimed is up to 8 weeks (subject to the usual statutory deductions). It counts as a week even if money is only owed for a few days that week.
The claim for holiday is capped at any holiday accrued over the last 12 months prior to the insolvency at a maximum of 6 weeks of holiday days, also capped at £525 per week (subject to the usual statutory deductions).
Statutory notice pay
Employees are entitled to a paid notice period even if it is not in their contract by operation of statute.
Statutory notice pay is one week’s notice for every complete year worked, up to a maximum of twelve weeks capped at £525 per week.
Pension contributions
Employees are advised to contact the appointed insolvency practitioner or official receiver if pension contributions have not been made for further details in this regard.
Redundancy
There are broadly three ‘main’ redundancy situations (although the statutory definitions are more complex):
- closure of the business as a whole; (Thomas Cook scenario)
- closure of the particular workplace where the employee is employed;
- reduction in the size of the workforce;
How?
An employer should give as much warning as possible of impending redundancies and undertake a consultation process to adequately consider suitable alternatives.
Alternatives to making redundancies are:
- voluntary redundancy
- lay off
- salary reductions
- short time working
At the first stage the employer must choose a fair pool from which to select the redundant employees. There is a significant amount of flexibility given in this as an employment tribunal will not go behind the business reason for such a decision. They must apply their mind to the decision and act from genuine motives. Any unreasonable artificial selection of the pool, by failing to include all those doing similar or comparable work may be deemed unfair selection.
The second stage is selection of reasonable selection criteria. They must be objectively measurable and non discriminatory. Once the criteria are chosen they are applied fairly and objectively.
An employer is required to also look for suitable alternative employment and adequately consult with employees in relation to any possibilities; an employee is allowed to refuse an alternative however the refusal should not be unreasonable otherwise the employee risks losing the entitlement to statutory redundancy pay. Employers are permitted to undertake a competitive interview process for suitable vacancies and equally an employee is entitled to a statutory trial period of 4 weeks before making a decision.
If no alternatives are found, then the employer will proceed to confirming the redundancy and an employee would be entitled to a statutory redundancy payment.
Had Thomas Cook taken the appropriate steps before insolvency to try and claw back money, they may have made redundancies to avoid collapse following in the footsteps of many other high street giants. There are special rules under the Trade Union and Labour Relations (Consolidation) Act 1992 ss188-198, whereby an employer is required to inform and consult with the appropriate representatives of any employees who are affected by the proposed redundancies, or measures that are to be taken in connection with such dismissals.
The duty arises when an employer is proposing to dismiss as redundant 20 or more employees at any one establishment within a period of 90 days or less. Any failures, may result in a claim for compensation known as the ‘protective award’ which is a maximum of 90 days but at the tribunal’s discretion.
Legal Advice
Facing redundancy can be a stressful time, compounded by the complexities of an unknown process and dissecting the contents of a settlement agreement. Curwens LLP have a team of specialist employment lawyers who are experienced in advising on redundancy situations.
If you require advice on this or any employment law matters please feel free to contact Kaajal Nathwani on 020 8363 4444 or This email address is being protected from spambots. You need JavaScript enabled to view it..
