On 25 April it was announced that retail giant, British Home Stores (BHS) had gone into administration after attempts to inject capital into the store were unsuccessful. Administrators have kept stores open as they try to find a buyer.

BHS employs approximately 11,000 people and the collapse is said to be the biggest failure on the ‘High Street’ since that of Woolworths in 2008.

The question now is what will happen to the 11,000 staff?

The business is sold

If the business, or part of the business, is sold as a going concern, it is likely that the Transfer of Undertakings (Protection of Employment) Regulations 2006 will apply, so that any employees assigned to the part sold would automatically transfer to the buyer on their current terms and conditions of employment.

Prior to the transfer there should be information given to the employees’ representatives, and in some cases, consultation should be carried out. A failure to do so could give rise to a protective award of up to 13 weeks’ gross pay per employee.

The business closes

Although attempts are being made to sell BHS as a going concern, there is no guarantee that a buyer will be found so employees are at risk of being made redundant.

The employees may be entitled to a statutory redundancy payment if they have at least two years’ continuous employment when the business closes. This is calculated by reference to the employee’s age, length of service and weekly wage. Though the total sum pay payable is capped at a maximum of £14,370.

Where 20 or more redundancies are proposed at one establishment within a period of 90 days, there is also the obligation to carry out collective consultation. As with a transfer this means, in practice, that employee representatives have to be provided with certain information and consultation must take place.

Unlike the transfer situation there are minimum prescribed periods for consultation before the first dismissals can take effect. Where there are between 20 and 99 employees being made redundant at a store, the minimum period is 30 days and where 100 or more it is 45 days. A failure to consult can give rise to protective awards of up to 90 days gross pay per employee.

The employees will also be due notice under their contracts. If employees are not paid their notice pay then this could give rise to wrongful dismissal claims.

The business has no money to pay

The National Insolvency Fund (NIF) will meet certain debts of an insolvent employer. These include statutory redundancy payments; up to eight weeks’ arrears of pay; up to six weeks’ arrears of holiday pay and statutory notice pay.

However there are limits on the payments and a cap of £479 will apply to a week’s pay in any calculation.

If you are thinking of re-organising or transferring all or part of your business, Gateley Plc can assist with strategic and operational advice to assist you with such changes.

This post was edited by Kim Findlow. For more information, email blogs@gateleyplc.com.

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.