Over a year ago, we wrote a post about the sale of British Home Stores for the paltry sum of £1. Just over a year later and the former high-street stalwart is in dire straits again. BHS boss Dominic Chappell has told his staff in a letter that they have been unable to secure a funder or a trade sale and therefore has filed for administration. This move puts 164 shops at the risk of closure and with this around 11,000 jobs.

The writing has been on the wall for a while and the figures aren’t pretty: a reported £1.3bn total debt and £571 million pension deficit. Last month bosses sold the leasehold for BHS’ flagship Oxford Street store was sold for around £30m, which was less than what they were hoping for. If a buyer isn’t found, it would be the biggest High Street downfall since Woolworths in 2008.

BHS will continue to trade as usual whilst the administrators try a find a buyer; but it’s now likely to be a piecemeal sale of strategically important parts of the business.

What is administration and where does it leave the employees?

Administrators Duff & Phelps have taken over the day-to-day control of the company. The first thing they will do is to review the books and assess what they can do to repay people who are owed money by BHS and what they can do to keep the business going. The administrators are likely to sell off as much stock and the leases that BHS owns to generate cash for creditors.

The news is worrying for BHS staff. The future of the company is uncertain which means their financial future is also uncertain. So what happens now? For now, BHS employees will have to wait and see whether the Company can survive administration. Usually, this would entail the administrators finding a buyer.

When attempts to run a business in administration as a going concern have failed you may think there isn’t much you can do. However, the National Insurance Fund, from the government, does offer some relief for employees where a business finally becomes insolvent. In some circumstances you can apply for the following (if your employer hasn’t already paid you the same):

  • A statutory redundancy payment;
  • Up to 8 weeks’ arrears of pay (the 8 week cap to include any right to a ‘protective award’ for any failure to collectively consult with you, when 20 or more have been made redundant;
  • Statutory notice;
  • Up to 6 weeks’ holiday pay;
  • A ‘basic award’ for unfair dismissal (calculated on the same basis as a statutory redundancy payment);
  • Certain pension scheme contributions.

All of the above payments, aside from pension scheme contributions, are paid in multiples of ‘a week’s pay’, which is currently capped at £479 a week. The rest isn’t all cut and dry; claims for ‘basic award’ and ‘protective award’ would have to be established by an employment tribunal. There is help out there for employees but most often they are the last to know where they stand.

To speak to our Employment team about redundancy or to receive advice from a business perspective, call us on 0161 930 5151 or email enquiries@gorvins.com.

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