What about the workers?
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What help and support can employees expect when their employer fails?
Words: Adam Hill
There has been a grim procession of haulage irms failing. So far in 2011 those going under have included: 21st Century Logistics, trading as Dodd’s Group, which ceased to be after 100 years (CM 1 September); Derbyshire haulage company SMC Transport; Lancashire-based warehousing and removals specialist Whittle Movers Limited; Norfolk building products haulier Halls Group, which closed its doors after 65 years; and timber hauliers Donaldson & McConnell and FW Mason & Sons, the latter with 82 years in business.
In most cases staff have lost their jobs. Ninety Dodd’s staff in Shefield and Kent were made redundant on the very day the administrator took charge. Administrator MCR cited a lack of working capital due to severe cashlow problems and said it had no choice but to wind down operations with immediate effect and market Dodd’s assets to maximise a return for creditors.
“Assets in this case will be things like trucks, buildings, the order book, desks and chairs,” a spokesman for MCR told CM. “There was no hope for the company to be sold as a going concern.”
It’s a sad end, but this is a familiar story.
In theory, employees facing redundancy will be entitled to a pay-off from their company. If they are lucky and their employer can pay, staff are able to receive up to £30,000 tax free.
However, where a company is in inancial dificulty to the point of going under it is highly likely that things will be more complicated, according to the United Road Transport Union.
“In our experience, when a company goes bust, and the staff are made redundant, there is usually very little chance that they will get any money that is owed to them,” a spokesman for URTU warns. “Commencing proceedings to claim money owed from previous employers can be very dificult, costly and time consuming.” So far, so bad. The good news, though, is that there is some help at hand in the form of a state safety net.
Even if their company is no longer trading, many workers who have lost their jobs will be entitled to a statutory redundancy payment, providing they have two years’ continuous service with the irm. They can claim one week’s pay for each year of service up to a maximum of 12 years.
National Insurance Fund
The government, via the Department for Business Enterprise and Regulatory Reform (BERR), will pay them directly. It works like this: if your employer is declared insolvent, you can apply for a direct payment from the National Insurance Fund. In order to do this you must irst write to your employer asking for your statutory redundancy pay – if the employer is unable to provide it, you then ill out a form called an RP1, which is available from the Insolvency Service (see box for details). “Usually an application to the secretary of state for outstanding redundancy payments is simpler and a more secure route of securing monies owed,” says the URTU.
There is a but, however. “They will only ever pay the statutory minimum amount, even if your contract of employment promised you more,” says the union.
BERR will attempt to get your money from the assets of the business and you can also claim against the company’s assets if, say, you are going to get less from the government than you were promised in your contract of The Department for Business Enterprise and Regulatory Reform redundancy payments helpline Tel: 0845 145 0004 employment. In effect, you become a creditor. “You will need to lodge a claim with the administrators if they are going through insolvency, but at best you are only likely to get some of what you are due, possibly after a long wait, and at worst nothing,” URTU advises.
Getting your redundancy money is not the only inancial consideration when things go bad, of course, and there is good advice out there on other ways to lessen the inancial pain. Trade union Unite tells its members who have mortgages to talk to their lender, and points out that some local councils run mortgage rescue schemes. The government’s Homeowner Mortgage Support Scheme could also help.
The government itself urges those who have been made redundant to “do everything you can to reduce your loss, especially by claiming all the state beneits and allowances to which you are entitled”.
The award of some of these will depend on your income and savings, but job seeker allowance should be claimed immediately (you might not be able to backdate your claim). There is also the employment and support allowance (if illness prevents you working), income support (for single parents), housing beneit (if you rent your property) and council tax beneit.
One of the most sobering aspects of the recent company failures is that many of these irms have proud names and an impressive heritage.
And while history is scant comfort to staff who are left picking up the pieces of their working lives, there is at least a mechanism in place to help them when the worst happens. ■