I bought a three pack of dahlia tubers from Wilko back in February. The packaging said they were a type called “perfect match” and the picture showed blooms in varying shades of pale pink.
They grew well and made me smile when they started to flower in July because they are neither pale pink nor a perfect match. Two are the same red and white and one is bright yellow. The price for the three pack at Wilko’s was just £3 whereas the price for just one dahlia tuber from somewhere like Sarah Raven would set you back £7.95.
Before Wilco’s announcement of its intention to appoint administrators, I searched on Twitter for Wilko dahlias to see if other people’s dahlias were similarly mismatched. I found many photos by proud gardeners of their Wilko bargain dahlias, often name unknown or different to what was pictured on the packet, blooming abundantly. Also, numerous humorous tweets about popping into Wilko just for some cat biscuits and coming out with bags full of “bits.”
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Feeling amused about my unexpected dahlia colours seems shallow now that Wilko has gone into administration. Although the administrators PwC are presently trying to find a buyer for some or all of the business, in a heavy blow for the 12,000 people who sold us keenly priced dahlias, pet food and back to school stationery, their jobs are at risk.
This is a deeply worrying time for those 12,000 people as they turn up for work this week, waiting to find out what administration means for them.
The job of the administrators is to act in the best interests of the creditors as a whole. Selling a business as a going concern will fetch a higher return for creditors so administrators will aim to achieve this where possible. Sometimes a buyer for the business has already been lined up before a company enters into administration in what is known as a pre-pack, but that has not been secured for Wilko’s.
If the administrators find a buyer for some of all of the business as a going concern this will mean the contracts of employment of employees will transfer over to the new owners of the business under the Transfer of Undertakings (Protection of Employment) Regulations 2006, commonly known as TUPE.
Regrettably this does not mean that the jobs of the transferring employees are safe from redundancy because the new owner might still need to make redundancies following the purchase, but the employees’ period of service and terms and conditions are protected and the new owner would have to follow proper redundancy process and pay all sums due to the employees including redundancy pay.
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Administrators only have 14 days from their appointment to decide whether to adopt the contract of employment of employees. Actions taken by the administrator in the first 14 days do not count as adoption of employment contracts. During this small window of time the administrators will make speedy decisions about who they need to retain as employees to keep trading for a while and who they can let go to save cost.
They generally will not follow any sort of consultation process despite this being a requirement for a fair dismissal of employees and will immediately terminate the contracts of employment of those they have identified they can manage without.
Those employees are still entitled to their accrued salary to date of termination, notice pay, holiday pay and redundancy pay but are ordinary creditors meaning they are last in line of the creditors to get paid. Employees who have their contracts formally adopted become preferential creditors of the Company although this doesn’t really add much where the Company is by definition struggling financially and highly unlikely to be able to pay off its creditors in full.
Fortunately, there is at least some money for employees made redundant by failed companies. If the company does not have the money to pay the employees what they are owed employees can apply to the Redundancy Payments Service for sums owed, although this is subject to the statutory cap of a maximum of £643 per week. The money comes from the National Insurance fund.
There is also the prospect of a protective award where more than twenty employees at one establishment are made redundant without following process. Employees can bring a claim in the employment tribunal for a protective award and the tribunal can award between 45 and 90 days pay.
Employees do not need two years’ service to bring this claim. Case law from the time Woolworths went into administration and which took around seven years to finally conclude determined that for the purposes of calculating the 20 employees all Wilko stores will not be lumped together as one establishment so only those employees employed in stores with 20 or more employees in that store are eligible to claim a protective award.
A claim has to be brought in the tribunal and a judgment given by the tribunal to get paid. Although the Company has to be a party to those tribunal proceedings, this is a formality only where the Company has gone into liquidation and the Company doesn’t take any part in the proceedings or attend the hearing. The Secretary of State for Business and Trade will also be a party to the proceedings and may make representations about the level of award to be made.
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The award once made by the tribunal will be paid by the Insolvency Service. Payment is capped at eight weeks pay at the statutory £643 per week rate even if the employees were awarded more by the tribunal. Employees cannot get a protective award for the same period as a claim for arrears of pay and any state benefits for the period are deducted. Protective awards are also subject to national insurance deductions.
It is my personal view that employees who are eligible to get a protective award from an insolvent employee should just be able to apply for it in the same way as they claim their redundancy pay without having to go through the hassle of getting a tribunal judgment.
These claims also take up the time of an already overburdened tribunal system. But the current way to get a protective award is a tribunal claim so if you are a Wilko employee in a store with more than 20 employees and are made redundant without process, keep an eye on the Wilko noticeboard on the GMB’s website.
Bethan Darwin is a partner with law firm