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Picking, mixing and counting the cost of Woolworths to all of us

Recent responses to parliamentary questions show the total cost to the taxpayer of the Woolworths administration was £59,207,942.40. These costs arose as Woolworths became unable to pay accrued salary and notice, so the taxpayer stepped in to pick up the cost. The cost impact of the Woolworths decision has also been quantified at over £18million to the tax payer.

pick and mix

 

Other figures given demonstrate the level of payouts by the UK taxpayer and are set out in our woolworths graph. The amount paid out by the taxpayer in respect of unpaid notice and salary has decreased readily since the height of the credit crunch as one would expect; the level of administrations has broadly declined. The protective award payments that have needed to be paid by the tax payer have remained relatively constant. It should also be noted that the high and consistent trend of these protective award payouts largely occurred before the Woolworths decision.

 

As the collective consultation rights that employees enjoy derive from a European Directive, the Government cannot simply change the rules to avoid having to pay out what had been over £128 million during the last 5 years. Our experience is that the liabilities arise because significant numbers of administrators, on being appointed, rapidly dismiss the workforce with no regard to the duty to collectively consult.

The Woolworths decision has the very real potential to increase this liability where administrators are appointed to multisite employers. It is no surprise to us that the first year of post Woolworths taxpayer payouts saw protective award payments being significantly more than the other payouts for salary and notice. It would appear that unless administrators start to engage with collective redundancy processes, the cost to the taxpayer will remain stubbornly high.

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further