Ted Baker To Close 15 Stores – Redundancy Rules When A Business Goes Into Administration

Administrators have confirmed that the High Street fashion retailer, Ted Baker is due to close 15 UK stores meaning 245 jobs will be cut. Out of the 46 stores across the country, eleven stores are expected to shut by 19 April, which will lead to 120 job losses.

In addition, 25 head office roles will go, and four stores that were already expected to close before the administration will shut soon, affecting a further 100 roles.

No Ordinary Designer Label, the firm behind Ted Baker’s UK shops, hired administrators in March. When Ted Baker fell into administration, the company had roughly 975 employees in the UK and ran 46 stores, including an e-commerce platform. US company Authentic Brands Group owns the intellectual property (IP) of Ted Baker with No Ordinary Designer Label holding business for the brand within the UK.

Authentic Brands said last month when No Ordinary Design Label fell into administration itself that the damage had been done during a tip-up with another business was “too much to overcome”. The administrators commented that the shops expected to close “have no prospect of being returned to profitability, even with material rent reductions.”

The 11 stores due to close by 19 April are listed below:

The four stores that are due to close within the next few weeks are:

This news comes after years of turmoil in the group. Ted Baker first started struggling in 2019 after founder Ray Kelvin quit his role following allegations of harassment. This was followed by many profit warnings and a reduction of the news of Ted Baker going into administration following the recent collapse of The Body Shop, Wilko, and Paperchase. All being said victims of the COVID pandemic and rising costs of living crisis.

What are the rules and processes regarding redundancy when a business goes into administration?

When a company goes into administration, some or all of its employees may be at risk of redundancy due to the company’s financial instability or its inability to continue operating in its current form. To ensure dismissal by reason of redundancy is fair, the redundancy process briefly outlined below should be followed.

1. Administrator(s) appointed

When a company enters administration, an administrator is appointed to take control of the company’s affairs. Although administrators carry out their duties as agents of the company, they must act in the best interests of the company’s creditors. Unlike other types of insolvency events, the appointment of an administrator will not, in and of itself, terminate employees’ contracts of employment.

2. Administrator’s assessment

The administrator will assess the financial situation of the company with respect to the company’s assets, liabilities, and prospects for recovery. The administrator will also determine if any parts of the business can be saved, sold, or restructured.

3. Employee consultation

During the administration process, the administrator should consult with employees or their representatives regarding any potential redundancies and how redundancies will be carried out. Where more than 20 redundancies are being made, the law dictates that the administrator must consult with the employees’ recognised trade union, or the employees’ representatives in the absence of a recognised trade union, as well as consulting with the employees individually. Where fewer than 20 redundancies are being made, the administrator is only required to consult with employees individually. Additional rights with respect to consultation for redundancy purposes may be contained within the contract of employment.

A ‘fair’ redundancy procedure requires employers to give employees as much warning as possible and to consider alternatives such as voluntary redundancies and early retirement.

4. Selection for redundancy

If redundancies are necessary, the administrator should establish objective criteria for selecting which employees will be made redundant.

The criteria will typically involve consideration of factors such as job performance, skills, and qualifications. Care should be taken not to directly or indirectly discriminate against employees with protected characteristics.

5. Notice and statutory redundancy pay

Affected employees should be provided with notice of their redundancy in accordance with the terms of their employment contracts, or the statutory minimum notice provisions. Notice should be served, and employees should be paid for their notice period, in the usual way.

Employees with 2 years of service have the right to receive statutory redundancy pay. The amount of statutory redundancy pay will depend upon the age of the employee and their length of service with the company up to a maximum period of 20 years. The redundancy pay calculation will also consider the gross weekly pay of the employee, this should be inclusive of any guaranteed overtime confirmed within the employee’s contract of employment and any bonuses or commission, up to a maximum of £700 (gross) (increased from £643 (gross) since 6 April 2024). The maximum statutory redundancy payment an employee can receive is currently £21,000 and again has been increased from £19,290 since 6 April 2024.

Employees should be aware that they can lose the right to receive statutory redundancy pay if they refuse an offer of suitable alternative employment within the same company.

6. Appeal process and tribunal claims

Ideally, employees should be offered the opportunity to appeal the redundancy decision, particularly where they believe that they were unfairly selected or where a fair redundancy process was not followed.

Additionally, employees who meet the eligibility criteria under the Employment Rights Act 1996 can bring unfair dismissal claims to an employment tribunal where a fair process was not followed.

7. Employee rights and claims in administration

Where employees bring claims against their employer in administration, they may be awarded preferential status for some of their claims. A claim that is awarded preferential status will rank higher in the order of priority for receiving payment, meaning that the claim will be considered before the claims of unsecured creditors. This is important because, when the order of priorities is followed, there is usually not much (if any) money left in the pot to pay the unsecured creditors; preferential status gives employees a better opportunity to recover the money they are owed by the company.

Employees also benefit from additional protection in that they can recover certain debts owed to them by their employer from the National Insurance Fund this includes statutory redundancy payments, arrears of wages (up to 8 weeks), payment for notice period, holiday pay (not exceeding 6 weeks) and any basic award of compensation for unfair dismissal.

8. Job opportunities

In certain circumstances, the administrator may be able to help affected employees find alternative job opportunities within the company; this is known as suitable alternative employment. Whether the role is suitable is largely subjective but will depend upon factors such as pay, benefits, and location of the role.

If an offer of suitable alternative employment is accepted, the alternative employment should commence within 4 weeks of the end of the employee’s current role. If this does not happen, the employee will automatically be classified as redundant and will be entitled to receive their statutory redundancy pay if eligible.

Employees have the right to a 4 week trial period where suitable alternative employment is offered. It is best practice for the trial to begin once their current role has ended. An employee may terminate their trial at any time without providing notice where the role is not suitable and must confirm in writing that the role is not suitable together with reasons as to why it is not suitable; failure to do so may result in them losing their rights to redundancy pay.

Any type of redundancy can be challenging and is often a distressing process for employees. In the context of a company entering administration, it is typically used as a last resort when efforts to save the company, or its assets, have failed. The administrator’s role is to navigate this process while ensuring that legal requirements are met, and employees are treated fairly and respectfully.