Wilko, the UK homeware retailer, has collapsed into administration putting more than 12,000 jobs at risk.
But, what can employees expect from the administration process?
The retailer sought protection from creditors after failing to secure emergency funding. Administrator’s PwC reported that “initially, Wilko will continue to trade all stores without any immediate redundancies… if buyers for some or all of the group are not found, it is likely that store closures and redundancies will follow”.
Wilko’s demise is one of the biggest retail casualties in the UK in recent years. It follows the collapse of Philip Green’s retail empire Arcadia and the department store chain Debenhams.
Administration is a formal insolvency procedure designed to rescue a company in financial distress. Administrators are appointed to assess the company’s financial situation and explore options for its survival. This could involve selling parts of the business, re-negotiating debts or finding investors.
Once in administration, a company can continue to trade. So Wilko stores will stay open for now, without any immediate job losses. The daily management and control of Wilko will however pass from the directors to the appointed administrators.
Employee rights and benefits
Administrators should communicate with employees about the situation, their rights and the options being considered. This might include information about the continuation of business operations, potential job losses and the timing of any payments.
In many cases, employees’ rights are protected during the administration process. Employees are often considered preferential creditors. This means they have a higher priority to receive certain payments, such as unpaid wages and accrued holiday pay.
Unfortunately, the administration process can lead to uncertainty and potential delays for employees in receiving wages, bonuses, and other entitlements.
Benefits such as pension contributions and health insurance for example might also be affected or even discontinued.
Redundancy process and rights
If the company cannot be saved in its entirety and all or part of it is eventually liquidated, employees may face redundancy. In such cases, employees may then be entitled to redundancy pay, notice pay, and any outstanding wages. The National Insurance Fund is potentially available to support employees in respect to certain debts owed by an insolvent company in the event of the company having insufficient resources to make these payments.
It is important to note that the impact of administration can vary based on factors such as the specific circumstances of the company, the industry it operates in, and the decisions made by administrators and stakeholders.
Employees will find that understanding their rights, seeking legal advice if needed, and preparing for potential changes are crucial steps during this uncertain time.