Beales is closing more than half of its
stores since it went into administration last month
Department chain Beales has shut 12 of its stores, putting almost 500 jobs at risk after announcing its collapse last month. This comes after administrators KPMG failed to sell all 23 of its outlets and were forced to close 12 of them on Friday night. The 12 stores will run closing sales over the next eight weeks and staff will keep their jobs until then. Beales employs about 1050 members of staff. With rising concerns over further store closures, what happens next for employees? Michael Doolin, Managing Director of Clover HR, speaks about the rights members of staff still have during this time and highlights their potential worries and concerns.
In 1881, Beales began trading in Bournemouth before expanding outlets across the country, but faced increasing losses over the years amid Britain’s struggling high streets. The company reported a loss of £3.1 million in March 3019, up from £1.3 million the year before. Despite interest from potential investors and buyers, a slump in sales along with rising costs saw Beales head towards administration. However, Mr Doolin insisted that going into administration does not signal the end of the business, contrary to popular belief.
“There is, however, a common misconception surrounding administration,” Mr Doolin said. “While the future may be uncertain, when a company goes into administration it does not immediately signal that it is going out of business. Rather, what administration does is allow time for options to be considered to see if the company can recover or a new owner can be found. What staff may not be aware of is that, for them, the first 14 days following the administration announcement are crucial.”
During administration, employee rights still remain including receiving holiday entitlement, sick pay, standard working hours and the right to request flexible working. Employee rights during administration are even extended to include payment of outstanding wages, redundancy pay, commission up to a maximum of £800 and any pension contributions – and these rights will be kept in place even if the business is bought off by another company.
“During administration, these rights are extended to include the right to be paid monies owed, such as outstanding wages and commission up to a maximum of £800, redundancy pay, up to six weeks’ occurred holiday pay and any pension contributions; the above rights are to remain in place during administration and, if the business is taken over by someone else, these rights are protected,” Mr Doolin said. “Although, if an employee is made redundant during the first 14 days of the business entering administration, they become an ‘ordinary creditor’. This means they will be in the last category to receive monies owed. However, their entitlement to outstanding wages and redundancy payments will remain.”
If members of staff are still employed after the initial 14-day period since Beales declared administration, they will stand a better chance at being compensated shall they face redundancy later on, as the employment rights of staff will effectively lie with the administrator.
“If retained beyond this, the employee becomes a ‘preferential creditor’,” Mr Doolin added. “As the name suggests, this decision is preferential to being made redundant during the period as it puts the employee in a better position should they face redundancy later on. It gives them priority over ‘ordinary creditors’ and they therefore stand a better chance of recouping monies owed to them. Once the initial 14-day period is over, the employment rights of staff are then effectively adopted by the administrator. The decision on how to proceed, therefore, lies with them. While the rights remain intact, administrators could ask employees to take a pay cut in order to help the company survive if a buyer still has not been found or request that employees defer a proportion of their pay. If the company cannot be saved, this becomes part of the monies owed to employees as preferential creditors.”
If Beales is able to find a last-minute buyer, all their employees’ rights will be protected as per usual. However, if the department chain store is closed down for good, members of staff may possibly not receive their full wages and other payments which is a major cause of concern to many. Members of staff can alleviate their concerns by speaking to HR departments to find a course of action for the future no matter which direction the company heads towards.
“So, in the event that Beales is purchased by a new company, TUPE legislation (The Transfer of Undertakings (Protection of Employment) Regulations 2006) will apply and employment rights will be protected,” Mr Doolin said. “However, should the department store chain be liquidated and closed down, employees may only receive a proportion of their wages and other payments. Ultimately, when a business announces its collapse into administration, employees can forgivably be concerned over not just the status of the company, but of their position and planning for the future. During this time, HR departments and consultancies are on hand to discuss what the business plans are with employees, and the proposed timescales. This will hopefully help to alleviate some of the concerns and help employees plan ahead if needs be.”
Beales is the latest high street store to suffer major losses as UK’s high streets continue to struggle amid high business rates and rising popularity of online shopping. Its rivals Debenhams and House of Fraser have also faced recent setbacks, having gone financial restructuring to prevent themselves from going bust. It is important the government looks at ways to bring life back to Britain’s dying high streets and address the growing demand to cut business rates and save thousands of stores from collapse.