Unions have called on struggling companies to prioritise workers during the COVID-19 outbreak as concerns grow over the use of government support schemes for employees.
Under the coronavirus job retention scheme the government will pay 80% of wages, up to a maximum of £2,500 per month, for workers at companies adversely affected by the outbreak.
Many high-profile businesses have taken advantage of the scheme but there are concerns administrators managing collapsed companies may not take advantage of a system designed to protect jobs.
Workers sacked by rent-to-buy retailer Bright House, which collapsed last week, have told Sky News administrators should have used the furlough scheme to protect them for at least three months.
Their treatment contrasts with the approach of Debenhams, which went into administration for the second time in a year on Monday, but last week furloughed 22,000 staff.
Their intention is to protect the company from creditors during the forced closure of stores but return to trade after the lockdown ends, though it is not clear how many shops or staff will be retained in the long term.
Bright House employees said hundreds of workers, many of them low-paid account managers, were made redundant by administrators without consultation or an explanation as to why the furlough scheme was not used.
Tracey Burns, a customer account manager at Bright House for three-and-a-half years, was sacked last week.
She said: “On a conference call with hundreds of other staff I was told that we were no longer employed, that no redundancy would be paid, no notice period would be paid and we’d have no pay for the two weeks already worked this month, including no overtime and expenses.
“The only answer they gave us was to apply to the government.
“I’m not going to be able to pay my rent, I’m not going to be able to pay my council tax.
“I’ve applied for universal credit but that will take five or six weeks. I’ve started looking for jobs but they mostly say come back after this is all over. There’s nothing out there. I’ve got nothing to fall back on.”
Frances O’Grady, general secretary of the Trade Unions Congress, said administrators should use the furlough scheme.
“There’s no excuse for companies laying off their workers at a time like this. The job retention scheme is there to provide essential support to working families, at no extra cost to employers.
“Many employers have done the right thing and furloughed their staff. But we need to see more bosses doing all they can to ensure jobs and livelihoods are safe.”
The role of administrators appears to be a grey area in government guidelines that could become critical if companies are forced into collapse by a prolonged lockdown.
Insolvency law states that an administrator’s first responsibility is to try and maintain the company as a going concern and, if that is not possible, to protect creditors.
The law gives administrators great latitude to decide the fate of employees, though the furlough scheme and the unique circumstances of the coronavirus outbreak offer a means of paying salaries not previously available.
Kevin Ellis, chairman of PWC told Sky News: “If that company is going to survive and come back out then furloughing the staff is the right thing, otherwise allowing the staff to be made redundant and therefore have the opportunity to find other jobs might be the right thing as well, but it depends on a case by case basis.”
A spokesperson for Grant Thornton, joint administrators of Bright House, said: “The joint administrators have been assessing current and future resourcing needs throughout the administration period and in light of the current limitations brought on by the COVID-19 outbreak.
“Of the c.2,200 employees… around 800 have been retained in their current capacity, around 500 have been furloughed under the Coronavirus Job Retention Scheme and unfortunately, around 900 have been made redundant since the appointment. The decision to retain or furlough certain roles is based on the ability of the business to adapt its operating model to the COVID-19 environment to maintain its services to customers and the future trading requirements of the administrators.”