Following the collapse of Thomas Cook, Paul Holcroft of Croner looks at the HR implications, including the redundancy rights of the travel firm’s employees.

What is the procedure for redundancy in the UK?

Though much of the media coverage has focused on the estimated 150,000 British holidaymakers stranded abroad, from an HR perspective, it is also important to recognise that an estimated 9,000 Thomas Cook employees have lost their jobs. Given that the company has ceased trading, this will be considered a redundancy situation.

Typically, employers who are planning to make 100 or more employees redundant are required to take part in a collective consultation lasting at least 45 days before any dismissal takes place. However, given Thomas Cook’s sudden collapse, there is a chance that this consultation did not take place. This means there is the possibility that staff who are made redundant could make a claim for failure to carry out a consultation to the employment tribunal.

How much redundancy pay is an employee entitled to in the UK?

Although much of the procedure is likely to be informed by Thomas Cook’s own redundancy policy, employees at the company will be entitled to statutory redundancy pay, providing they meet the requirement for two years’ service. Legislation provides different pay rates for staff, depending on their age and length of service.

However, given the lack of funds, it is unclear whether Thomas Cook would be able to cover these redundancy payments. In this situation, employees will need to apply to the National Insurance Fund to claim payment for redundancy pay and any unpaid wages, accrued holiday and notice pay.  

An employee (but not the self-employed or agency workers) will be able to claim:

• wage arrears: up to 8 weeks’ wages
• holiday pay: up to 6 weeks’ annual leave pay
• notice pay: an employee must be given the notice period stated in their contract or the statutory minimum notice period, whichever is longer
• redundancy payments: these are calculated by the length of the employees’ service, their salary (subject to the cap) and their age up to a maximum of 20 years’ employment

Should employees need to claim for pay through the National Insurance Fund, payments are capped at £525 per week.

Are employees entitled to pay during lay offs or short-time working?

As well as direct employees, there may also be individuals in other organisations that rely on Thomas Cook’s continued operations for their own business, such as coach drivers for package holidays. In these situations, there may be a lack of available work created by Thomas Cook’s closure and it would help the respective employers if there was a lay-off provision within employee contracts, legally allowing them to prevent staff from attending work unnecessarily.

During this time, those with at least one months’ service will be entitled to statutory guarantee pay. This calculation is made by multiplying the number of hours the employee would have worked on the day in question by their guaranteed hourly rate. The amount is capped at a maximum of £29 per day and the payment is limited to 5 days within any rolling three-month period.

About the author

Paul Holcroft is an associate director at Croner, a consultancy for HR, health and safety and reward.

See also

What are your employee rights when your company is insolvent?

A guide to redundancy pay for directors

Five things employers should know about collective redundancies

Find out more

Redundancy: your rights (Gov)

Your rights if your employer is insolvent (Gov)

Make a claim to an employment tribunal (Gov)

Lay-offs and short-time working (Gov)

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