November 30, 2020

What can HR learn from the collapse of Thomas Cook?

Paul Holcroft, Associate Director at HR consultancy Croner explores the HR implications of such a development.

Travel firm Thomas Cook has become the latest high profile business to collapse, leaving an estimated 150,000 British holidaymakers trapped abroad and the loss of thousands of jobs. With this in mind, it is timely to consider the HR implications of such a development. 

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

Although much of the procedure is likely to be informed by Thomas Cook’s redundancy policy, employees will be entitled to statutory redundancy pay providing they meet the requirement for two years’ service. The 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 covering redundancy pay and any unpaid wages, accrued holiday and notice pay.   

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, it would appear that Thomas Cook’s sudden collapse did not allow for this consultation to occur. Meaning there is the possibility that staff who are made redundant could make a claim of failure to carry out a consultation. 

As well as direct employers, there may 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.

It is also essential to consider those employers who may have staff stranded abroad due to flight cancellations. Well-constructed absence policies will help form the basis of any approach. However, HR personnel are encouraged to show a degree of leniency under the circumstances. Staff are sure to benefit from employer support in these situations and it will be a good idea to give them the opportunity to use any remaining annual leave to cover the absence, or alternatively take this as unpaid leave.