Up to 20 senior staff at House of Fraser face losing redundancy payments that were agreed before the department store chain collapsed, Drapers has learned.
The employees were put into a 45-day consultation period on 21 June, when HoF announced plans to shake up its brand strategy and drop eight of its 11 own-brand labels.
Senior staff from the buying and merchandising teams expected to be paid between £20,000 and £25,000 each as part of agreed redundancy terms. Junior staff were to receive smaller amounts.
However, these payments were not made when their employment with HoF ended. The retailer went into administration on 10 August, and was bought by Mike Ashley’s Sports Direct for £90m the same day.
One former employee, who did not wish to be named, told Drapers that HoF had agreed to pay their redundancy settlement “in two weeks” in early August, but no funds had been forthcoming.
The ex-employee said: “There was a group of 15 to 20 put into consultation and given an end date of 6 August. Then the company went into administration a few days later [on 10 August], and the administrator [EY] wouldn’t pay us.
“When we were given a 45-day consultation period, everyone knew when our final day would be, so why did they choose on the final day [of our employment], not to give us our due monies and settle everything?
“[House of Fraser] said, ‘There will be money in your account’, and that we’d be paid within two weeks of the redundancy date.”
Another employee who was made redundant said: “We went through it in the official and legal way. We left on 6 August and, on 10 August, [HoF entering administration] was in the news within hours. Because of the administration, we were told they [the administrators] weren’t responsible for any redundancy payments.”
Workers are entitled to statutory redundancy pay from the Insolvency Service in cases where their employer becomes insolvent. However, statutory payments are often significantly lower than payments agreed with employers.
Drapers understands that some staff may receive as little as one week’s pay in lieu of their original redundancy package.
A spokesman for the Insolvency Service said: “As House of Fraser went into an insolvency process, employees made redundant prior to the sale of the business are entitled to make a claim statutory redundancy and for compensatory notice pay. These amounts are subject to legal limits.”
It is unclear whether any additional payments may be claimed against the HoF administrators.
Drapers understands that four directors of merchandising at HoF, who left the business immediately on announcement of the shake-up on 21 June, were paid and are unaffected.
Administrator EY has been contacted for comment.