What happens when your company goes into administration?

A company that goes into administration

I am updating this post for the Thomas Cook employees, who has gone into administration over night. For all of those people who find themselves without jobs.

Many people and their families going through a hugely stressful time. Worrying about what is next for them, the stress of trying to find a new job. Hopefully you have some emergency money set aside for such real emergencies. An emergency fund is fund that would cover your essential monthly costs for 3-6 months, held in easy access cash savings account.

It Happened to Me

It has happened to me; I have felt the stress and the worry. In 2008 I started a new job with First Quench Retailing, the company who owned Wine Rack and Threshers. They owned around 800 retail outlets in most towns and cities. It was the main beers, wine and spirits store in Penzance, I remember it well growing up as they would always ID me when I trying to buy underage booze.

I was in the finance team supporting the wine, beers, spirits and food commercial directors in their decisions, I was their finance business partner. I was the person to analyse their plans to ensure there was a quick return on spend and that proposed promotions would work. My main objective was to increase sales and keep control of costs. I knew immediately they were in trouble from the financial decisions we were making.

A company gets desperate for cash

There was a big sale and lease back program, where the retail stores were sold for let’s say £80m and then the company leased them back paying a monthly rental amount instead. The investors poured in a huge cash injection to help with cash flow, but an 800 strong retail operation swallows money like you would not believe.

We got pretty desperate with promotions, the big 3for2 offer was something that Threshers/Wine Rack invented. The first time it was ran in 2006/2007 it went viral and the sales were INCREDIBLE. It was always running just before Christmas when everyone stocks on booze. We re-ran this promotion every year, it’s impact diminishing as each year passed. But it was always an amazing cash injection. BUT the margins fell from 40%ish to 20%ish.

Margins are so important in retail. In simple terms and ignoring tax, you sell a bottle of wine for £10, but this bottle costs you £5 to buy. Your margin is £5 so 50%. The more you squeeze this margin the less money you have to pay your staff, rent, electricity bills and other essential business costs.

I would spend my working life coming up with new promotion ideas, or business casing ideas from others to generate as much cash as possible. It was an incredible experience for a young accountant. I am grateful for what I learnt and experienced in this job.

Maternity leave and soon after my job is gone

In August of 2009, after I had been there for 14 months I went on maternity leave. Josh was born in October. And in November my company went into administration.

I saw it on the news first, and a few hour later my manager called me to let me know that from that day forward, I no longer had a job. I had a 6-week-old baby and I had lost my job.

Sort out the financials quickly

First thing to sort out was the financial remuneration, the immediate statutory redundancy payment. I had less than two years’ service, so it rounded to two years, so I got 2 weeks redundancy pay. You tend to get 1 weeks statutory redundancy for every year you have worked for the company. I remember getting around £800 paid quickly into my bank account, within a couple of weeks. But that was it.

I was also owed three months salary as notice pay. But I would not receive this money until the administrators had done all their work. This took years. Employees are near the bottom of the pile for money owed. The banks and HMRC are paid their owed money first, and the pecking order is worked through until finally the employees owed notice pay are recognised.

Citizens Advice Bureau

I went straight to citizens advice bureau to find out what I was entitled to benefits wise. You can call them too, just look on their website. I had to make a claim for statutory maternity pay. If I had not been on maternity leave, I would go straight to the job centre to apply for job seekers allowance. Time is of the essence here as job seekers is only paid as soon as you apply and are accepted, it is not backdated. It is money you are due, 100% make an appointment immediately and apply for the money you are due from the government.

My statutory maternity allowance was tiny, at the time around £110 per week, but I did have some savings. Not much but some. My thrifty ways came into play and I cut back on everything, did a mad eBay sale to generate cash. This was before Mrs Mummypenny days (my website was born in 2013), but I have always been good with saving money and generating cash.

I had to find a job

By the time Josh was 7 months old I had to find a job. Our savings were gone, and we couldn’t afford to pay the mortgage.

Fate has a wonderful way of working sometimes. I saw on LinkedIn, a friend from my Tesco days was looking for a commercial finance manager to work for him on contract basis at T-Mobile in Hatfield, near to where I lived. A meeting was quickly arranged and I met Simon and Aaron from the team, the next day the job was mine. I started work two weeks later on a 6-month contract. It was a great job, I totally landed on my feet, Simon was a brilliant boss.

Around three years later in 2012/2013 I finally received my three-month notice pay. But all I got was 30p in the £1. I was owed around £9k in total, but only received £3k. I took this as a bonus, I was never expecting to get any money from the company that went bust. So, I went out and bought a beautiful original piece of art with the money. Yes, I spent the entire £3k on a picture. Here is it. Beautiful.