Woolworths and Statutory Obligations

http://www.statesassembly.gov.je/documents/statements/41235-8801-2012009.htm

The Viscount has advised of the steps he has already taken and anticipates taking to identify and best protect any legal rights of the employees, given that there remains property in the Island belonging to Woolworths plc., the sale or assignment of which will need the sanction of the Royal Court. The Minister for Social Security is satisfied that every effort is being made to protect the legal rights of the former Woolworths plc. employees....Whilst Jersey does not currently have legislation in respect of redundancy pay, legislation does make provision for minimum periods of notice that an employer is required to give an employee on termination of their employment. These notice periods are longer than those required in the UK. In addition to being briefed by the Viscount, the Minister for Social Security has written to the joint Administrators to express his disappointment and that of the Chief Minister in respect of the failure to meet their statutory obligations under Jersey Employment Law - in particular regarding the failure to make payments in lieu of notice. The Minister has further requested a meeting with the Joint Administrators to discuss these and related matters.

If I fail to meet my statutory obligations under the law, and neglect to return my income tax form, or pay my Parish rates, or renew my driving license, or ensure I have insurance to drive, or breach the Data Protection Law at work, then the Law would be down on me like a ton of bricks, with summons, fines and probably in some cases threatened imprisonment. For instance, if I fail to make an income tax return, or make a fraudulent one, the following applies:

Legal proceedings may be taken if you fail to submit a Return at all. The penalty for this is a fine up to £5,000. The penalty for negligently making an incorrect Income Tax Return is a fine of up to £5,000 PLUS twice the tax which would have been undercharged by reason of the negligence. If you fraudulently make an incorrect Tax Return you could face imprisonment up to a maximum of 15 years and a fine.

If you are Deloites, the administrator, however, with the Employment Law, apparently, what you get is a letter expressing "disappointment" at your failure to comply with the statutory obligations. The Viscount may be acting on this matter, but there is evidently no letter warning you about this, no summons to the court, no statutory fine which should be imposed on the administrators as soon as possible, and no threat of imprisonment. Why have a statutory obligation if it evidently is not statutory to some accountant firms!

In the words of Lewis Armstrong, "what a wonderful world"!

Redundancy in Jersey

Last year Horseplay fell victim to the collapse of its parent company, and by the end of this year, we had no more Woolworths either. The Money programme on Radio 4 was discussing fallout from the credit crunch, and they suggested that the vulnerable end of the market would not be either the very expensive retailers, because the people who buy from them are not that badly hit by the credit crunch (and may even still be getting improbably high bonuses), not the very cheap cut price retailers, because people will be downsizing their purchases to those. They suggested that the middle market of shops like BHS, Marks and Spenser etc is where the downturn will hit hardest, and possibly garden centre chains, B&Q, and so on. These may trade very well in Jersey, but as the recent closures show, if a chain goes down, the local shop goes as well, regardless of how well it is doing.

This is a vulnerability in our local economy, and if any steps can be taken to mitigate against it, they would take the form of encouraging local businesses where possible rather than UK chains, whenever a choice presented itself. Otherwise, I fear we may see more closures in the high street, and more unemployment. This is especially bad because we have no compensatory redundancy payment scheme, and while funding one will mean some kind of extra tax, possibly on employers, it is certainly time that it was considered.

Now New Zealand does not have any specific redundancy scheme in operation, but in June 2008, they commissioned a report on the matter which explores the options in great detail. The advantage of this is that they are looking at the kind of tax burden or employer / employee burden that this will involve, and also the state of the economy (i.e. an economic downturn) in their assessment of the pros and cons of the options. No doubt Jersey could get consultants to do the same kind of exercise, but most of the basic economic groundwork would, I am certain, have been done in principle in the New Zealand report.

The full report, well worth reading, is at:
http://dol.govt.nz/publications/research/restructuring-and-redundancy/restructuring-and-redundancy-01.asp#contents

Report of the Public Advisory Group on Restructuring and Redundancy

A summary of the funding models can be found at:
http://dol.govt.nz/publications/research/restructuring-and-redundancy/restructuring-and-redundancy-05.asp


Funding models

In considering options for compensatory funding models the Group agreed that the primary aim for any model is that there should always be money available to distribute for compensation to employees in the event of a redundancy.

Self Insurance - Employers remain responsible for funding statutory redundancy entitlements, and can fund that either through their own balance sheet or by taking insurance with a third party provider.

Compulsory Compensation Insurance - Employers remain responsible for funding statutory redundancy entitlements, and must take insurance with a third party provider to ensure payments are available even in an insolvency situation.

Levy - Employers (and possibly employees) pay a payroll-based levy to a centrally managed fund which then meets statutory redundancy payment costs (similar to the levy collection under ACC scheme, but with only lump sum compensation payable as per the statutory formula).

Contributions - Employers and employees (and possibly government) make contributions representing a small proportion of wages into one or more managed funds (similar to Kiwisaver) which then provides any lump sum compensation payable as per the statutory formula.

General Taxation - Government funds statutory entitlements from general taxation (effectively an enhanced social security or unemployment benefit in redundancy situations).

Options (b) through (e) offer higher funding certainty, but with varying degrees of compliance and administration costs. Options (b) through (d) potentially open another source of short and medium term investment funding in New Zealand, potentially assisting capital deepening and through that productivity. Options (b) through (e) could have reduced administration costs, greater efficiency and lower risks if they were firmly aligned with a similar funding scheme already in operation for another purpose (e.g. (b)) private income protection insurance, (c) ACC, (d) Kiwisaver, (e) Unemployment Benefit payments made by MSD) rather than set-up on a stand-alone basis.