The recent news that Northern Foods is planning to mothball its
Fenland Foods ready meals facility in Grantham, could be a sign of
the current issues facing food manufacturers according to experts
at law firm Browne Jacobson.
The facility will be closed from August 2008, following the
company ceasing to supply ready meals to Marks & Spencer, and
is likely to involve the loss of 700 jobs.
Mark Hughes, Corporate lawyer at Browne Jacobson, said:
“Whilst the reasons for the resigning of supply are not
known, it serves as a stark reminder that food manufacturers often
face being reliant upon one main customer, which in addition to
carrying the risk associated with losing that customer, also means
that banks and other financial institutions are less inclined to
lend to them.
“The recent rises in the costs of food materials are also
likely to hit the profit margins for those who supply to the large
multiples as supermarkets are reluctant to pass on any price
increases to customers.”
In addition to the other costs incurred from a shut down of a
single site operation, the redundancy process itself provides
companies with further costs in administering that process
correctly and in accordance with employment legislation.
Dawn Lobley, a specialist in employment law at Browne Jacobson,
explained:
“Employers must inform and consult with appropriate employee
representatives of the workforce when planning to dismiss as
redundant 20 or more employees at one establishment within a period
of 90 days or less.”
Employers are obliged to inform and collectively consult with
the workforce “in good time” which must in any event be:
- for a minimum period of 30 days (where the redundancies will
affect between 20 and 99 employees at one establishment);
- or a minimum period of 90 days for large-scale redundancies
programmes affecting 100 or more employees at one
establishment).
Dawn Lobley explained that in addition to costs of retaining a
workforce for the collective consultation process, employers will
need to cover additional costs associated with dismissals, such as
notice payments, statutory redundancy payments and payment for
accrued holiday.
“Employers will also need to be careful to ensure that they
have properly complied with their obligations to inform and consult
with the workforce and followed a fair dismissal procedure. Failure
to do so could mean the employer facing a punitive award for a
failure to inform and consult (which can be up to 90 days gross pay
per employee) or an unfair dismissal claim where the maximum
compensatory award an employee can receive is currently
£63,000,” she added.
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