Chapter 8: The Restructuring Plan
7. The role of employees Companies experiencing financial difficulties may often blame labour or employment costs for their failure to make a sufficient profit. Of course, in some respects these problems may be easily solved. The company may shed part of its workforce paying the dismissed employees whatever their entitlements are under employment protection legislation. The company may shift its operations overseas where labour costs are lower. This is a phenomenon of an age where manufacturing jobs are often relocated to low-cost, developing countries and administrative backup to companies in the service sector is often performed by means of offshore call centres and ‘help’ lines. The company, however, may operate in a branch of the economy where relocating a substantial proportion of jobs overseas is not a realistic option. To take a random example, a company may operate a chain of hairdressing salons and finds itself undercut by competitors who have reduced overheads through paying their staff less. How can the company survive the competition? One alternative might be to ask employees to take a wage cut but what if they refuse? Does administration or Chapter 11 open up possibilities that are foreclosed by the general law? This issue will be addressed in this chapter. The important point to note is that general employment protection and also protection during reorganisation proceedings is much stronger in the UK than it is in the US though the devil, as always, is in the detail. After identifying some initial contrasts between the US...
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