The payments, which will cost East of England several hundred thousand pounds, will go to 290 workers who have been made redundant by the administrator after 12 society non-food stores were sold to the retailer in July last year.
Directors decided to make the payments — equivalent to a 75 per cent enhancement of their redundancy payment had they been paid off last summer — to former employees who had worked for the Co-op for at least two continuous years and who were subsequently made redundant by Vergo’s administrator.
East of England Co-op Chief Executive Richard Samson said: “We would like to show our support to those ex-employees, as the law has failed to protect their rights. The failure of Vergo Retail has created many victims across the country and the lack of protection for employees highlights a serious failure in the law. Although there is no legal obligation for the society to contribute to their redundancy pay, we are concerned that the law has been ineffective in protecting their employment rights in this situation.”
Mr Samson said the society had been in a constructive dialogue with trade unions Usdaw and NACO and Conservative MP for Ipswich, Ben Gummer, over the issue, following Vergo’s collapse.
He added: “The directors have considered this unique situation and feel that we should act in a positive way. We transferred the businesses to Vergo in good faith last year, as we would have been forced to close these stores otherwise.
“We gave Vergo a significant amount of support, including rent-free premises for a year. We were therefore extremely disappointed that less than a year later, Vergo’s total business failed and we have raised questions about this with the administrator. We now await their report.
“Our main priority with the former Vergo stores, which we still own, is to work with the administrator to secure new tenants as soon as possible and we will encourage any new occupiers to consider employing former Co-op staff.”
In Essex, three of the stores are in Colchester, two in Clacton plus there are branches in Witham and Dovercourt. In Norfolk, the affected stores are in Norwich and Great Yarmouth, while in Suffolk they are in Ipswich, Felixstowe and Stowmarket.
Mr Samson added: “We would welcome a Government investigation into Vergo’s collapse and I have written to Vince Cable, Business Secretary, offering our full support for any such investigation. We will be writing to him again to take up the issue of how employees can be better protected under the law as this has clearly highlighted how inadequate current legislation is when a business failure takes place.”
Society President Gillian Bober commented: “In this unique situation, we have acted on our principles by supporting a number of ex-colleagues at a very vulnerable time for them.We have also offered support to our former employees, providing help with CVs; giving references where appropriate and considering them for society jobs where possible.”