Collective Redundancies in England

In today’s economic climate, businesses may need to consider reducing their workforce in order to cut costs. If a company is proposing to make 20 or more employees redundant, the business will be making collective redundancies.

1. The duty to consult
The duty to collectively consult arises where the employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less. The duty is to inform and consult appropriate representatives of the affected employees. Failure to inform and consult employees may result in the Employment Tribunals awarding a Protective Award of up to three months pay to each affected employee.

1.1 Affected employees

  • Affected employees are those affected by the proposed dismissals or by measures proposed to be taken in connection with the dismissals.
  • Where any of the affected employees fall into a category in respect of which a trade union is recognised, the trade union must be consulted. In other cases, the employer may consult with representatives directly elected by the affected employees or with an appropriate standing body of representatives elected or appointed for some other purpose.
  • If the employer does not already have elected representatives and it will be necessary to organise the election of employee representatives for that purpose

1.2 Election of employee representatives
Specific statutory rules govern the election of employee representatives for the purposes of collective consultation. The main practical consideration when planning an election is whether the affected part of the workforce should be treated as a whole or divided into constituencies for the purposes of elections, bearing in mind that the interests of all affected employees need to be properly represented. It is important to note that consultation cannot start until after the representatives have been elected.

1.3 Collective consultation
Consultation must begin in good time. Certain minimum time periods apply depending on the scale of the redundancies proposed. Where 100 or more redundancies are proposed, consultation must begin at least 90 days before the first dismissal takes effect. For less than 100 redundancies, the consultation period is at least 30 days.

There are two broad stages to the consultation process:

  • (i) The provision of information about the proposals to the representatives;
  • (ii) Consultation on those proposals “with a view to reaching agreement”.

While it is not necessary for employers and representatives to actually reach agreement, the consultation process is more akin to a negotiation than a mere exchange of competing views. Unwillingness on the part of the employer to seek agreement (for example, by suggesting that certain decisions are already a fait accompli) can lead to a breach of the requirements and the making of a Protective Award by a tribunal.

1.4 Individual consultation
In addition to consulting with Employee Representatives, the employer needs to initiate individual consultation with employees affected. Our short guide to Redundancies in the UK sets out further information on the individual consultation process so as to limit the risk of procedural unfair dismissal claims.

2. Notification to BIS
Where the duty applies, the employer must also notify the Department for Business, Innovation and Skills (‘BIS’) of the proposed redundancies. Failure to do so is a criminal offence. This duty is separate from the duty to consult and the notification must be sent to the BIS at least thirty days before giving notice to terminate an employee’s contract if 20 -99 employees are being made redundant or at least ninety days before termination if more than 100 employees are to be made redundant.

3. Legal and contractual entitlements on termination

  • 3.1 Notice Pay
    Statutory notice is calculated by reference to an employee’s length of service. An employee will be entitled to receive one week notice per complete year of service up to a maximum of 12 weeks. Often employment contracts may provide for a longer notice period than the statutory notice period.
  • 3.2 Statutory Redundancy Pay This is calculated by reference to an employee’s week’s pay (up to a maximum of £380) x number of complete years’ service under the age of 41 plus 1.5 x 1 week’s salary (up to the £380 per week) x number of complete years’ service at the age of 41 and over, up to a potential maximum of £11,400. This is only payable where an employee has been employed for more than two years.
  • 3.3 Contractual or ex gratia redundancy payment
    This should be discussed with employee representatives at the outset of the consultation process and should therefore be considered at the planning stage of the exercise.

We can advise you on the planning of your collective consultation exercise, appointment of elected employee representatives and the drafting of your documentation to ensure you avoid potential claims for breach of the collective consultation obligations and unfair and automatic unfair dismissal.

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© , October 2009

Please contact:

Emmanuelle Ries

DD +44 (0)20 7553 9938

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