When a company is faced with having to make large-scale redundancies, it can be difficult to maintain workplace and employee motivation. However, in April 2013 a new collective redundancy law was introduced which has made it possible for businesses to restructure more quickly, saving time, stress and money.
The main changes in the collective redundancy laws means that when an employer plans to dismiss 20 or more employees it has to consult representatives of those affected within a 90 day period or less. Previously the obligation was only triggered when those 20 or more employees all worked ‘at one establishment’ within the organisation. You can find out more info about the ruling on collective redundancies at Blaser Mills’ blog.
What is collective redundancy?
When a business proposes to make 20 or more employees redundant within a period of 90 days, this is known as collective redundancy. A company has to make sure it adheres to the legislation for collective consultation processes to avoid many costly traps which could result in the payout of six figure compensation awards.
Why would a company need to make collective redundancies?
There are different circumstances that lead to the necessity of collective redundancies. Perhaps the company needs to close or relocate some or all of their business. Maybe there is a need to save costs as part of an efficiency drive or perhaps the business needs to be reorganised to work more effectively.
How has the law changed?
Until the change in the law, an employer had to offer a minimum 90-day period for consultation, and no dismissals could take place during this time. This obligation would only be set in motion if the proposed redundancies were for 20 or more employees who all worked ‘at one establishment’. However, the Employment Appeal Tribunal has held that those three little words ‘at one establishment’ should be deleted from the UK legislation.
Who does an employer need to inform & consult?
When planning to make collective redundancies, an employer is required to consult “appropriate representatives” of those affected. These may include:
- Trade union representatives
- Directly elected representatives
- A standing body of elected or appointed representatives.
The first stage of consultation is to provide the representatives with written information including details of the proposed redundancies.
What if an employer doesn’t comply?
Mishandling the consultation process or the election of representatives, or failing to comply with any of the rules around collective redundancy could lead to each affected employee being made a financial award for up to 90 days’ uncapped gross pay.
So it’s important to get the process of collective redundancy right. For more information, read this informative collective redundancy consultation article.
In order to make collective redundancy work for your business, it’s important to:
- Maintain transparent and good working relationships with employees, unions and other employee representatives;
- Aim to agree procedures for handling redundancies in advance – but allow for some flexibility;
- Start the consultation process as early as possible and only make the decision that redundancies are ‘necessary’ after consultation has taken place;
- Recognise that the impacts will be emotional as well as economic.