With many people predicting a downturn in the economy, it is increasingly likely that you may be considering restructures and redundancies as the year progresses.

There have been some fairly significant changes to the law in relation to redundancy in recent months (in particular, collective consultation), and these are set out below. For your convenience, the key points are in bold.

When considering the number of redundancies, does it matter whether they are compulsory or voluntary?

If you are proposing to make 20 or more employees redundant at one establishment within 90 days, you must consult with employee representatives for at least 30 days before you give notice of redundancy.

If you are proposing to make 100 or more employees redundant at one establishment within 90 days, you must consult with employee representatives for at least 90 days before you give notice of redundancy.

In a recent case, an employer anticipated making 19 employees redundant. After going through the redundancy process, it made 17 employees compulsorily redundant. However, in an attempt to reduce the number of compulsory redundancies, the employer had invited employees to volunteer for redundancy.

As it happens, the employer accepted 3 employees for voluntary redundancy, making a total of 20 redundancies. As the employer had anticipated making only 19 employees redundant, it did not carry out any collective consultation. As a result, the Union brought a claim.

The Tribunal took the view that, for the purposes of considering whether collective consultation was required, the 3 volunteers should be added to the 17 compulsory redundancies. As a result, the employer was in breach of the law.

Key point - Both compulsory and voluntary redundancies should be taken into account when determining whether there is a need to carry out collective consultation.

Collective consultation - What is the penalty for not consulting properly?

If you fail to collectively consult with employees, the employee representatives can bring a claim for a “protective award”.

Until recently, it was generally thought that, where the number of employees to be made redundant was between 20 and 99, the protective award should be 30 days pay per employee, as the consultation period was only 30 days.

However, following a recent change in the law, even where the required consultation period is only 30 days, the penalty for not consulting can be up to 90 days pay per employee.

When deciding how much to award, the Tribunal will take account of the employers’ culpability. In other words, if there is a total disregard of the law (particularly if there is an in-house HR team), the Tribunal is likely to make a protective award of (or close to) 90 days.

It should be noted that the 90 days pay is per employee and at the employee’s usual rate of pay. This payment is in addition to any redundancy payments and/or notice pay.

Clearly, the cost of getting collective consultation wrong can be extremely high, as the protective award can, in effect, amount to a quarter of the annual wage bill.

Key point - Ensure that you consult properly, as the penalty for not doing so can be up to 90 days pay per employee

Consult - About what?

With collective consultation, you are required to consult in respect of ways of:

• Avoiding the dismissals;
• Reducing the numbers of dismissals; and
• Mitigating the consequences of the dismissals.

Historically, the employer’s business reason for making redundancies was something that did not need to be discussed with employee representatives.

Basically, it was a matter for the employer as to how it should run its business, and if the employer decided that, for economic reasons, there was a need for redundancies, it did not need to consult with employee representatives about the actual reason.

However, following a recent change in the law, this is no longer the case. If the decision will inevitably lead to collective consultation for redundancy (and many decisions will), you should consult with the employee representatives in respect of that decision.

Key point - Where the business reasons for redundancies will inevitably lead to collective consultation, you are required to consult with employee representatives in respect of those business reasons.

Remember, consultation is not the same as negotiation. In other words, there is not a need to reach agreement. All that is required to satisfy the obligation to consult is that you discuss the matters with the employee representatives and consider their representations.

Posted: April 2nd, 2008 under Employment/HR.
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