Government proposes new redundancy consultation rules

In June 2012, the UK government launched a consultation over plans to reform legislation on collective redundancies. The proposals include reducing the current minimum 90-day consultation period for redundancies of 100 or more employees. The EU Directive on this requires only a minimum consultation period of 30 days, and the government has asked for feedback on the impact a period of 30 or 45 days would have on the restructuring of businesses seeking redundancies.

Current consultation rules

The EU Directive on collective redundancies (98/59/EC) became British law in the Trade Union and Labour Relations (Consolidation) Act 1992. It says employers who propose to make 20 or more employees redundant within a 90-day period must consult employee representatives. The consultation must be conducted with a view to reaching agreement, and must look for ways to avoid redundancies, reduce their number and mitigate their consequences.

The consultation must begin ‘in good time’ (not further defined in the Act) and, where an employer proposes to make 100 or more employees redundant, it cannot start to implement the redundancies until at least 90 days after the consultation began. Where 20–99 redundancies are proposed, this minimum consultation period is 30 days. The employer must also notify the relevant public authorities according to the same timescale.

However, the minimum consultation periods of 30 or 90 days are not required by the EU Directive, which only requires that redundancies do not begin until 30 days after notification of the relevant authorities (this may be extended to 60 days in some circumstances).

Consulting on consultation

In November 2011, as part of a review of employment law, the government called for feedback on minimum redundancy consultation periods (UK1112039I). It asked whether the rules hinder restructuring and employment flexibility, thereby putting ‘future business success at risk’. After considering the evidence received, on 21 June 2012 the Department for Business, Innovation and Skills (BIS) published a consultation document (298Kb PDF), setting out proposals for changes to the redundancy rules.

The BIS states that its proposals aim to:

  • improve consultation quality;
  • improve employers’ ability to respond to changing market conditions;
  • balance the interests of the employees who are made redundant with those who remain.

Reducing the minimum consultation period

The government consultation document proposes reducing the 90-day minimum period before redundancies of 100 or more employees can take effect. It regards this as unnecessary ‘gold-plating’ of the EU Directive, and seeks views on how minimum periods of either 30 or 45 days might impact on businesses.

The BIS argues that this would allow employers to restructure more quickly, and savings made in administrative and wage costs might reduce the number of redundancies. Employees would benefit from ‘greater certainty and a less marked impact on morale and productivity’. Once the collective redundancy notice has been issued, those made redundant could ‘take advantage of career resources and begin the alternative job search sooner’. Those who are not made redundant would ‘face a shorter period of uncertainty about their future and will be better placed to continue their career in the organisation’.

The government also proposes the drafting of a new non-statutory Code of Practice setting out the ‘principles and behaviours behind a good quality consultation’ on redundancies, with a particular focus on dealing effectively with the most contentious issues.

Norman Lamb, the Minister for Employment Relations, commented:

The current rules do not fit the current economic climate. They are driving bad consultation and slowing businesses’ ability to restructure and they are much more restrictive than the rules in many other EU Member States. This has a negative impact on both employers and employees and is threatening the UK’s competitiveness.

The consultation closes on 19 September 2012.

Social partner reactions

The Trades Union Congress (TUC) denies that there is any convincing evidence that the current rules on collective redundancy notice periods need to be relaxed. Its General Secretary, Brendan Barber, said:

The current 90-day consultation rules on redundancy are working perfectly well … The government is in danger of confusing quality with quantity. Shortening the notice period will not lead to a better process. It takes time for unions and employers to consider carefully what alternatives there may be to job losses and what the impact on the remaining workforce will be.

Employers generally take a more positive view of the proposals. Tim Thomas, Head of Employment Affairs at the Engineering Employers Federation (EEF), the manufacturing employers’ organisation, stated:

We broadly welcome these proposals as the law in this area strongly favours employees and their representatives, which can lead to prolonged periods of uncertainty. This needs to be rebalanced and greater emphasis placed upon the protection of employment for all workers. The 90-day consultation period can delay the resolution of redundancy consultations and employers will welcome a move to 30 or 45 days.

Mark Carley, IRRU/SPIRE Associates

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