InsightsInsight - Education, Employment & HR - UPDATED: October 7, 2021 12:00 am
What do employers need to think about when making large-scale redundancies?
We explain the legal obligations for employers and the processes they must follow.
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Our experience since the beginning of the pandemic has been that the rate of large-scale redundancies has increased significantly. Now that the furlough scheme has ended, this trend may well continue through into the new financial year.
As a result, employers might now be considering the need to make 20 or more employees redundant in a period of 90 days or less. Below, we provide a reminder of the main issues that you need to think about before commencing such a process.
What is a large-scale redundancy?
If you are proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, this is considered a large-scale redundancy.
What does this mean for the employer?
The law imposes a duty on you to consult on your proposal with appropriate representatives of the affected employees.
Affected employees are those affected by the proposed dismissals or by measures proposed to be taken in connection with the dismissal.
Where any affected employees fall into a category where a trade union is recognised, the trade union must be consulted. In other cases, the employer may consult with representatives who have been directly elected by affected employees (via the specific statutory rules that apply), or with an appropriate standing body of representatives who have been elected or appointed for some other purpose (if this body meets certain requirements).
You must also notify the Department for Business, Energy and Industrial Strategy (BEIS) on Form HR1. Failure to notify BEIS is a criminal offence for which businesses may be fined an unlimited amount.
How long do I have to consult for?
Consultation must begin in good time. Minimum time periods for consultation apply depending upon the scale of the redundancies proposed. Where your proposal is redundancies of:
- 20 – 99: the minimum period of consultation must begin at least 30 days before the first dismissal takes effect
- 100 plus: the minimum period of consultation must begin at least 45 days before the first dismissal takes effect.
What does consultation involve?
As a minimum, consultation must be undertaken ‘with a view to reaching agreement’ on certain matters, such as:
- ways and means of avoiding dismissals,
- reducing the number of dismissals
- mitigating the consequences.
It is not enough for you as the employer to simply explain your proposals and listen to what is said. Whilst it is not necessary to actually reach agreement, the consultation should be more like a negotiation rather than just an exchange of views.
Consultation begins by providing information on the proposals to representatives. The law sets out specific written information that must be provided.
Other consultation obligations for large-scale redundancies
You should remember that, in addition to collective consultation, you must also consult individually with potentially redundant employees and ensure that a fair process is followed to minimise the risk of successful unfair dismissal claims.
You may also have obligations to collectively consult under an ‘information and consultation agreement’. If you have this, it would be in place under the Information and Consultation of Employees Regulations 2004, also known as the ICE Regulations.
Are there any exceptions to consultation?
Where ‘special circumstances’ means it’s not reasonably practicable to consult in good time or provide the statutory information required, the employer does not need to fully comply with the duty. But employers must still take such steps towards compliance as are reasonably practicable.
‘Special circumstances’ is interpreted narrowly. We would advise taking legal advice before relying upon this provision.
What are the consequences for breach of collective consultation duties?
- Failure to comply with any of the rules on information or consultation, or on the election of representatives, can lead to a protective award being made to employees by an employment tribunal.
- The maximum protective award is up to 90 days’ gross pay for each dismissed employee. (The statutory cap on a week’s pay which applies to other claims does not apply here.)
- The award is based on the seriousness of the employer’s default.
Do changes to terms and conditions of employment fall within this?
Although you might not immediately think this is the case, the wider definition of ‘redundancy’ does require collective consultation where an employer is proposing changes to employees’ terms and conditions by dismissing the employee and re-hiring them on new terms.
Managing a large-scale redundancy process
The collective redundancy provisions are complex and can have an impact on businesses, with financial and commercial consequences. We therefore urge you to start planning any process early and to take legal advice as soon as possible.
If you need assistance with management and delivery of a redundancy process, this can be provided through our HR service, Kent HR.
If you are looking to make redundancies and would like further information on the impact of furlough, then book a free 30-minute initial consultation with a member of the Brachers Employment team, at a time that suits you. You may also want to consider our options for fixed cost redundancy support.
This article was first published on 15 June 2020 and has subsequently been updated on 7 October 2021.
This content is correct at time of publication
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