With the furlough scheme coming to an end a new survey has shown that 1 in 3 employers are likely to make redundancies over the next 3 months. Couple that with the latest statistics from the Ministry of Justice, showing that employment tribunals have increased by 18% in April to June 2020, and it all paints a worrying picture.
One of the biggest and most expensive risks when considering a restructure or redundancy process is a claim for a protective award for a failure to inform and consult with employee representatives prior to enacting the first dismissal.
If successful, an employment tribunal may award compensation of up to 90 days pay per potentially affected person. To help you navigate this potential risk we have put together a useful FAQs on collective consultation.
What is collective consultation?
The obligation to inform and consult with appropriate employee representatives, i.e. a collective consultation, is triggered when an employer is looking to:
- dismiss as redundant 20 or more employees within a 90-day period at one establishment
- change the terms and conditions of employment of 20 or more employees
- transfer of undertakings potentially impacting 10 or more people
What is an appropriate employee representative?
Appropriate employee representatives might be a recognised trade union, or a group of representatives elected for the purpose of collective consultation for a given project.
How long must we consult for?
For redundancy purposes, when considering the dismissal of 20 or more people within a 90-day period at any one establishment, collective consultation must last at least 30 days. Where 100 or more dismissals are being contemplated collective consultation must last at least 45 days.
What information must be provided and what do we have to consult on?
The employer must provide the representatives with the following:
- the reasons for the proposals
- the number and description of employees the employer is proposing to make redundant
- the total number of employees of that description employed by the employer at the establishment
- the proposed method of selecting the employees who may be dismissed
- the method of carrying out the dismissals (with due regard to any agreed procedure), including the time frame over which the dismissals are to take effect
- the proposed method of calculating redundancy payments
- the number of agency workers temporarily working for, and under the supervision and direction of, the employer
- the parts of the employer’s undertaking in which those agency workers are working
- the type of work those agency workers are carrying out
When does the collective consultation period start?
It starts when you have a forum of representatives in place to conduct the consultation process. It does not start on the date of any company announcement and not necessarily the date you submit your HR1 to the Department of Business, Energy, and Industrial Strategy. This is also a statutory requirement.
What if I do not know how many dismissals will take place over the 90-day period?
Strategically speaking, a business must have some idea of what their business strategy is and what, if any, headcount reductions may be required within a reasonable time frame.
If you are unsure at any given point, e.g. you might be looking at each department in turn over a three-month period, you must consider starting collective consultation at the earliest opportunity. This avoids a situation where you might make a couple of redundancies one month, but then two months later be considering more, which might trip you over the 20 dismissals in total.
Do employees need two years service to make a claim?
No, employees do not need any qualifying service to claim a protective award so you must include those with less than two years service in your numbers for consultation. You also cannot rely on service as a selection criterion for redundancy, except as a tie breaker.
If one person claims, do I have to pay the award to everyone?
An individual may only claim for themselves. However, that does not stop them telling other people about it and one person may prompt multiple claims being filed by those in scope of the process.
A trade union may claim on behalf of the entire bargaining group, in which case any award made would apply to the whole group, whether they are members of that trade union or not.
How much are we talking?
Assuming national living wage for someone over 25 working 37.5 hours per week, you are looking at an award of £5,886.00 per person. Given that such a claim might only be triggered when 20 to 99 are in scope of the process, you are looking at a total potential bill of between £117,720.00 and £582,714.00.
This useful FAQ sheet has introduced you to the fundamentals of a collective consultation but does not cover the process in depth. If your business is planning a restructure or redundancy process it is essential that you seek advice immediately to save you from falling foul of an employment tribunal and costly awards.