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Trigger for Collective Redundancy

Large scale redundancies are in the news at the moment. Last weekend we learned that another giant of the British high street, BHS, has gone into administration. Unless a buyer is found to keep the retailed going 11,000 employees are likely to lose their jobs.

Two weeks ago the Indian company Tata announced it is cutting more than 1,000 jobs. Most of the jobs are being cut at Britain's biggest steel plant at Port Talbot in South Wales, where 750 positions will go. Many service firms and contractors rely on the Port Talbot plant, which employs more than 4,000 people, so the direct cuts will have a knock-on effect across the whole region.

A redundancy situation arises when a job no longer exists in whole or in part because the business no longer operates, no longer exists in the same place or employees are no longer needed to carry out the particular kind of work they were employed to do.

Collective redundancy is triggered when an employer proposes to make 20 or more employees redundant in a 90 day period at the same establishment. In USDAW and anor v Ethel Austin and anor and USDAW v Woolworths the ECJ considered the meaning of “establishment” and concluded that it means the place at which workers are assigned to carry out their duties. It does not mean all the units in the whole organisation. When these large companies went into administration, the duty to consult collectively was not triggered in units where fewer than 20 workers were employed. The decision means that employers with many small branches or bases may be more easily able to reduce staff numbers by avoiding lengthy consultations and associated costs.

A redundancy is a dismissal and is therefore capable of being unfair. No dismissal is ever risk- free but by following a correct (and fair) process you can minimise the risk. The fair process you adopt must also be fairly applied.

In the case of consultation related to collective redundancies, redundancy is defined as dismissal not for a reason related to the individual concerned. This definition might include, a situation where dismissals are not related to the conduct or capability of the individual. This definition is important because it provides a broader requirement for consultation. For example, it may create a requirement to consult where an employer decides to offer alternative employment or change an employee’s hours by giving lawful notice of termination of their contracts and re-engaging them on different terms and conditions.

During a collective redundancy you are required to consult with the “appropriate representatives”. This may be a trade union representative or a workplace representative. Consultation has the same purpose in collective redundancy as it does in small scale redundancy. That is to see what can be done to reduce or remove the need for dismissals. Good practice also requires individual consultation with employees throughout the process. A failure to consult with employees could lead to a claim of compensation.

Collective consultation must begin at least 30 days before the first dismissal takes effect. If you plan to make more than 100 employees redundant in a 90 days period it must start at least 45 days before the first dismissal takes effect. You must also notify the Redundancy Payments Service (RPS) before a consultation starts. The deadline depends on the number of proposed redundancies.

There are certain things you must disclose to the representative in writing so that he is able to play a useful part in the consultation process. As a minimum this should include:

  • the reasons for the proposed redundancy;
  • numbers and descriptions of affected employees;
  • proposed methods of selecting those for redundancy;
  • proposed methods of carrying out the dismissals; and
  • how any redundancy enhancements will be paid?

When selecting employees for redundancy there needs to be a fair process in place that is not discriminatory. For example, last in, first out could potentially cause problems with age discrimination. Use a selection matrix to objectively assess the skills required for the job. You may wish to include some general elements such as discipline record.

You may have an agreed collective redundancy procedure in place. If you have, follow this procedure when considering making redundancies. If there is no agreed procedure in place you still need to follow a reasonable procedure. A failure to do so could result in unfair dismissal claims if employees have more than two years’ service.

We deal with the good, the bad and the ugly of HR. If you need help with redundancies collective or single (or any other HR issues),give us a call on 01908 262628.

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