Redundancy and collective consultation - guidance for employers

The definition of ‘redundancy’

The dismissal of an employee will be by reason of redundancy if it is “wholly or mainly attributable to” the employer:

• Ceasing or intending to cease to carry on the business for the purposes of which the employee was employed by it (business closure) (section 139(1)(a)(i), ERA 1996);
• Ceasing or intending to cease to carry on that business in the place where the employee was so employed (workplace closure) (section 139(1)(a)(ii), ERA 1996); or
• Having a reduced requirement for employees to carry out work of a particular kind or to do so at the place where the employee was employed to work (reduced requirement for employees) (section 139(1) (b), ERA 1996).

For collective consultation, the definition of redundancy also includes circumstances which do not immediately appear to be redundancy, for example, where an employer changes employees’ terms and conditions of employment through termination and re-engagement.

Preliminary considerations if you are thinking about redundancies

The first step should be to establish whether there is a genuine redundancy situation:

• Is there a closure of the business for which the employee was employed?
• Is there a closure of the place of business where the employee was employed to work?
• Is there a reduced requirement for employees to carry out work of a particular kind?

Once you have established that there is a genuine redundancy situation, the next step is to consider the following points:

• How many redundancies are being proposed?
• If 20 or more redundancies are being proposed in a 90-day period, then the collective consultation obligations will arise (which we will come onto later in this guide) and it will be necessary to notify the Secretary of State of the proposed redundancies.
• If fewer than 20 redundancies are being proposed, then it will be necessary to follow a fair procedure in relation to each employee at risk of redundancy.
• Consider the appropriate pool of employees if selection will be necessary.
• Establish a proposed set of objective selection criteria if selection will be necessary.
• Put together a list of alternative vacancies on a group wide basis.
• Consider any alternatives to redundancies such as continued furlough, a freeze on recruitment, a freeze on overtime or voluntary redundancy.
• Consider whether there are any employees who are pregnant, or on maternity, adoption or shared parental leave as special rules will apply to these employees.

Collective consultation

When you have established how many redundancies are being proposed, you will be in a position to assess whether it is proposed that 20 or more employees will be made redundant over a period of 90 days or less.

If so, there will be a duty under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) to:

Inform and consult appropriate employee representatives (section 188, TULRCA). This may either be trade union representatives or elected employee representatives if you do not recognise a trade union.

Where 100 or more redundancies are proposed, consultation must begin at least 45 days before the first dismissal takes effect. For less than 100 redundancies, the consultation period is 30 days.

Notify the Secretary of State (in practice BEIS, on Form HR1) (section 193, TULRCA). Notification must be received by the Secretary of State at least 45 days before the first dismissal, where the employer proposes to dismiss 100 or more employees within a 90-day period.

Where less than 100 redundancies are proposed, the notification period is 30 days.

A tribunal may award up to 90 days’ gross pay in respect of each employee where there has been a breach of the information and consultation duty.

An employer may also be fined if it fails to notify the Secretary of State by submitting a HR1.

Whenever there is an obligation to consult collectively, the employer will also need to ensure that it has followed a fair procedure in relation to proposed redundancies, including consulting with individuals properly, so as to minimise claims for unfair dismissal.

What if we do not have time to collectively consult?

There is a limited exception/defence to the obligation to collectively consult. The exception applies where there are “special circumstances which render it not reasonably practicable” for the employer to comply with the requirement. These are:

1. To begin in good time and at least the relevant minimum period before the first dismissal;
2. To consult with a view to reaching agreement about ways of:
   1. avoiding dismissals;
   2. reducing the numbers of employees to be dismissed; and
   3. mitigating the consequences of the dismissals; or
3. To consult with and give the employee representatives certain prescribed information in a written format including as minimum:
   1. The reasons for the proposed dismissals.
   2. The numbers and descriptions of employees whom it is proposed to dismiss as redundant.
   3. The total number of employees of any such description employed by the employer at the establishment in question.
   4. The proposed method of selecting employees who may be dismissed.
   5. The proposed method of carrying out the dismissals, with due regard to any agreed procedure, including the period over which the dismissals are to take effect.
   6. The proposed method of calculating the amount of any redundancy payments to be made (over and above the statutory redundancy payment) to employees who may be dismissed.
   7. “Suitable information” about use of agency workers.