It’s a difficult time for a business when they need to make an employee redundant. When a company needs to make a substantial amount of redundancies, this is known as collective redundancies.
The dismissal of 20 or more employees may be necessary if the company finds they are in financial trouble or needs to restructure the business. It could be the case that the role or even the department is not needed anymore.
Also, if a company is feeling financial strain, collective redundancies could help stop the company from folding. An employer will look at all their options before making this significant decision.
When a company is going to make collective redundancies, it must ensure they comply with moral and legal obligations.
There are legal rights in collective redundancies for employees and a redundancy process for employers that they must follow.
In this article, we will guide those employers or employees facing collective redundancies:
The legal process involved during collective redundancies.
The consultation requirements the employer must follow
Employees' rights during redundancies
The potential disputes that may occur and how to resolve them
The obligations of the employer during the process and after
What Is Collective Redundancy?
Collective redundancies are when a company needs to dismiss 20 or more employees in a short period. This may be due to economic reasons or due to downsizing of the business. It’s classed as collective redundancies when the redundancies are all made within 90 days.
When this large quantity of employees is made redundant, there are certain legal aspects you must follow to help protect the employer and employees.
The Trade Union and Labour Relations (Consolidation) Act 1992 protects the rights of employees and sets out the legal obligations employers must follow when making redundancies.
It states that when collective redundancies are going to occur, you must hold collective consultation. This is when there are 20 or more redundancies, they are from one place and are going to be made within 90 days.
As well as consulting with employee representatives, the employer is legally obligated to tell the government. If they do not follow the legal obligations in collective redundancies, they could face penalties.
The number can include voluntary redundancies and those who you are hoping to move to an alternative role.
Employer Obligations in Collective Redundancies
Consultation Requirements
When you are going to make collective redundancies, an employer needs to arrange a consultation.
This is where the company will discuss their redundancy proposal with the trade union. If there is no union, it will be an employee representative who may be elected by the individuals.
It’s important to also consult with the employees individually to fulfil your moral obligations.
Timeframes for Consultation
Collective redundancy consultation requirements state time frames to consult the employees and the chosen representatives.
When you have 20 to 99 redundancies, you need to give at least 30 days before the date of the redundancy. If you have over 100 redundancies, there need to be at least 45 days before redundancy occurs.
Employees can take legal action if their employer does not follow this timeframe for consultation. Employers could face paying compensation for up to 90 days for each employee.
Providing Information
You need to provide the following for the consultation:
You need to provide why you are making the redundancies, providing thorough reasons.
The number of employees affected by the collective redundancy
The roles of the employees who are facing redundancies
How these employees have been selected
How the redundancy will be carried out
The packages that will be provided to those employees?
Employee Rights in Collective Redundancies
Right to consultation
Every employee has the right to be consulted during the redundancy process. They have the right to choose who will represent them during the consultancy process. They may want to vote for a representative or even may choose to stand for themselves.
With the information provided by the employer during the consultation, the employee should have a clear understanding of why they have been selected.
They can make sure this has been chosen with fairness and will give the employee an option to discuss other alternatives. The employee legally has a right to transparency on why the redundancy is occurring.
They have a legal right to challenge this if they feel that it is an unfair reason for dismissal. They could take the matter further such as suing the company for unfair dismissal.
Notice Periods and Redundancy Pay:
When redundancies need to happen, employees may be entitled to the following:
Statutory notice periods
By law, you need to be given redundancy notice periods before your employment ends as discussed on Gov UK:
If you have worked at the company between a month and 2 years, you need at least one week’s notice.
If you have worked for between 2 and 12 years, you need to receive a week per each year employed.
If you have worked for over 12 years, you are required to be given 12 weeks. They can give you more but not less than these time frames.
Redundancy pay
When you are made redundant, you will be entitled to redundancy pay if you are an employee of a company for 2 years or more. The money you will receive will depend on factors that include the length of service.
You should legally get:
One week’s pay for each full year (22-41 years old)
Half a week if under 22 for every full year
One and a half week’s pay per full year if you are 41 and over
This is capped at 20 years for years of service. You are not entitled to statutory redundancy pay if you are staying at the company or offered alternative work. You also wouldn’t get this if you were on a fixed contract.
Alternative Employment
An employer should try to find alternative employment within the company if redundancies need to be made. They should offer you a job that is ‘suitable’ which depends on several factors:
Whether the job is similar to the current work you do
The terms of the role offered
Whether your skills and circumstances are suitable for the job
Whether the pay and hours and location are suitable.
If a suitable role is offered and you turn it down for unreasonable reasons, the employee could lose their right to redundancy pay. The employee has a right to ask for a trial period in the role.
Challenges and Risks for Employers
Failure to Consult
Employees have the right to take further action if consulting is not done properly. Here are some of the legal and financial risks:
Employees can claim unfair dismissal to the employment tribunal if the consultation does not provide proper reasoning and explanation for the dismissal. Or the consultation has not taken place within the required time frame. This could lead to penalties.
A protective award can be claimed if the consulting procedure has not been done properly. The employer could end up paying up to 90 days' pay per employee.
Breach of contract could be claimed if the employee fails to follow the terms in their contract in regards to consulting.
Selection Criteria Disputes
There could be debates over the selection criteria used for redundancies. Employers are expected to explain the fair reasoning for making the decision. Employees could make a discrimination claim under the Equality Act 2010.
They could also claim unfair bias for the employer’s decision and claim compensation.
Reputational Damage
When collective redundancies occur, the company is at risk of reputation damage. If the situation is mishandled and claims do occur, this can impact the company’s reputation and cause a loss of clients.
Employee morale will occur which could affect the quality of work and the long-term future of employees.
Best Practices for Managing Collective Redundancies
To manage collective redundancies, you should do the following:
You need to ensure there is transparent communication during the redundancy. You can minimise misunderstandings and reduce tension by clear and open communication.
You need to use fair and objective selection criteria for the redundancies. You need to clearly explain why you have made a reasonable decision. This will help to avoid any claims of unfair dismissal or discrimination if they take further action through organisations like ACAS.
You should offer support to those employees facing collective redundancy. You could guide them with career advice and offer outplacement services. You can assist them in finding new employment and give them a reference.
Legal and Regulatory Considerations
Employment Law Compliance
Employers need to ensure they comply with UK employment law when making collective redundancies.
They must follow the procedure which includes consulting with the employee and their representative. They should offer an accurate notice period and redundancy payments. This will stop an employee from taking further action such as appealing a redundancy.
Record Keeping
When making collective redundancies, it’s important to keep records in case there is legal action taken. An employer should keep records of the consultation process, the selection criteria and all communication.
This will stop any disputes and will be valid evidence for any employment tribunal.
Seeking Legal Advice
When an employer wants to make collective redundancies, it’s important to seek legal advice. This will help them to be compliant with redundancy law and follow the correct procedure.
This will stop employees from potentially taking legal action which can then be costly to the employer.
FAQs
What are the consultation requirements for collective redundancies?
The consultation requirements for collective requirements consist of:
Make sure the consultation takes place within the period
Consulting with either the trade union or an elected employee representative
Providing valid information about the plans offering reasonable and fair explanations for the redundancy
Discussing any alternative job positions, redundancy pay and notice periods
How much notice must employers give in collective redundancy situations?
An employer must give a notice period depending on how long they have worked at the company. If they have been at the company less than 2 years they receive a week. Over 2 but less than 12 is a week per year. And over 12 years must be 12 weeks.
What rights do employees have if they are selected for redundancy?
They have a right to consultancy with a representative so they have a clear understanding of why the redundancy is occuring.
They are also entitled to statutory notice and redundancy pay if they have worked at the company for over two years. They should also be offered alternative employment if suitable.
Can employees challenge their selection for redundancy?
They could take the employer to an employment tribunal if they want to challenge their selection. If they think they have been unfairly chosen or there is discrimination in any way, they can take the matter further.
What happens if an employer fails to follow the redundancy consultation process?
The employee has several options if an employer fails to follow the redundancy consultation process:
They can discuss with their employer and ask them to follow the legal procedures of consultation.
If they still fail to follow the process, this can then be escalated to the employment tribunal.
The employee could claim breach of contract, unfair dismissal or protective award.
The employer could then be forced to pay compensation and face damages.
Conclusion
When collective redundancies need to be made, companies must follow the set procedures. Employers have certain rights and obligations in collective redundancies. They must arrange a consultation before any redundancies can take place.
This can help prove why the redundancies need to occur and how the fair selection process has been conducted. This can help prevent any further action from being taken by employees.
We have also discussed employees' rights and the support they should receive from their employers. We have looked at the right to notice periods, alternative jobs and redundancy pay.
Businesses can consult with Lawhive’s employment law experts when collective redundancies need to occur. They can help to ensure compliance with redundancy laws and minimise the risk of legal disputes.
Employees should also seek legal advice if facing collective redundancy to know their employee rights. Book a free legal assessment today.