A ‘collective redundancy’ occurs when a business proposes to make at least 20 employees redundant at the same establishment within a 90-day period.
When carrying out a collective redundancy, you are legally required to go through a collective consultation process with appropriate representatives of the affected employees.
We outline below what your legal obligations are and explain how to follow a fair and effective collective consultation process, protecting your business from the risk of costly claims.
Definition of redundancy
Redundancy occurs when the reason for dismissal is not related to the individual but is due to:
- Business closure
- Workplace closure
- A diminished need for employees to carry out a particular kind of work.
Collective consultation obligation
If the proposed redundancy will result in the dismissal of 20 employees or more at the same establishment within a 90-day period, you are under a legal obligation to conduct collective consultation.
The obligation is triggered if you propose to make at least 20 employees redundant, regardless of how many employees you actually end up making redundant.
Collective consultation must be carried out with appropriate representatives and this duty is in addition to your obligation to individually consult with each of the affected employees.
Failure to consult
If you fail to engage in a fair collective consultation process, both the representatives and the affected employees can bring a claim to the employment tribunal within three months.
If a claim is upheld the employment tribunal may make a protective award of compensation, which can be up to 90 days’ pay for each redundant employee.
This will be a significant cost to your business, so it is important that you fulfil your consultation obligations.
Collective consultation must be held within “good time”, and there are legal timeframes that must be met:
- In cases of 20-99 potential redundancies, collective consultation must begin at least 30 days before the first redundancy dismissal occurs.
- In cases of 100 plus potential redundancies, collective consultation must begin at least 45 days before the first redundancy dismissal occurs.
This means that no employees should be made redundant before the collective consultation process has been completed.
You must collectively consult with “appropriate representatives” of the affected employees.
Appropriate representatives will be:
trade union representatives if there is a recognised trade union in your business; or
elected employee representatives if there is no recognised trade union.
Employee representative elections
If there is no recognised trade union and elected employee representatives are required, you must arrange a fair election process to select these individuals.
As the employer, you are free to determine the number of elected representatives and whether different representatives are required for different groups of employees.
Candidates must be affected employees, and all affected employees should be given the opportunity to stand for election and vote.
Rights of representatives
You must allow appropriate representatives to consult freely with the affected employees.
You should also provide them with the facilities needed to perform their function, such as a space to meet up with affected employees and a means of communication.
Representatives should be given reasonable paid time off work to perform their duties, for example to discuss issues and communicate with employees.
They are also legally protected against dismissal or detrimental treatment arising from their position as a representative.
The consultation process must be genuine as there is a legal obligation to engage in “sufficient meaningful” consultation before confirming the redundancies.
There is no prescriptive consultation process, as this will largely depend on the circumstances of the situation, but we advise following at least the three stages below:
- Initial announcement
Firstly, you should hold a meeting with all affected employees to inform them that redundancies may be necessary and the reasons for this.
Providing clear reasons explaining the need for redundancies will enable you to engage in useful discussions with employees and answer any questions they may have.
It is also advisable to outline any measures you have considered or taken at this stage to try to avoid the need for redundancies.
- Collective consultation
Prior to the commencing collective consultation, you must disclose important information to the appropriate representatives, which includes:
- the reasons for potential redundancies
- a list of the employees at risk of redundancy
- the proposed selection criteria
- the proposed calculation for redundancy payments
Collective consultation then involves discussing all aspects of the proposed redundancies as well as:
- ways to avoid the need for redundancies
- ways to reduce the number of employees to be made redundant
- ways to mitigate the consequences of redundancy
It is important that you keep an open mind throughout this process and carefully consider any points made by the representatives, with the aim of coming to an agreement.
- Individual consultation
As well as engaging in collective consultation you must also consult individually with the employees at risk of redundancy.
We recommend that you hold at least two private meetings with each employee.
The first meeting should explain why their specific role is at risk of redundancy and outline the selection criteria that will be used.
The employee should be given the opportunity to ask questions, voice any concerns and propose any suggestions they may have that would enable their employment to continue.
Once the employee is selected for redundancy you should meet with them again to explain why they have been selected and explore any issues they may have with the process.
It is also important to discuss any alternative roles within the business that the employee could take on instead.
If you are conducting a collective redundancy, you are obliged to notify the Secretary of State for Business, Energy and Industrial Strategy using a HR1 form.
You must notify the BEIS:
- at least 30 days before the first dismissal if you are proposing to make 20 or more employees redundant; or
- at least 45 days before the first dismissal if you are proposing to make 100 or more employees redundant.
Although there is no requirement for you to offer voluntary redundancy, it is best practice to do so.
You could encourage volunteers to come forward by offering an enhanced redundancy pay package.
However, it is essential that you retain the right to reject requests for voluntary redundancy so that you are not at risk of losing valuable employees.
Suitable alternative employment
You should consider any alternative roles available to employees at risk of redundancy, as failure to do so may render any subsequent dismissal procedurally unfair.
We advise making employees aware of all vacancies that they could reasonably fill, even if such roles are for less pay or at a lower level, rather than making any assumptions.
If an employee accepts your offer of an alternative role within the business, or they unreasonably reject such an offer, this may forfeit their entitlement to statutory redundancy pay.
However, for this to apply you must be able to demonstrate that the offer was for a suitable alternative role and that the employee’s refusal to accept it was unreasonable.
With redundancy it is common practice for employers to pay employees in lieu of their notice period rather than requiring them to work through it.
However, if you require a redundant employee to work their notice, you will need to allow them reasonable paid time off to find alternative employment.
This could be allowing them paid time off to attend a job interview, for example.
Statutory redundancy pay
Any employee with at least 2 years’ continuous employment, is entitled to statutory redundancy pay.
This is calculated using the employee’s gross weekly pay (subject to a statutory cap which is currently £544) and based on their age and length of service.
You must provide employees with a statement explaining how this payment is calculated when terminating the individual’s employment.
Enhanced redundancy pay
Many employers offer enhanced redundancy pay, particularly when an employee has come forward for voluntary redundancy.
There is no obligation to offer any payment above statutory redundancy pay, although there is a risk that if you consistently offer enhanced redundancy pay it will become a contractual entitlement on the basis of custom and practice.
Inevitably the Covid-19 pandemic has had a detrimental effect upon businesses, and many have been forced to consider the need for redundancies.
With the furlough scheme coming to an end in September 2021, it is likely that some businesses will be left with no option other than to make staff redundant.
Even if you are struggling with the effects of the pandemic, you are still under the same obligations to consult individually with the affected employees and consult collectively with their representatives.
Where in person consultation is not feasible, you can consult virtually through telephone calls or video conferences, provided employees are given sufficient information and the opportunity to put forward suggestions and ask questions.
If you are considering making redundancies as a result of Covid-19 and the furlough scheme is still available, there is a risk that this will render the dismissal unfair unless you can show that redundancy was reasonable in the circumstances.
You should also take care to treat all affected employees fairly, especially those who have been placed on furlough, by referring to the period before they went on furlough when scoring and not using furlough as a factor for selection.