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Collective redundancy consultation period will be cut to 45 days, Government announces

The minimum consultation period that must take place before a company can make large-scale redundancies will be cut to 45 days from next year, the Government has announced.18 Dec 2012

The change will apply where more than 100 employees are at risk of redundancy, and follows a Government consultation in June. Businesses will be able to consult employees for longer if appropriate. Employers must currently consult employees for 90 days where a collective redundancy is proposed.

Other changes will see employees on fixed-term contracts which have come to an end excluded from consultation requirements, while new guidance on collective redundancies will be produced by Acas, the publicly-funded conciliation service.

Businesses have argued in favour of shortening the minimum consultation period, and Employment Relations Minister Jo Swinson said that this had been backed up by "hard evidence" in the responses to the consultation.

"The UK has a labour market that is flexible, efficient and fair but some of our laws need reform to respond to an ever changing employment landscape," she said. "Our reforms will strike an appropriate balance between making sure employees are engaged in decisions about their future and allowing employers greater certainty and flexibility to take necessary steps to restructure."

The existing 90-day minimum period could cause "unnecessary delays" to a company restructuring, as the consultation period was usually completed "well within" this timeframe, she said.

"We want to improve the quality of consultations by making sure that there are tools available to help employers manage their process fairly and successfully to deliver the best possible outcomes for all parties. Acas will be working with stakeholders to produce non-statutory guidance that will be designed to help improve the quality of consultations," she said.

Currently an employer which proposes to make collective redundancies, involving 20 or more employees at a single establishment within the next 90 days, must consult on its proposals with unions or representatives of the affected employees as well as notify the Department for Business, Innovation and Skills (BIS). Where an employer is proposing to make more than 100 employees redundant it must allow for at least 90 days consultation, while a minimum consultation period of 30 days applies where between 20 and 99 employees are potentially affected.

Employment law expert Christopher Mordue of Pinsent Masons, the law firm behind, said that the Government's proposals would bring UK consultation requirements closer to those operating elsewhere in the EU.

"The Government has not gone as far as it could have – instead of equalising the notification period for all collective redundancies at 30 days, it has maintained a 'two tier' approach so that a period of 45 days applies where the proposal is to make 100 or more redundancies at one establishment," he said. "But the cost of having to employ staff for the whole of the notification period is significant reduced under this proposal – and that saving could actually help preserve other jobs."

"The other change which will be welcomed by employers - especially those in sectors such as higher education and IT - is that dismissals which occur on the expiry of fixed term contracts will no longer be subject to the collective consultation obligation. This also brings UK law in line with the EU Directive which has always excluded these dismissals. The current rules mean that employers with high numbers of fixed term contract staff can be involved in collective consultation on a permanent basis, and often that consultation is meaningless as the options for extending the fixed term contract are very limited."

However, Mordue warned that problems would remain for employers as a result of the 'two tier' approach, particularly those that employed workers at more than one 'establishment'. Employers who made a mistake could see costs of up to 90 days' pay per employee, on top of the cost of employing them during the consultation period, he said.

"The question of what counts as a 'single establishment' is still very uncertain in some cases," he said. "The Government has been unable to provide a legislative solution to this uncertainty as the issue is governed by European case law but has suggested that this – and other contentious issues – will be clarified in new guidance from Acas. The risk is that guidance can only go so far in providing clarity without departing from established case law and so may be of limited benefit."