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Reduced employee consultation periods proposed for large-scale redundancies

The length of time employers are legally obliged to consult with their staff if they propose to make large numbers of them redundant could be cut as part of Government plans to make the process more "flexible", it has said.25 Jun 2012

It has suggested that the existing 90-day consultation period where over 100 members of staff could be made redundant be cut to 30 or 45 days. It has also proposed a new Code of Practice to improve the "quality" of communications between employers and staff.

The formal consultation (51-page / 298KB PDF) on the proposals follows a call for evidence last year, which the Government said set out the "need for change". The existing system was "confusing", did not "fit the current labour market" and contributed to "bad quality consultation", it said. Changes introduced as a result of the consultation, which closes on 19 September, will apply in England, Wales and Scotland.

Employment Relations Minister Norman Lamb said that the current system was clearly "not working in the best interests of either staff or managers".

"Our reforms are about improving the quality of consultations - this really is a case of quality over quantity," he said. "The call for evidence showed that the current arrangements are not fit for purpose for the modern labour market ... at present fear and uncertainty can hang over a workforce for three months, sometimes resulting in some of the best employees choosing to leave, even if they would not have ultimately been made redundant."

However employment law expert Christopher Mordue of Pinsent Masons, the law firm behind, described the package as a "missed opportunity for decisive reform".

"The headline proposal on reducing the notification period in large scale redundancies will be very welcome," he said. "But in other areas the proposals will disappoint - many of the potential reforms flagged in the call for evidence are not being carried through into real legislative change."

He added that many of the proposals contained in the consultation document "seem to involve guidance and codes of practice rather than legislative change".

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.

The Government proposes either reducing the consultation period to 30 days for all collective redundancies or reducing the existing 90-day period where 100 redundancies or more are proposed to 45 days. Companies will be able to continue consulting beyond these minimum periods if longer is required.

Other proposed reforms include the introduction of a new non-statutory code of practice, setting out what is required of a "good quality" consultation process. This will consider what the consultation process should cover, who should be affected and at what point the consultation process should start. The Government also plans to improve guidance on the support it offers to both employers and employees.

The 'protective award' paid by the employer to each employee affected by a failure to consult will, however, remain at a maximum of 90 days' pay regardless of any new limit as the award is linked to "the employer's attempts to comply" and not the length of the consultation period, the Government said.

Mordue said that retaining this award would be "grossly disproportionate" if the underlying consultation period was cut as a result of the consultation. He emphasised that by cutting the costs of complying with consultation requirements the proposals could "actually save jobs" as well as bring the UK into line with existing European minimum standards.

"Cutting the notification period to 30 days would reduce by two thirds the compliance cost for the employer - an aggregate compliance cost of 9,000 days' pay in respect of 100 employees under the current rules could reduce to an aggregate 3,000 days' pay under the new regime," he said. "The change will also enable more decisive action by employers and reduce the negative impact on morale of drawn-out consultations with inevitable outcomes."