- Current law: Under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992, employers proposing to make 100 or more employees redundant are required to consult with their employees over a 90 day period.
- Proposed law: To cut the consultation period down to just 45 days and to exclude fixed-term contracts from collective redundancy agreements when they reach the end of their “natural life”. The aim is to introduce this change in April 2013.
- Labour has argued it will boost economic growth and create a flexible labour market.
- Employment Relations Minster, Jo Swinson, has commented, “The process is usually completed well within the existing 90-day minimum period, which can cause unnecessary delays for restructuring, and make it difficult for those affected to get new jobs quickly.”
- The change has been welcomed by the British Chambers of Commerce with the Director of Policy, Dr Adam Marshall commenting that “In the 21st century requiring a business to spend a quarter of a year consulting on how to restructure is unnecessary, frustrating and potentially disastrous.”
- The TUC has stated, “Making it easier to sack people is the last thing we need.”
- Shadow Business Secretary, Chuka Umunna, has stated that the change will simply be a “watering down” of employee rights.
A 90 day consultation period can act as a security blanket for employees being made redundant giving them time to get to grips with their situation and to make plans for the future. It may also have a financial benefit to some employees and put them in a stronger bargaining position having 90 days of consultation rather than the proposed lower rate. However, the 90 day consultation period only applies to situations where 100 or more employees are being made redundant and therefore, arguably, it would only benefit a proportion of those being made redundant.
Currently, where there are 20-99 redundancies, the consultation period is 30 days and reducing the period from 90 to 45 days for redundancies of 100 or more appears to be reasonable and more when taking this into account. Sometimes 90 days can be a very long time when the outcome is almost certain. On the other hand, 90 days could be far too short. With the proposed changes, the 45 day period will be the minimum consultation period- there is nothing to stop an employer taking longer with consultation.
Businesses are likely to be pleased with the announcement as it means less red tape and a quicker redundancy process which could save them not only time but costs. However, employees are likely to feel that this is just another reform in the long line of many which attacks their employment rights. Unite has already commented that the 90 day period provides it with more time to find solutions and alternatives to redundancy and shortening this period will reduce the opportunity of finding solutions.
The point to bear in mind is that consultation needs to be meaningful and focus should be placed on this. Although the new minimum period for consultation is likely to be set at 45 days, employers should not forget that the quality of the consultation is key. If after 45 days, the process has not been sufficiently completed, employers should not rush into making rash decisions and should consider whether further time is required.