What is a Collective Redundancy?
A collective redundancy is when an employer proposes making 20 or more employees redundant within 90 days. If there is a collective redundancy, your employer has to hold a group consultation.
Section 188 of the Trade Union and Labour Relations (Consolidation) Act (TULRCA) is the relevant legislation. This legislation implemented the European Collective Redundancies Directive (Directive 98/59).
If there are fewer than 20 proposed redundancies, no set rules are required to be followed.
Proposed dismissals concerning a collective redundancy are based on organisations downsizing or closing rather than individuals’ performance or conduct.
What Happens in a Collective Redundancy Consultation?
Your employer will arrange a meeting with you to explain the issues. This includes the reason(s) for your redundancy and any potential alternatives. Furthermore, you can ask to be accompanied by an employee representative or a trade union.
The consultation should include the following:
- Reasons for the redundancies
- The method of selecting employees for redundancy
- Alternatives to avoid or reduce redundancies
- The method of how the redundancies will be carried out
- Information concerning the redundancy payments
The group consultations should happen at least:
- 30 days before the dismissal (for 20-99 proposed redundancies)
- 45 days before the dismissal (for 100 or more proposed redundancies)
What Happens if my Employer Fails to Follow the Correct Collective Redundancy Procedure?
If your employer fails to follow the correct procedure, you may claim to an employment tribunal within three months. If the tribunal finds the complaint is justified, a protective award may be made. This involves the employer paying the employees remuneration for a protected period. The remuneration would consist of up to 90 days’ normal gross pay for each affected employee.
Employees can bring a claim for unfair dismissal and/or a protective award within 3 months from the effective termination date. Moreover, You do not need to have been employed for two years to qualify for a protective award.
If a fair process is not followed, there is a possibility of the following risks for the employer:
- Legal claims in the Employment tribunal
- Compensation to employees for unfair dismissal and/or compensation for financial loss
- Compensation to employees for failure to collectively consult
- Reputation risk
- Negative impact on employee relations with continuing employees.
The Election of Employee Representatives
There is a legal duty to consult elected employee representatives. The employee representatives could be representatives of a recognised trade union. They could also be directly elected representatives elected by employees for the purpose of the redundancy consultation.
The employer must ensure the election is fair and reasonably practical. The main purpose of electing employee representatives is to represent employees’ interests during the redundancy consultation. If the employees fail to elect representatives within the required period, each must be provided with the necessary information individually.
Both the organisation and elected employee representatives will have meetings regarding the consultation process. The elected employees will then discuss the outcome of the meetings with the other employees.
Am I Part of a Collective Redundancy?
If your employer makes 20 or more employees redundant, including yourself, you are part of a collective redundancy. In such cases, the collective redundancy consultation rules must be followed.
Fair Reasons for Redundancy
Redundancies can only be a fair reason for dismissal if the grounds for redundancy are reasonably established.
An objective criteria must be used when selecting employees for redundancy. It includes qualifications, skills, performance & attendance, standard of work, disciplinary record and, at times, length of service. Although service length and the ‘last in, first out’ approach may be used, it could lead to indirect discrimination if unjustifiable.
Once the criteria have been established, each employee in the redundancy pool would be scored against it. Then, the employees with the lowest scores would be selected for redundancy.
Redundancy can arise in several situations:
- The requirement for the employee has diminished or ceased
- The job no longer exists, and/or work is completed by others
- There are new systems in the workplace
- The workplace has closed down
- The business has relocated
- The business has transferred to another employer
Also, for the redundancy process to be fair, the employer will need to explore other alternatives, such as:
- Reducing working hours
- Periods of unpaid leave
- Redeploying staff
- Restricting over time
- Early retirement
If the dismissal reason wasn’t fair and the correct procedure wasn’t followed, the employee could claim unfair dismissal and discrimination.
What Questions Should I Ask in a Collective Redundancy Consultation?
It is important to be prepared and raise any concerns you may have about the redundancy in the consultation. The following are common questions usually raised by affected employees:
- Why me, and who will do my work?
- Who else is at risk?
- How has the pool of employees at risk been identified?
- Is the process of selection fair?
- What are the alternatives, and are there any other roles available?
- When will my employment end?
- How will my redundancy pay be calculated?
- Will I be given a reference for future employment?
- Do I need to return anything?
- How do I say my goodbyes?
Redundancy Payment Calculation
When an employee is made redundant, they are entitled to receive a notice of termination of their employment. This will be their contractual or statutory notice (approximately a week for each year of employment, subject to a maximum of 12 weeks).
If an employee has at least two years of service when dismissed, they’re entitled to statutory redundancy payment. This is calculated as follows:
Age x Complete years of continuous employment x week’s pay
The correct age factor is calculated as follows:
- Half a week’s pay for each complete year of employment in which the employee was under the age of 22
- One week’s pay for each complete year of employment in which the employee was aged between 22-40
- One and a half week’s pay for each complete year of employment in which the employee was over the age of 41
The service length is capped at 20 years, and the figure used for weekly pay is capped at £544. The maximum amount of statutory redundancy pay is £16,320.
Employees are also entitled to receive pay for any accrued but untaken holiday pay.
Your total contractual and statutory redundancy pay may be tax-free up to a maximum of £30,000.