Cutting redundancy consultation risks increased unemployment

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date: 17 February 2012

embargo: 00.01hrs Monday 20 February 2012

Reducing consultation rights during collective redundancy exercises could cost jobs, damage workforce morale and increase unemployment, the TUC warns today (Monday).

Currently, where employers are proposing to make between 20 and 99 employees redundant, they must allow for at least 30 days consultation with unions or workplace representatives before any job cuts can take effect. Where 100 or more jobs are at risk the consultation period must last for at least 90 days.

The government is considering whether the 90-day consultation period should be reduced to make it easier, quicker and cheaper for employers to lay off staff. The TUC argues that cutting back these consultation rights would be detrimental for employers, employees and the wider economy.

Genuine consultation and effective negotiations between unions and employers can deliver genuine benefits, says the TUC, by lowering job losses, avoiding compulsory redundancies, and assisting employers to retain skilled staff. The process helps to ensure restructuring exercises are transparent and fair.

During the last recession many private sector employers worked with unions to find ways of avoiding mass redundancies and retaining skilled staff. A recent TUC survey of workplace reps revealed that more than a third (36 per cent) of employers were willing to agree to longer consultation periods than the statutory minimum, often willing to consult for 90 days or more when far fewer than 100 redundancies were planned.

The TUC believes that effective working relations between employers and unions help to avoid job cuts and to maintain the morale and loyalty of staff who survive restructuring exercises. For example, as a result of strong working relations with the CWU and Prospect unions, the BT group has succeeded in avoiding the need for any compulsory redundancies in recent years.

Longer consultation periods also provide time for employers and unions to explore all alternatives to redundancies, including identifying new orders, efficiency savings, restructuring, and recruitment freezes. For example, union reps from a utilities company surveyed by the TUC reported that when consultation due to last 30 days was allowed to continue for longer, this enabled discussions of all the relevant issues, including the selection criteria for redundancies. In this instance, nine jobs were saved when union arguments were recognised by the employer.

The 90 days minimum consultation periods provide time for effective redeployment exercises, to ensure any selection processes are fair and for employers and unions to agree redundancy packages which assist workers in getting training and paying bills until they find new employment. It also provides time for union learning reps and government agencies to provide access to training, advice and job search support to those at risk of redundancy.

The TUC believes any reduction in the 90 days minimum consultation period will send a signal to employers that they need not prioritise exploring ways of saving jobs. This could lead to increased unemployment and more reliance on the welfare benefits, and would also have a detrimental impact on local economies and communities - particularly those areas of the UK where unemployment is already high and where there are limited job vacancies.

The TUC argues that there is now a case for strengthening collective redundancy consultation arrangements. For example, the recent experience of former Woolworths staff illustrates the unfair outcomes which can result from the 20 employee threshold for redundancy consultation.

After Woolworths went into administration, the insolvency practitioners failed to consult with USDAW, the recognised union. USDAW subsequently brought a successful application for awards, winning £67.8 million for 24,000 Woolworths' employees. However 3,000 employees failed to receive any compensation because the Employment Tribunal concluded they had been employed in separate shops which employed fewer than 20 employees.

The Woolworths case is not an isolated example either. Unions regularly tell the TUC that employers attempt to restructure businesses and organisations into smaller establishment units so as to avoid the duty to consult over redundancies.

TUC General Secretary Brendan Barber said: 'Genuine consultation between unions and employers is vital in a redundancy process, regardless of how many people are at risk of losing their jobs. Working together, unions and bosses can decrease the number of job losses, avoid compulsory redundancies and ensure that the redundancy process is fair. They can also retain skilled staff and maintain morale amongst remaining staff.

'As a result of the recession and government spending cuts, unemployment is now running at more than 2.6 million and tens of thousands of jobs will continue to be lost in the public sector this year. Rather than cutting back on consultation rights, now is the time for ministers to strengthen collective redundancy arrangements and protect working people and employers.'

The TUC believes the government's current review of collective redundancy law provides an important opportunity to amend the law and to prevent a repetition of the recent Woolworths situation.

NOTES TO EDITORS:

- The TUC's full response to the government call for evidence on collective redundancies is available at www.tuc.org.uk/tucfiles/223/CallforEvidenceCollectiveredundancyconsultation.pdf

- In the submission, the TUC argues that the existing 'establishment' test should be replaced by the broader 'undertaking' test, so that the duty to consult would apply in virtually all instances where an employer was considering more than 20 redundancies. It would make no difference if the affected staff were dispersed across different departments, divisions, regional offices or retail outlets within a business. The use of the 'undertaking' test would also reduce uncertainty for businesses and unions and the need for costly litigation on when the duty to consult applies.

The TUC also believes that the 20 employee threshold for information and consultation rights on collective redundancies should be removed. The current threshold means that employees working in small firms do not have the right to be informed and consulted where redundancies are being considered. As a result, employers in small firms are less likely to take employees' needs into account before making redundancies. This may lead to missed opportunities to rescue the organisation or save jobs, and also means that employees receive far less notice of redundancies and have a shorter period of time to find alternative employment than those employed in larger workplaces. The 20 employee threshold also enables employers in larger organisations to stagger redundancies, in order to avoid consultation duties.

- In 2010, the TUC and the Labour Research Department conducted a survey of union workplace reps requesting information about redundancies in their workplaces. Information was gathered from almost 120 workplaces and organisations, and three-quarters of these had experienced recent or proposed redundancies. The TUC survey was completed before spending cuts announced in the comprehensive spending review were consulted on or took effect.

- All TUC press releases can be found at www.tuc.org.uk

Contacts:

Media enquiries:
Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk

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