Government action is needed to reform the collective redundancy process in insolvencies, says the insolvency trade body, R3.
This is in response to the government’s request for evidence for how collective redundancy consultation with employees works when a business is on the brink of insolvency. The aim is to see if outcomes for both employees and employers could be improved.
The insolvency profession is calling for a number of measures, including clear guidance from government, and reform of the protective award compensation regime, which currently sees the taxpayer foot the bill for incomplete redundancy consultations out of the national insurance fund.
During the consultation, the rules require alternatives to redundancy to be discussed. Insolvent businesses however, do not have the funds to comply and there are rarely any realistic alternatives. R3 says that this leaves insolvency practitioners seeking to comply with the law in an impossible position.
Currently, the statutory redundancy consultation period is:
- Employers proposing 100 or more redundancies have to start collective redundancy consultation with staff representatives at least 45 days before the first redundancy takes effect.
- Employers planning 20 or more redundancies have to start redundancy consultation at least 30 days before the first redundancy.
Andrew Tate, vice president of R3, says: "Companies can become insolvent incredibly rapidly. There may not be enough money left to pay salaries for a week, let alone 45 days while consultation takes place, or even to pay for the consultation process itself. Moreover in an insolvency process the future of the business might not be clear enough for meaningful consultation."