Identifying Redundancy Situations and Collective Consultation

Identifying a Redundancy Situation

Redundancy requirements are set out in the Employment Rights Act 1996. To rely on redundancy as a fair reason for dismissal, there must be a genuine reduction in the need for staff.

Section 139 of the Act highlights three main scenarios:

• The complete closure of a business
• The closure of a particular workplace
• A reduced need for employees to carry out work of a particular kind

The third is the most common. It deals with situations where fewer employees are needed for certain tasks. The total workload may remain the same, but if it can be done by fewer staff, redundancy may apply.

The phrase “work of a particular kind” is central. It requires employers to look at the type of work needed, not just changes to terms and conditions. For example, outsourcing or new technology may reduce the need for staff, even when the tasks continue.

Case law supports this approach. In Safeway Stores plc v Burrell, a three-stage test was set out:

1. Has there been a reduction in the need for employees to do work of a particular kind?
2. Is the dismissal due to that reduction?
3. Is there a direct link between the two?

Another case, Packman v Fauchon, confirmed that redundancy can still apply when the same volume of work exists, but fewer employees are needed due to efficiency gains.

The key point is that redundancy must be based on the real operational needs of the business.

Collective Redundancy Consultation

When 20 or more staff may be dismissed within a 90-day period at one establishment, employers have a duty to carry out collective consultation. This duty is found in the Trade Union and Labour Relations (Consolidation) Act 1992.

Consultation must start in good time and finish before any dismissals take place. The law sets minimum periods:

• 30 days before the first dismissal, if 20 to 99 redundancies are proposed
• 45 days before the first dismissal, if 100 or more redundancies are proposed

The process involves employee representatives. Employers must explain the reasons for redundancy, the number and type of employees affected, and the method of selection. They must also consider ways to avoid or reduce redundancies and limit the impact on staff.

The definition of “establishment” is important. It refers to the unit or location where employees are based, not the entire business. The 20-employee threshold applies per establishment, not across all sites.

Employers must also notify the Secretary of State by sending form HR1 to the Insolvency Service. Failing to do so is a criminal offence and can result in uncapped fines.

Protective awards of up to 90 days’ pay per affected employee may also be ordered if consultation rules are not followed.

Conclusion

Employers must be able to show a genuine redundancy situation and comply with consultation duties. By starting the process early and engaging with representatives, they reduce legal risk and help maintain trust with their workforce.