Redundancies and Cost-Cutting: How It Just Got More Expensive

Claire Treacy, Senior Associate

Employers that propose to make 20 or more redundancies within a 90-day period or less must carry out a collective consultation procedure with the impacted employees – this also applies to employers who propose to change 20 or more employees’ terms and conditions of employment through “fire and rehire” tactics within a 90 day period or less.

When collective consultation obligations apply there are strict minimum timeframes that apply.  The timeframes differ depending on the number of redundancies that are proposed and strict requirements about what should take place during a collective consultation process.

If an employer gets this wrong then, in addition to unfair dismissal claims, employees will have a claim for what is referred to as the protective award. Unlike unfair dismissal claims that can only (currently) be pursued by employees that have at least 2 years’ service with the business, a claim for the protective award can be made by all employees irrespective of how long they have been employed by you for and irrespective of whether they have been made redundant.

The purpose of the protective award is to penalise the business.  The protective award can be up to 90 days gross (uncapped) pay for each employee depending on the extent of the employer’s breach of the collective consultation obligations.

As a result, this claim is already an expensive claim for employers and since the 20^th January it has become even more expensive. This is because an Employment Tribunal will now be able to award an uplift to the protective award of up to 25% in respect of a business’ unreasonable failure to comply with the Statutory Code of Practice on Dismissal and Re-engagement. Therefore, an Employment Tribunal will have to now consider not only whether the collective consultation obligations have been breached, but also whether the code has been breached.

The Statutory Code of Practice on Dismissal and Re-engagement came into force in July 2024. We provided a summary of the code following its introduction which can be read here: Code of Practice on ‘Fire and Rehire’ | Kuits Solicitors.

Businesses considering making redundancies or changing terms of employment should seek legal advice from our team before starting any consultation process given the risk of getting it wrong is now more expensive than ever.

It should also be noted that the Government’s Employment Rights Bill is seeking to bring more redundancy situations within the obligation to collectively consult as the number of proposed redundancies will soon need to be calculated across the business rather than across individual sites as is currently the case.

However, despite this risk there may be merit in businesses considering “fire and rehire” tactics now if this is something deemed necessary for the business given that the Government’s Employment Rights Bill is seeking to make it illegal to use “fire and rehire” tactics unless it is in the most exceptional circumstances.

This is a complex area of the law so please contact us on 0161 832 3434 for advice about the options available to your business should you be considering a redundancy or restructuring process in your business. More information regarding redundancy procedures for employers can be found on are website here.