Consultation on collective redundancy and fire and rehire – what could this mean for employers?

Posted: 21/11/2024

The government recently launched a consultation document seeking views on its plans to strengthen the collective redundancy framework and protections for employees against fire and rehire practices, as set out in the Employment Rights Bill. For more information on the bill itself, see the previous article here. To understand what the consultation covers, please read on. The consultation can be found here.

The duty to consult collectively 

Under the current law, the requirement for businesses to consult collectively is triggered where the business is proposing to make redundant 20 or more employees at any one establishment or site within 90 days or fewer. Under the collective redundancy legislation, the term ‘redundancy’ is construed widely, and includes the proposed termination and re-engagement of staff (commonly known as the practice of ‘fire and rehire’). Employers who fail to comply with the collective consultation requirements face protective awards of up to 90 days’ pay per affected employee.

The proposed changes 

The bill proposes some key changes to collective redundancy practices, two of which are the subject of the current consultation.

Increasing the penalty for failure to consult collectively
The government is considering doubling the protective award from 90 to 180 days’ pay per affected individual, or to remove the cap on the compensation altogether. A protective award is made by an employment tribunal when it considers that an employer has failed to satisfy its collective consultation obligations. The tribunal will award an amount that it believes to be just and equitable in all the circumstances, having regard to the seriousness of the employer's default. Calculated using the employees’ actual pay (ie the statutory cap on a week’s pay does not apply), a protective award for a total failure to consult collectively could equal half of the annual wage bill for the affected employees. The award is designed to punish the employer rather than compensate an employee, and can be a huge cost to employers, as well as one that can be overlooked when counting the cost of redundancies. 

Interim relief
The government is also seeking views on whether an employee should be able to apply for interim relief where they are bringing claims for a protective award in collective redundancy situations, or in a fire and rehire situation. Under these proposals, an employment tribunal, on receipt of a claim, would order the employer either to re-instate or re-engage the employee until the full hearing of a case or, where the employer refuses to re-employ the employee, to continue to pay their salary and benefits until the full hearing. 

Further changes

The government will consult over further changes to collective redundancy consultation in 2025. Proposals include increasing the minimum consultation periods and removing the requirement that the redundancies take place at a single establishment. There are also proposals to clamp down on the practice of fire and rehire.

Practical steps

The current consultation closes on 2 December 2024, and the government’s response can be expected sometime next year, although it is not anticipated that there will be any change in the law before 2026. Responses to the consultation may of course influence the wording of the bill as it progresses through Parliament, and employers who believe that these proposals will have a significant impact on their organisations may wish to familiarise themselves with the consultation document and submit a response. 

We will report on further developments in relation to the bill, including any future consultation documents, as they arise. If you would like a review of your current business practices and some expert advice on dealing with collective redundancy situations, or any other aspect of your workforce, or need guidance on changing terms of employment, contact Paul Mander or Christina Leung.

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