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Is the end of ‘no compulsory redundancy agreements’ nigh?

Friday October 21st, 2011

Lesley Murphy, Partner, Harper Macleod LLP

Recent figures indicate that the Scottish Government has cut its wage bill by 2.7% over the last year in a bid to reduce costs and improve efficiency.  With further cuts required to the local Government budget outlined in John Swinney’s budget statement – an estimated £13 million in the case of Glasgow City Council – how much longer can an embargo on compulsory redundancies in the public sector be sustained?

There has, in recent years, been a trend in the public sector of various employers, unions and other bodies entering into agreements not to implement compulsory job cuts.  This presents challenges for many affected employers who have had to find their cost-savings elsewhere. Alternative measures have included voluntary severance schemes, restructuring of how services are delivered and, in the case of Scottish Borders Council, an agreement to freeze pay in exchange for the no compulsory redundancy commitment.

However, the latest squeeze on public spending may signal a return to traditional methods of cost-cutting.  If compulsory cuts are on the horizon, for many employers they may be of a scale which would trigger the collective consultation obligations which come into play when 20 or more redundancy dismissals are proposed. Voluntary redundancies count as ‘dismissals’ for this purpose. Where the rules are engaged, employers have to consult over the proposals via the relevant union or employee representatives, with failure to do so resulting in possible claims for so-called ‘protective awards’ of up to 13 weeks’ pay per head.  The process involved notifying to the relevant representatives certain prescribed information including the reasons for the proposed redundancies, the expected number and the proposed method of selecting employees to be dismissed.  Thereafter, there should be discussion with a view to reaching agreement on potential ways of avoiding the dismissals, reducing their number and mitigating their consequences.  These discussions should continue for at least 30 days (where fewer than 100 redundancies are proposed) and for a minimum 90-day period where over 100 jobs are being axed. Accordingly, the impact of the collective rules can be to elongate substantially the process for all concerned and the lead-in time for HR departments in terms of planning their processes to ensure compliance.

The public sector is no stranger to handling large scale consultation obligations, however, many public employers may not have come into contact with these particular rules in some years. This legislation serves an important purpose in ensuring that redundancies are not implemented lightly without appropriate consultation. They do, however, undoubtedly place a strain on management and support functions who are required to carry out these exercises whilst maintaining service levels; likewise employees can understandably find the process stressful.

It may be that the continuing spending cuts force a number of public sector employers to re-acquaint themselves with the procedures sooner than they would have hoped.

For more information, contact: Lesley Murphy, Partner at Harper Macleod LLP, tel no: 0141 227 5392 or email lesley.murphy@harpermacleod.co.uk

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