ICAS calls on Government to improve redundancy consultation

david-menzies By David Menzies, Director of Insolvency

11 June 2015

ICAS has called on the UK Government to improve the process for collective consultation on redundancies for employers who are facing insolvency. 

Responding to a Call for Evidence, ICAS in its written response highlights that the current legislation creates an inherent tension between the requirement to consult on proposed redundancies and the duty to act in the best interests of all creditors when the company is facing imminent insolvency. 

The redundancy consultation requirements could therefore be improved by recognising the different capabilities of employers who are solvent and those who are insolvent.


Response to call for evidence on collective redundancy

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Issues with consulting employees

David Menzies, Director of Insolvency, said "It is often impractical for employers or insolvency practitioners to consult with employees when the company is facing insolvency. Put simply there will often be no funds available to pay employee wages for 30 or 45 days to allow a consultation to be undertaken and the law does not recognise that at present.

"The Government must consider and clarify as a matter of policy whether the interests of one stakeholder group in a company facing insolvency should take precedence over others and then ensure that there is effective legislation to achieve this if that is what is desired.

"We fully recognise and support the need for employees to be consulted in non-critical situations. Where there is severe financial distress however there needs to be simplified, streamlined and effective methods of communicating with and gathering views from employees or their representatives which recognises the unique situation faced by the company."

Working with the insolvency profession

With the cost of failing to consult correctly resulting in substantial protective awards, the focus of many employee consultations is on the process rather than carrying out an effective and quality discussion with employees or  their representatives. 

ICAS has therefore suggested that the Government should work with the insolvency profession to introduce a principals based standard to support effective and quality employee consultations in insolvency situations.

View the Call for Evidence

Topics

  • Consultations and responses
  • Insolvency

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