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Consulting on Collective Redundancies in Insolvency Situations

Insolvency and restructuring trade body R3 has welcomed the news that the Government intends to produce new guidance for consulting on collective redundancies in insolvency situations

Following a number of high-profile insolvency cases where employees were made redundant without the full statutory consultation period, the Government has been looking at reforms that could be made to redundancy consultations.

R3 has long called for reform so that inevitable clashes between insolvency and employment law can be resolved. It says that the Government’s proposed guidance could help get a better deal for employees, employers, insolvency practitioners, and the taxpayer.

“Collective redundancy consultations are required by statute but the special nature of insolvencies, and the speed with which they happen, often result in an inability to undertake the full consultation process,” explained Caroline Sumner, R3’s technical director. “A full consultation requires an alternative to redundancy which often isn’t there when a company has failed.”

“The cost of keeping staff on and running the consultation means less money can get back to creditors, but maximising creditor returns is one of the primary goals of an insolvency procedure,” she said. “Not making staff redundant quickly could prevent them from accessing benefits or applying for new roles, trapping them in a situation where they’re not being paid by their insolvent employer.”

“While the Government says it will consider regulation in future, we should see how the guidance works first,” she added. “Insolvency practitioners find themselves in an impossible position when caught between employment law and the realities of an insolvency, so additional regulation would have led to punishment for practitioners trying to do their jobs with few alternatives.”

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