Last week, an employment tribunal concluded that Wilko, the retail chain, breached its collective consultation obligations in its handling of mass redundancies arising from its 2023 collapse.

It is important that all businesses take their collective consultation obligations seriously. The financial consequences of not doing so can be significant. Wilko is now facing a bill for protective awards of over £2 million.

With the Employment Rights Bill proposing tougher obligations and tougher penalties in this area, let’s take a look at the building blocks of legal compliance and what went wrong for Wilko.

What is collective consultation?

Where a business proposes to dismiss 20 or more employees in a 90-day period, collective consultation duties under the Trade Union and Labour Relations (Consolidation) Act 1992 are triggered.

The business must engage in consultation about the proposed redundancies with elected employee or trade union representatives. The consultation period varies depending on the number of redundancies proposed. For between 20 and 99 redundancies, a 30-day consultation period must be observed. For 100 or more redundancies, a 45-day consultation period applies. These periods must be completed before any dismissals take effect.

What do we mean by consultation?

When planning collective redundancies, employers must consult with employee representatives about:

  1. how to avoid the dismissals;
  2. how to reduce the number of dismissals; and
  3. how to lessen the impact of the dismissals.

The aim is to try to reach agreement on these points.

Employers must also give certain written information to the representatives. This is usually set out in a letter known as a ‘s188 letter’ and must include:

  • the reasons for the proposed redundancies;
  • the number and type of roles affected;
  • the total number of employees in those roles at the site;
  • the selection method for choosing who may be made redundant;
  • the process for carrying out the dismissals, including timing and any agreed procedures;
  • how any redundancy payments (beyond the statutory minimum) will be calculated; and
  • details of any agency workers across the business – how many, where they work, and the kind of work they do.

This information helps ensure that the consultation is meaningful and that employee representatives can take part effectively.

What is the risk of non-compliance?

An employment tribunal is able to make a protective award where a business fails to comply with its collective consultation duties. The award can be for up to 90 days’ gross pay (uncapped) per affected employee.

In Wilko’s case, credit was given for what had been done and the protective award was four days’ pay for shop workers and 13 days’ pay for those working in the support centres.

What went wrong for Wilko?

The GMB brought a claim on behalf of 10,000 affected Wilko employees, claiming that Wilko had failed in their collective consultation duties. The tribunal found that, whilst Wilko had conducted some collective consultation with affected staff, it was not sufficient to discharge their legal obligations.

Around 9,000 store workers (at stores employing 20 or more people) will receive four days’ pay, while staff in distribution and support centres will receive 13 days’ pay.

What will the Employment Rights Bill change?

The Employment Rights Bill plans to increase the maximum protective award from 90 to 180 days’ gross pay. It will also make changes to the meaning of ‘establishment’. Currently, separate branches of a business can be considered to be separate establishments. It is only if 20 or more redundancies are proposed at any one of these establishments that collective consultation would be triggered.

Under the ERB, in a case where employees are being made redundant at more than one establishment, regulations will prescribe a threshold number of employees across all impacted establishments (higher than 20), above which collective consultation will apply.

Key takeaways

The example of Wilko is a salutary one, especially for businesses with large numbers of employees. Here are our key takeaways:

  • It is important to take the time to get collective consultation right. Put together a clear process at the outset, and follow it.
  • You cannot assume that being in financial difficulties will get you off the hook. The tribunal in Wilko’s case was clear that financial difficulties do not absolve a business from its obligations. There is a defence where ‘special circumstances’ mean that it is not ‘reasonably practicable’ to consult. However, this is very narrowly applied and even a failing business would be expected to inform and consult employees as much as possible.
  • The impact of failure to collectively consult is cumulative. An award of four days’ pay (as was awarded to Wilko shop workers) does not sound particularly weighty, but when you multiply this across 9,000 workers you are facing a bill of circa £2 million.

Members of the HR Inner Circle can access our template s188 letter as well as a host of other redundancy documents in the templates Vault.