Collective redundancies

What it means

Collective redundancies are the termination of employment of a larger number of employees within 30 days for reasons unrelated to them as individuals, typically organisational changes or the closure of an operation. The threshold depends on the size of the workforce and the Labour Code sets it in tiered numbers.

Under certain conditions, termination agreements concluded for the same reasons also count towards the number. A company therefore cannot avoid its obligations by offering agreements instead of notices of dismissal.

The aim of the rules is that redundancies happen with the knowledge of employees and the authorities, and that ways to limit them are explored, such as redeployment or retraining. The rules derive from an EU directive and are similar across the EU.

How it works in practice

At least a month before the first notices are delivered, the employer must begin consultation with employee representatives, such as a trade union, and inform them in writing of the reasons, numbers, selection criteria and severance. A copy goes to the labour office.

After consultation the employer notifies the labour office of the outcome in writing. Employment terminated by notice as part of collective redundancies does not end before a statutory period after that notification has passed, even if the notice period would expire earlier.

For the books, collective redundancies mean mainly additional costs: severance pay by length of service, wages during the notice period and pay in lieu of untaken leave. If the decision is taken and announced before year end, we book a provision for these costs.

What to watch out for

Failing to follow the procedure has serious consequences: employees can claim compensation, the labour inspectorate imposes a fine and the dismissals can be challenged as invalid. For larger restructurings we therefore prepare the redundancy timeline together with a lawyer.

Collective redundancies can also take place in bankruptcy, carried out by the trustee. A company heading into financial difficulty should consider preventive restructuring earlier, within which staff reductions can be planned with more care.