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R3 Calls for Government Reform of Collective Redundancy Process in Insolvencies

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Insolvency trade body m R3, has called on the UK Government to reform the collective redundancy process in insolvencies, requesting, in particular, clearer Government as well as change to 'protective award' compensation regime, which means that the taxpayer covers the costs of incomplete redundancy consultations.

Currently insolvent businesses must undertake a 45-day redundancy consultation, when alternatives are to be discussed. This requirement is not practical however, as companies, which are insolvent, often cannot afford to comply – despite wanting to do so.

Commenting, Andrew Tate, who is the Vice-President of R3, stated:

"The government 'call for evidence' is very welcome. This is a perfect chance to embrace the calls for reform and sort out the very real problems that exist with trying to consult on redundancy when companies fail."

"Existing consultation requirements are near impossible to fulfil in many company insolvency situations. This is a hopeless state of affairs which needs to be addressed urgently."

"Clear guidance is needed from government. Insolvency practitioners will try and save jobs and businesses, but the rules on what they should do when they can't are problematic and unworkable. R3 has called for clarity now for some time. The government needs to work with a range of stakeholders, from the unions to the insolvency profession to achieve meaningful reform."

"Insolvency practitioners should always provide as much advice to employees as possible about redundancies, and the profession works closely with Jobcentre Plus to make sure help is available. However, in a fast-moving insolvency situation, with limited time and money, and where job losses are inevitable, a full 45-day consultation can often be impossible."

"Companies can become insolvent incredibly rapidly. There may not be enough money left to pay salaries for a week let alone 45 days while consultation takes place, or even to pay for the consultation process itself. Moreover in an insolvency process the future of the business might not be clear enough for meaningful consultation."

"The success of the MOU between R3 and Jobcentre Plus – which has helped 120,000 people facing redundancy in the last five years – shows that non-regulatory solutions are possible."

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