DTI guidance paper reveals burden of EU directive on employee consultation

DTI proposals on the new EU rules governing the consultation of employees reveal the "enormous burden" of the new measures on UK businesses, according to law firm Reynolds Porter Chamberlain (RPC).

The Information and Consultation Regulations come into force on 6 April 2005 and consultation by the Government on the proposals ends on 22 October 2004. Under the new regime, employee representatives will have the right to be informed about the employer's economic situation and consulted about employment prospects and decisions likely to lead to changes in work organisation or contractual relations.

RPC argues that, as well as the cost in management time, the employer will have to bear the cost of:

• ensuring that the ballot to appoint employee representatives is fair - according to the Regulations there must be one representative per 50 employees subject to a minimum of two and a maximum of 25 representatives at any business;



• paying each employee representative not just for time spent attending meetings with management but also to review information provided and to consider and present alternative proposals to management's plans.

Geraldine Elliott, Head of Employment at RPC, explains that the Regulations require consultation to take place before management makes key decisions which will either affect "the situation, structure and probable development" within the business or lead to "substantial changes in work organisation or in contractual relations". This will involve holding discussions between the employee representatives and the level of management appropriate to the subject under discussion. Management will be obliged to provide a reasoned response to employee proposals.

Geraldine Elliott comments:

"Employers will fear that the process for making important decisions will become even more drawn out and painful than it already is. Keeping staff informed and gathering their feedback may be best practice but the Directive and these Regulations go further. They require businesses to establish a dialogue with employees via their representatives over strategic decisions.

"The DTI is asking companies not to put too many restrictions on the distribution of information to employee representatives. Combine this with the expectation that the employee representative should be informed of a problem before management have decided on a solution and you have the recipe for the spread of dispiriting rumours throughout a company."

RPC cites that the DTI's own calculations estimate that it will cost UK businesses £430m to implement the new Regulations.

Initially the Regulations will only affect businesses with over 150 employees. The Regulations will apply to businesses with more than 100 employees and those with more than 50 employees (75% of all businesses by employment) from 6 April 2007 and 6 April 2008 respectively.
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