law 33 Handling redundancy
the right way Consulting staff during redundancy hit the news earlier this year. The Advocate General handed down his opinion that employers should only be obliged to collectively consult when the number of employees affected by redundancy and assigned to a specific business unit exceeds 20, writes Julie Taylor, associate solicitor
This is rather than being triggered when the total redundancies across the whole business exceeds 20.
This issue arises out of the long- running Woolworths cases and further clarity should be received when the European Court of Justice (ECJ) delivers its judgment later this year. The ECJ is not bound to follow the opinion of the Advocate General, although often it does give an indication of which way the judgment may go. If followed, the UK courts would have to follow the ECJ and this would mean a move away from the current position of treating the entire company as one ‘establishment’ when it comes to collectively consulting.
news extra
Taxes on profit create high social costs, says Saïd Business School
New research from the Oxford University centre for business taxation estimates that for every £100 of corporation tax collected by HMRC, there is a cost to society as high as £29.
The paper titled: ‘The Social Costs of Taxing Profit’ was written by Professor Michael Devereux, director of the Oxford University centre for business taxation and senior research fellow Li Liu, Saïd Business School, Oxford.
The costs include both the direct costs of complying with the tax law, and indirect costs arising from the ways in which taxes distort economic behaviour. For example, taxes on profit induce businesses to reduce their investment and employment – the foregone benefits of such reduced activity is an additional cost to society.
The tax revenue itself is not a social cost: it represents a transfer from the taxpayer to the Government – leaving the taxpayer worse off, but allowing additional expenditure on publicly-provided goods and services. But the additional 29% is an estimate of a pure waste to society of complying with the tax, with no offsetting benefit.
The research is based on a detailed analysis of around eight million confidential UK corporation tax records in the UK made available by HMRC for research purposes between 2001 and 2008. The approach used for measuring the social cost of taxes is based on estimating the elasticity of taxable income – the extent to which the income of companies responds to differences in the tax rate.
THE BUSINESS MAGAZINE – THAMES VALLEY – APRIL 2015
Li Liu said: “Corporations can modify their behaviour in response to tax in a number of different ways. They can change the scale of production and hence the demand for labour, capital and other factors; they can adjust the choice of financial policy and locate both real activities and profits elsewhere.
“It would be extremely difficult to try to estimate all of these responses, and to aggregate them into a single measure of the social cost. This research breaks new ground by estimating the elasticity of taxable profit, which incorporates all margins of response to changes in the tax rate and so makes possible the estimation of social costs. The relatively high social costs of corporation tax that we estimate should inform policy making, as the economic implication of corporation tax goes well beyond tax revenue.”
A short policy paper describing the research is available.
Details:
www.sbs.ox.ac.uk
Shaw Gibbs assists in creation of new company
Oxford-based accountancy and business advisory practice Shaw Gibbs has completed a deal between Fresh Direct and Bain Capital. The agreement, which was unveiled in November 2014, creates a new company that brings together three of Bain’s fresh food businesses – M&J Seafood, Pauleys and Wild Harvest – with fresh produce wholesaler Fresh Direct.
The new company will operate under the Fresh Direct name, with M&J Seafood, Pauleys and Wild Harvest retaining their brand names. The merger creates an all-in-one fresh food destination for chefs and caterers, providing produce, fish and seafood, meat and products for exclusive fine dining requirements.
Details:
www.shawgibbs.com www.businessmag.co.uk
Since the Employment Appeal Tribunal decision in the Woolworths cases, employers with employees across a number of sites have had to aggregate the numbers affected across all locations and collectively consult all staff in every location if there are to be 20 or more redundancies in a 90-day period.
Employers should continue to follow this process until we hear from the ECJ and also consider the following before making redundancies:
• If it is a collective redundancy situation then notify the secretary of state.
• Consult with the relevant trade union and/or ensure employee
consultation must start 45 days before the first redundancy.
• Ensure that the consultation covers ways of avoiding the redundancies and limiting the number. Consider whether there is any alternative employment available within the organisation.
representatives are elected if it is a collective redundancy consultation. Ensure that the representatives are provided with information such as the number of redundancies, the reasons for them and the proposed method of selection at the start of the consultation.
• Identify a selection criteria which must be fair, reasonable and capable of objective justification. For example, qualifications, disciplinary record, timekeeping, length of service. Score the affected staff with reference to the agreed criteria.
• Check whether minimum periods of consultation apply. Between 20- 99 redundancies, the consultation must begin 30 days before the first redundancy dismissal. For 100 or more redundancies, then the
• Ensure that individual employees who will be dismissed for redundancy have been properly consulted, informed of the decision in writing and given an opportunity to appeal.
Redundancy is never a nice process for either the employer or the staff but it is often an unavoidable exercise that many employers face at some point. Good planning, communication and awareness of the specific legal requirements can help make a difficult situation more manageable.
Details: Julie Taylor 01635-508080
www.gardner-leader.co.uk
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