Staff councils will soon have more power to access employer’s information,
giving them a greater voice. But companies should be adapting working practices
now before changes to legislation come into force in 2005. Taj Rehal reports
Upcoming legislation that will require employers to consult employees on a
range of business issues has not even entered its final form but is causing UK
business leaders considerable alarm. Set to come into force on 23 March 2005,
the regulations will require only 10 per cent of a company’s employees to
request rights to information and consultation in order for that company to
have to provide it.
This is not just among those whose organisations lack an existing
consultative body or staff council, and that may therefore have to create one
to comply with the new regime. Given the much wider spectrum of issues on which
employers will have to involve employees, the regulations will also affect
organisations that already run a staff council, as their relationship with
those councils will have to change.
The consultation period on the new draft regulations, released in July, will
end on 7 November. The DTI will consider this feedback before publishing the
final regulations next year.
As a result of these issues, many fear that the legislation will create a
new form of power-sharing with employee audiences, giving rise to another
powerful stakeholder audience that will further dilute management’s "right
to manage". How could this occur?
What gives rise to this stakeholder power? Under the new regime, employers
will need to involve staff representatives on key business issues. The
regulations confirm that management must provide a staff council with
– the recent and probable development of the undertaking’s activities and
– the situation, structure and probable development of employment within the
undertaking and any anticipatory measures envisaged, in particular where there
is a threat to employment within the undertaking
– decisions likely to lead to substantial changes in work organisation or in
contractual relations, including collective redundancies and business transfers
as defined in the relevant legislation.
Management will be under a duty to give information to the staff council
"at such time, in such fashion and with such content as is appropriate to
enable, in particular, the [staff council] to conduct an adequate study and,
where necessary, prepare for consultation".
There is little doubt, therefore, that the forthcoming regime will create a
new voice for the workforce. It is significant, too, that employers will need
to "consult with a view to reaching agreement" on decisions changing
working conditions or contractual terms – suggesting that the representative
bodies will be able to negotiate on the issues it considers (even if the
regulations do not say this explicitly) and that employers must show that they
are approaching such discussions with open minds.
So, although there is no executive power, as such, conferred on the new
representative bodies, they will have an important influence that employers
will be unable to ignore.
What are the likely practical implications of this stakeholder influence?
With your staff council in place, what will be the practical effects of this
employee empowerment and, on the basis of these draft regulations, are
businesses justified in fearing the creation of another stakeholder influence?
Let’s look in turn at each of the information areas described above.
Business activities and economic situation
In essence, the obligation to provide information on these areas refers to
information showing the current and predicted trading position for the
business. Any information given must be with such content as to enable the
staff council to conduct an adequate study, and, if they so choose, to appoint an
external third-party expert to assist them.
In practical terms, management will need to provide: the orderbook, sales
ledger, tender information, sales/performance forecasts, debtors, actual and
anticipated costs, and, potentially, profit assessments.
The most thorough way of providing this information may be to allow the
staff council direct access to management accounts. However, even with the
confidentiality obligations the regulations impose, such a step is very
unlikely to be acceptable to management.
Alternatively, some form of financial summary may be appropriate. Yet,
should the information provided not be considered adequate, the staff council
is likely to seek outside expert assistance to interpret the evidence.
Alternatively, they could go to the Central Arbitration Committee (CAC) seeking
a declaration that this information be provided.
Employment prospects and anticipatory measures
The second area the regulations focus on is the duty on management to inform
and consult regarding employment prospects and any anticipatory envisaged
measures, particularly where there is a threat to employment.
Naturally, this will cover redundancy, yet it will also extend to all other
areas that have an impact on employment; for example: restructuring, expansion
plans, takeovers, mergers and outsourcing.
Consider, for example, a situation where the board is considering a proposal
to outsource its payroll function. In normal circumstances, the board would
contact third-party providers, invite tenders and/or hold beauty parades. It
would then, on the basis of that information, come to a decision to outsource
the department and appoint third-party providers.
Under the new regime, however, once outsourcing is mooted as a possibility
(making it a ‘probable development of employment’), management will then have
to provide information on the proposal to the staff council.
The staff council would expect to:
– be informed as to the reasons why this decision is being proposed
– have access to management accounts to understand the cost reasons and
implications of such a decision
– be entitled to consider the information and make representations to the
The board would then have to consider these representations and give a
considered response to the staff council, causing potentially costly delays in
It is important to remember that, once management has considered any
reasonable response from the staff council, they can still reach their own
conclusion. The board would be able to implement the decision and then continue
with the normal consultation that would follow, either through redundancy
and/or through TUPE consultation as the outsourcing takes place.
Changes to work organisation or contractual relations
Here, consider two scenarios.
Scenario one: amalgamating two departments.
Customers have demanded that more staff are available to answer their
queries. In response, management is considering amalgamating two different
customer service departments. There are to be no redundancies.
The usual position would have been that the board, having reached its
decision, would either implement this directly or work with the HR department
to do so. Most employers would ensure that there were senior members of
management available to discuss the changes with the staff affected, to ensure
the smooth transition to the new working arrangements.
However, the regulations will require the involvement of the staff council
before the actual decision is made. Inevitably, the staff council will seek the
views of the affected employees before the changes take place. Management will
then be under an obligation to try an reach agreement on the change.
Both the employees’ willingness to accept change and management’s acceptance
to adapt will, as ever, determine whether it is successful. It is clear to see
that the regulations give a more powerful voice to the employees to raise any
concerns that they may have before a management decision is ultimately made.
Scenario two: the annual pay review. Changes in employees’ pay will
create changes in contractual relations. Therefore, before the employer
announces an annual pay award, it will be required to provide information to
the staff council and consult with them with a view to reaching agreement.
For those employers that do not have a collective bargaining regime in
place, this will be a significant potential change. Staff councils should be
able to consider management information and come to a collective opinion on the
proposed pay award. They will also, no doubt, wish to seek the views of the
employees affected by any such pay award.
Obviously, although there is no express collective bargaining power
introduced for staff councils, they will have a significant influence and,
therefore, effect over potential pay awards, although the final decision on any
pay award will ultimately rest with the employer.
The introduction of the regulations will undoubtedly see an increase, in
practical terms, in the role a workforce plays in influencing an organisation’s
management. However, in business terms, there are hurdles to be overcome first.
The Government has announced that it will produce guidance giving practical
examples of how it envisages the regulations will take effect. However, these
regulations emphasise the view, shared by many, that businesses should take
control over the process. Rather than wait until the regulations are imposed on
employers in March 2005, employers should be grappling now with how they
practically want to introduce or adapt existing structures to deal with this
new stakeholder influence.
Taj Rehal is based in the London office of Beachcroft Wansbroughs