CIPD - Information and Consultation of Employees Regulations

Employee relations

Revised June 2008

This factsheet gives introductory guidance. It:

explains the Information and Consultation of Employees Regulations 2004
recommends practical considerations for UK companies in meeting the requirements of the legislation
considers the business case for informing and consulting with employees
includes the CIPD viewpoint.

The Information and Consultation of Employees Regulations 2004 (SI 2004/3426)¹ are based on an EU Directive establishing a general framework for information and consultation² which was agreed in March 2002. They give employees rights to be informed and consulted about issues that affect their employment and the prospects of the business.

The Regulations came into force on 6 April 2005 and now apply to all undertakings with 50 or more employees. In the Regulations, ‘undertaking’ is defined as ‘a public or private undertaking’ carrying out an economic activity , whether or not operating for gain. In this factsheet we use the term ‘employer’ or ‘organisation’.

The UK and Ireland were granted later implementation dates for smaller companies. From April 2005, only organisations with 150 or more employees were covered. Organisations with 100 or more members of staff had until April 2007 before the legislation applied to them, while those with 50 or more employees were covered by the regulations from April 2008. The UK and Ireland have been most affected by the Directive's requirements because before April 2005 they did not have any general information and consultation laws. Other EU Member States already had a range of workplace consultation requirements and required fewer legal changes to comply.

The Regulations

The Regulations have been drafted to allow employers significant flexibility in establishing methods of informing and consulting employees that suit their particular organisation.

Employers that have 'pre-existing' information and consultation agreements that cover all employees and have been formally approved by the workforce will only have to consider making changes if they receive a request to negotiate new arrangements supported by 40% of employees.

Organisations that don't have formally approved information and consultation agreements may be vulnerable to having the Regulations' standard provisions imposed on them if just 10% of employees make a request for new arrangements. Employers in this position will be required to negotiate new arrangements but if agreement can't be reached then the standard provisions will apply.

Employers without 'pre-existing agreements' can take the initiative by informing the workforce that they intend to establish new arrangements and negotiate an information and consultation agreement without waiting for a request. This allows employers to set the agenda but if negotiations fail and agreement can't be reached then the standard provisions will again apply.

Pre-existing and negotiated agreements allow employers to agree with the workforce the information and consultation arrangements that suit the particular size, type and employment culture of their organisation.

The standard provisions

Under the standard provisions, employers must inform and consult with their workforce in the following areas:

recent and probable developments in the organisation's activities and economic situation.
the situation, structure and probable development of employment, and any anticipatory measures that are envisaged, especially where there is a threat to employment.
decisions likely to lead to substantial changes in work organisation or contractual relations.

The position on direct and indirect arrangements for informing and consulting with employees

Pre-existing and negotiated agreements can allow for information and consultation arrangements to be either direct (between managers and employees) or indirect (through employee representatives) or a combination of the two.

However arrangements under the Regulations' standard provisions must allow for the election of employee representatives and the establishment of indirect methods of informing and consulting with the workforce.

What issues are subject to information and consultation?

Subjects that might be addressed under 'recent and probable developments' include profit and loss, sales performance, productivity, structure, divestments, market developments and strategic plans.

'Contractual relations' or decisions likely to lead to substantial changes in work organisation could cover:

working time and practices
training and development
equal opportunity
health, safety and environment
pension and welfare issues
merger and acquisition
tranfser of undertakings
employment plans
collective redundancies
restructuring
reorganisations
data protection issues
outsourcing
pay.

However, in order to avoid dispute or confusion, employers should ensure that their information and consultation agreements specify precisely which issues are to be addressed.

What is consultation?

The Regulations defines consultation as 'the exchange of views and establishment of dialogue' between the employer and employees or emploee representatives. Consultation must be timely insofar as the company decision-making process is concerned, with management providing sufficient information to employee representatives, allowing for them to prepare a study, formulate an opinion, submit it to management, and to receive management's feedback on that opinion. On decisions that are likely to lead to substantial changes in work organisation, or contractual relations, consultation must be carried out 'with a view to reaching agreement'.

Can companies require employee representatives to respect confidentiality?

Employers are permitted to withhold information and not consult where disclosure 'would seriously harm the functioning of the undertaking or the establishment, or would be prejudicial to it'. This means that employee representatives could challenge the withholding of information by employers. Employers can, however, impose a duty of confidentiality on employee representatives, and this can extend beyond their individual term of office.

How should employers act?

Organisations should have audited their industrial relations environment, understood what information and/or consultation arrangements were already in place and assessed whether or not they needed to be adapted to meet the requirements of the Regulations. Employers should have verified what workforce agreements, partnership arrangements, collective bargaining processes were in place across their company, established whether they are informal or formal procedures, which establishments/undertakings and employees were covered, and identified what issues were already subject either to information or consultation or bargaining, and if any additional subjects would have to be included to meet the legislation’s requirements.

Organisations should have reviewed their management decision-making processes, and assessed the ease with which management could take account of new consultation requirements in decision-making. In particular, top and line management should have understood the implications of the requirement to inform and consult in a timely way, and on a wide range of business issues.

All information and consultation arrangements will need to be monitored and reviewed to ensure they are working as they were intended to.

Training

Both management and employee representatives need training in a wide range of areas if information and consultation arrangements are to prove effective and robust. Training is likely to cover areas such as principles of information and consultation, giving presentations, providing feedback and understanding financial information.

Compliance and enforcement

Where a negotiated agreement is in place, or where an employer is subject to the standard information and consultation provisions any complaint of failure to comply must be brought to the Central Arbitration Committee (CAC).

Where the CAC upholds a complaint, the person who brought it may then apply to the Employment Appeal Tribunal for compensation up to a maximum of £75,000.

The provisions in the Regulations on compliance and enforcement do not apply to pre-existing agreements. A pre-existing agreement would be enforceable through the courts only if that means of enforcement had been agreed between the parties.

CIPD viewpoint

The CIPD was closely involved in the consultation over the legislation and believes that it will help promote productive employee relations through improved dialogue in the workplace. Research shows that organisations that involve and engage their employees in matters that affect their employment experience are likely to benefit through increased motivation and commitment. Our report Understanding the people and performance link: unlocking the black box³ revealed that HR policies that foster staff engagement through involvement in decsion-making, job influence, performance appraisal and team working are linked to job satisfaction and motivation. This is not an isolated conclusion. Our report Management choice and employee voice⁴ showed that employee voice was seen to contribute to business performance via better employee contributions, improved management systems and productivity gains. More information on this topic is available in our employee voice factsheet.

Go to our factsheet on Employee voice

Useful contacts

Acas: information and consultation pages

Central Arbitration Committee

Department for Business, Enterprise and Regulatory
Reform: information and consultation guidance

Involvement and Participation Association

References

The Information and Consultation of Employee Regulations 2004. (2004) SI 2004/3426. London: Stationery Office. Available at http://www.opsi.gov.uk/si/si2004/20043426.htm
Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a general framework for informing and consulting employees in the European Community. (2002) Official Journal. L080, 23/03. pp0029 - 0034. Available at: http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!
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PURCELL, J., KINNIE, N. and HUTCHINSON, S. (2003) Understanding the people and performance link: unlocking the black box. Research report. London: Chartered Institute of Personnel and Development. Available at: http://www.cipd.co.uk/bookstore
MARCHINGTON, M., WILKINSON, A. and ACKERS, P. (2001) Management choice and employee voice. Research report. London: Chartered Institute of Personnel and Development.

Information and Consultation of Employees Regulations