Collective redundancy law is changing: what employers need to know

Written by Emma Louise-Hewitt, Head of Employment Law at Sydney Mitchell

The government has opened a consultation on one of the most significant changes to collective redundancy law in decades.

Hidden behind the technical detail is a simple reality - getting redundancies wrong is about to become much more expensive, and for large employers, much easier to do so by accident.

Emma-Louise Hewitt, partner and head of Employment Law at Sydney Mitchell, explains the context for the consultation, and what employers need to do to get redundancies right.

The Employment Rights Act

The Employment Rights Act 2025 introduces a new organisation‑wide trigger for collective consultation. The consultation that is now underway asks where that new threshold should be set, and how it should apply to employers of different sizes.

While the detail is still up for debate, the direction of travel is clear. Collective consultation is going to apply more often, to more employers, and to more employees, and with protective awards now doubled from April 2026, the financial risk of non‑compliance has never been higher.

Where are we now?

Under the current rules, employers must collectively consult if they propose 20 or more redundancies at one establishment within 90 days. As of 6^th April 2026, failure to do so can now result in a protective award of up to 180 days’ pay per employee. For large workforces, the sums involved can quickly become eye‑watering.

The existing test is site‑based. This means that large employers can lawfully implement significant redundancy programmes without any collective consultation, provided that the dismissals are spread across multiple sites with fewer than 20 at each. This is what the government seeks to change, to effectively, close the gap.

What is changing? 

The Employment Rights Act adds a new threshold test, requiring collective consultation if there are:

• 20 or more redundancies are proposed at one establishment, or
• another (new) organisation‑wide threshold is met, based on the total number of proposed redundancies across all sites/workplaces within a 90‑day period.

The single‑site test is staying. The new test simply sits alongside it. The big unknown is where the new threshold will land.

The consultation options and what they really mean for employers

The current open consultation sets out four possible approaches:

• A single fixed number (somewhere between 250 and 1,000 redundancies)
• A pure percentage test (e.g. 10 per cent of the workforce)
• Tiered fixed thresholds, with different numbers depending on employer size.
• A combined approach, using percentages for smaller employers and fixed numbers for larger ones.

The government’s clear preference is for simplicity, pointing towards either a single fixed threshold or tiered fixed numbers. A pure percentage test popular with some very large employers looks unlikely to survive.

If percentage only thresholds fall away, the question becomes whether the final system ends in tiers. Tiered thresholds are the government’s stated second preference, and arguably the most politically defensible compromise.

From an employer perspective, the most important issue is not how the threshold is set, but what happens if you misjudge it.

As of 6 April 2026, tribunals can award up to 180 days’ pay per employee for failure to consult collectively. Consider the exposure:

• 300 employees affected
• Average daily pay: £150
• Maximum protective award: £150 x 180 x 300 = £8.1 million

And that’s before legal costs, management time, reputational impact, and the inevitable employee relations fallout.

Crucially, protective awards are punitive, not compensatory. Employers do not get credit for acting in good faith if they simply get the law wrong.

The new organisation‑wide threshold significantly increases the risk of:

• Inadvertent non‑compliance, where HR teams track site‑level proposals but fail to aggregate them.
• Timing errors, particularly where redundancy exercises emerge sequentially.
• Group‑structure assumptions, where managers assume redundancies “don’t count together” without checking the employing entity.

Even with helpful recent case law (notably Micro Focus, which confirms past dismissals need not be counted), large employers running frequent, dispersed restructures are much more likely to stray into collective consultation territory. Therefore, whilst the margin for error is potentially shrinking, the cost of error is rising.

Who is most likely to be caught?

• Very large employers making repeated small batches of redundancies across multiple sites.
• Retail, logistics, care and hospitality businesses with distributed workforces.
• Employers without centralised tracking of proposed redundancies.
• Businesses relying on legacy practices built purely around the single‑site test.

How do you ensure you get it right?

Collective redundancy compliance does not have to be complex, but it does need to be planned and structured.

1. Track proposals, not dismissals  - It is too late to count once decisions are final. Employers need live visibility of proposed redundancies across the organisation.

2. Aggregate early, then reassess - Each time a redundancy exercise is proposed, ask:

Could this connect with other proposals in the next 90 days?

Are we close to an organisation‑wide trigger?

Reassessment should be routine, not exceptional.

3. Check the employing entity - Do not assume group‑wide aggregation (or separation). Confirm which legal entity employs the affected employees before counting numbers.

4. Remember the exemptions – but use them carefully - Redundancies where consultation has already started can be ignored, as can unconnected later exercises. But this depends on clear evidence of separation.

5. Do not delay consultation just to “wait and see” - Tribunals take a dim view of tactical delay. If you are close to a threshold, early consultation is far safer  and often commercially sensible.

6. Consider standing representative structures - For large employers, having pre‑elected or standing bodies can dramatically reduce risk and delay, particularly where consultation may be triggered repeatedly.

7. File HR1 early and accurately - Failure to notify the Secretary of State remains a criminal offence and often accompanies protective award claims.

What should employers do now?

The consultation closes on 21^st May 2026, with the new threshold expected to take effect in 2027.

Between now and then, employers should:

• Audit current redundancy tracking processes.
• Identify who “owns” aggregation decisions.
• Stress test scenarios against likely threshold models.
• Factor increased protective award exposure into risk planning.

The consultation may determine where the line is drawn. But employers should assume that the line will be easier to cross, and much more expensive to ignore.