The Employment Rights Act 2025 is set to bring significant reforms to employment law, with a number of these changes already being implemented. One important proposal, set to be introduced in 2027, concerns the consultation obligations that arise during collective redundancy exercises.
In this article, we consider the current position, the proposed changes, and what this means for employers.
Under the current law, an employer proposing to dismiss 20 or more employees at the same ‘establishment’ within a period of 90 days must begin consultation with employee representatives.
Where the threshold is met:
consultation must begin at least 30 days before the first dismissal where 20 to 99 redundancies are proposed; or
consultation must begin at least 45 days before the first dismissal where 100 or more redundancies are proposed.
Employers must also notify the Secretary of State before issuing notices of dismissal.
The meaning of establishment has been the subject of considerable litigation and generally refers to the local unit to which employees are assigned to carry out their duties, rather than necessarily the employer's business as a whole.
What factors determine an ‘establishment’:
manages its own workforce,
is reasonably permanent and stable,
can carry out the tasks it's assigned, and
has its own technical means, equipment and organisational structure that allow it to carry out its function.
The effect is that large-scale redundancy exercises, spread across numerous workplaces, could fall outside the collective consultation regime simply because no individual establishment reaches the statutory threshold.
This was highlighted by the collapse of Woolworths in 2008; although thousands of employees lost their jobs, many individual stores did not meet the 20 employee threshold. As a result, collective consultation obligations were not triggered at those locations, despite the very substantial number of redundancies across the business as a whole.
The existing requirement that an employer proposing to dismiss 20 or more employees within a period of 90 days must commence consultation with employee representatives will remain. However, the Employment Rights Act 2025 will introduce an additional organisation-wide threshold, so that the obligation to collectively consult is not confined solely to employees at the same ‘establishment’.
The precise nature of the threshold has not yet been determined. However, the Government consultation (which closed in May this year) offered four potential approaches:
a fixed numerical threshold, with a provision similar to the current position,
a threshold expressed as a percentage of the employer’s workforce,
a fixed threshold that varies according to the size of the employer, or
a combination of a fixed and percentage-based threshold, determined by the size of the employer.
The Government indicated a clear preference for the first approach, considering it the simplest to administer, the easiest to understand and the least likely to give rise to disputes.
Current proposals under this approach suggest a threshold between 250 and 1,000 redundancies across the organisation as a whole. This range is intended to provide additional protection to employees, without imposing disproportionate burdens on small and medium sized businesses.
Where both the establishment-based test and the new organisation-wide threshold will be triggered, current guidance states employers will not be required to consult all employee representatives together or seek to reach the same agreement with every representative group.
The change is intended to strengthen redundancy rights by offering protections for employees who currently do not benefit from collective redundancy consultations. At the same time, the Government aims to preserve employers’ need for flexibility to respond to business needs.
For employers, particularly those operating across multiple sites, branches or offices, this reform is likely to substantially increase the number of redundancy exercises that trigger collective consultation obligations.
Redundancy processes may also take longer due to the need to plan and allow time for 45 days collective consultation.
Where an employer fails to comply with its collective consultation obligations, an Employment Tribunal may make a protective award in favour of affected employees.
Previously, the maximum protective award was capped at 90 days' gross pay per affected employee. However, the Employment Rights Act 2025 has doubled the maximum award to 180 days' gross pay per affected employee.
With the recent increase in the maximum penalty for failing to properly consult, it is important employers ensure compliance. To help with this, employers should ensure they:
clearly monitor and record data on total workforce numbers, proposed redundancies across all locations and the timing of those proposals within any 90-day period;
identify appropriate employee representatives across multiple sites;
train HR teams and managers on the new threshold, once it is confirmed; and
budget sufficient time for the 45 day consultation period.
While the final threshold is awaited, employers should begin considering the practical implications now. Organisations with multiple workplaces are likely to be affected most significantly. Early planning around workforce data, consultation procedures and redundancy processes will help ensure readiness for when the reforms take effect in 2027.
For more information, please contact our employment team.
