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The future of collective redundancies | Unpacking Labour’s revised proposals

Written by Lesley Rennie on 18 March 2025

Back in June 2024, prior to the General Election, we explored the potential for change to the collective redundancy landscape, specifically when the obligation to collectively consult would be triggered. 

Now that the Employment Rights Bill has completed its third reading in the House of Commons and inches ever close to receiving Royal Assent and becoming law, we revisit the likely change on the horizon.

What is collective consultation?

The financial pressures on UK businesses is greater than ever, thanks in part to the imminent National Insurance changes announced in last year’s Autumn budget. As such, reductions in headcount and restructurings remain high on the agenda for many businesses seeking to remain profitable and viable. This is unlikely to change any time soon.

At present, where an employer proposes to make 20 or more employees redundant within a 90-day period “at a single establishment”, they will be under a legal obligation to collectively consult with appropriate employee or Trade Union representatives. An “establishment” is generally the unit or workplace to which employees are assigned. It must be relatively permanent and stable but doesn’t need to have independent management who can decide to dismiss staff, or be economically or administratively separate.

There has been a raft of case law interpreting the meaning of “establishment”, which only serves to highlight the complexity inherent in determining what an “establishment” is in the context of a particular business. The waters become further muddied where remote working is present. For instance, the relevant team or department may form the “establishment”, with the geographical location carrying less weight.

Other key points to note include:

  • What constitutes redundancy: A redundancy for the purposes of collective consultation includes a dismissal for any reason not related to the individual employee. It therefore has a broader application than it may initially appear, encompassing “fire and rehire” dismissals.
  • 90 days: The 90-day period is a rolling period and could include redundancies which have already been made. Employers must therefore look forward and backwards when assessing whether the collective consultation duty is triggered. 
  • Consultation requirements: Where the duty to collectively consult applies, the consultation process is prescriptive and can be easy to get wrong if not approached correctly. Consultation begins once certain specified information is given to the representatives and must continue for a minimum period before any dismissals take effect. The minimum period depends on the number of proposed redundancies: 45 days where 100 or more redundancies are proposed and 30 days where 20 or more redundancies are proposed.
  • “Meaningful” consultation: The law requires “meaningful” consultation – it shouldn’t be a box-ticking exercise. Views should be sought and genuinely considered in an effort to reach agreement. For example, the proposed selection process and scoring system should be discussed and the representatives’ views taken into account.
  • Notification: Employers must notify the Department for Business, Energy and Industrial Strategy (BEIS), using form HR1, either 30 days before the first dismissal takes effect (in the case of 20 or more redundancies) or 45 days before the first dismissal takes effect (in the case of 100 or more redundancies). This is a key step with severe penalties for non-compliance.

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What happens if an employer gets it wrong – now and in the future?

Currently, the penalty for failing to fulfil the duty to collectively consult is up to 90 days’ gross pay per employee, which can result in a hefty financial penalty for an employer. However, the Labour government doesn’t feel this goes far enough and intends to double the potential sanction to 180 days’ gross pay per employee as part of the changes brought in by the Employment Rights Bill.

The government consulted with relevant stakeholders in relation to proposals to keep the maximum protective award as is, to double it, or to remove the cap entirely. Unsurprisingly, the result was split, with employers and employees having differing views.

By doubling the maximum protective award rather than scrapping the maximum altogether, the government believes it has struck a balance between the competing interests. In its response to the consultation, it stated that “Employers who avoid their collective redundancy obligations remove the opportunity to prevent or reduce the volume of redundancies via consultation. This means employers lose valuable staff and employees have their livelihood put at risk. Moreover, employers should not be able to pick and choose when to fulfil their legal obligations, nor should it be financially beneficial to ‘buy-out’ employees from their rights or “price in” the cost of non-compliance.”

The increase to the protective award to a maximum of 180 days’ gross pay will no doubt provide a significant financial deterrent to employers who may otherwise have been minded to ignore their obligations and rather budget for the potential awards that could result. That said, employers with lesser financial means will understandably be concerned about their potential financial exposure particularly given the prescriptive nature of the duty. To counter this, the government has committed to publishing guidance to support employers in fulfilling their obligations.

What else is due to change?

The government initially intended to remove the “establishment” threshold, meaning that a business would have been required to collectively consult when proposing to dismiss as redundant 20 or more employees across the business within a period of 90 days.

For businesses, particularly those that regularly restructure, this would have meant that the collective consultation obligation would have been triggered far more frequently. This appears to have been recognised by the government, which has amended the Bill to abandon its proposal to remove the establishment test and has instead replaced it with an alternative approach.

If the Bill passes in its current form, the obligation to collectively consult will apply where an employer is proposing to dismiss as redundant, within a period of 90 days or less, either:

  • 20 or more employees at one establishment; or
  • At least the “threshold number of employees”, as defined in amended legislation.

That new threshold must be at least 20 employees in total aggregated across all establishments and could be:

  • A specified number;
  • A number determined by reference to a specified percentage of employees (e.g. 10% of the total workforce on a specified date); or
  • A number that is the highest or lowest of two or more numbers, whether those numbers are specified numbers or determined by reference to a specified percentage of employees.

In short, the government has inbuilt flexibility to determine the applicable threshold through Regulations. As it stands, we have no indication of what that threshold is likely to be – it’s hoped that the picture will become clearer as the Bill progresses through Parliament.

Notably, the Bill provides that the Regulations which will set out the threshold can make different provisions in respect of different descriptions of employer, so it’s not inconceivable that there could be an exemption for small employers or different thresholds applied depending upon the size of the business.

The proposed removal of the “establishment” threshold struck fear into many employers hearts, so this tempered approach will be welcome news. However, until we have visibility on this alternative trigger, it’s difficult to assess the impact upon organisations’ flexibility to make redundancies without the need for a time-consuming collective consultation process, and businesses remain unable to adequately plan for the future.  

What is clear is that careful planning and expert advice will be needed more than ever to ensure compliance with the amended collective consultation obligation as the consequences of failing foul could be disastrous.

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If you’re concerned about the potential impact of Labour’s proposed redundancy consultation changes, or need guidance on navigating redundancy processes, our team of legal and HR experts are here to help.

We can even conduct consultations on your behalf and offer management training to ensure your team is equipped to navigate redundancy exercises confidently and compliantly.

For support geared to your specific situation, contact our team on 0345 226 8393 or request your free consultation using the button below.