The Employment Rights Act 2025 introduces two significant changes for employers undertaking large-scale redundancies: (i) a doubling of the financial penalty for failures in collective consultation; and (ii) a forthcoming expansion of the circumstances triggering collective consultation obligations. Together, these changes potentially make redundancy processes more costly, complex, and burdensome for employers.
Under current rules, employers must collectively consult if they propose 20 or more redundancies at one establishment within 90 days. That means engaging with appropriate employee representatives in good time, following a meaningful process, and filing Form HR1 with the government.
Change one: the price of getting it wrong has doubled
From 6 April 2026, the maximum compensation (known as the “protective award”) available to employees if their employers fail to properly consult doubles from 90 days’ pay to 180 days’ uncapped pay per affected employee. Skipping, or short-cutting, any of the steps in a collective consultation process has always been risky. Now, it may be twice as costly.
Change two: a new trigger for collective consultation is coming
The Employment Rights Act 2025 amends the collective redundancy framework to introduce a new additional organisation-wide threshold to trigger collective consultation obligations. This will require employers to collectively consult whenever they make a threshold number of redundancies across their entire organisation — not just at a single site or establishment.
The new organisation-wide threshold will not replace the existing “establishment” trigger (with “establishment often being interpreted by employers as meaning “single site”) — it will sit alongside it, and either trigger will be sufficient to bring the full suite of collective consultation obligations into play. However, it remains the case that numbers will be counted according to a particular employing entity, and not by aggregating numbers across the whole corporate group.
The organisation-wide threshold is expected to come into force in 2027; however, the type of threshold and threshold number itself are yet to be determined and will be set out in future regulations.
The government is now considering what the threshold should be and is consulting on four potential approaches:
- A single fixed number (i.e. [X] or more employees across the organisation). This is the government’s preferred approach being the clearest to understand and least likely to lead to disputes.
- A percentage-based threshold (i.e. [X]% of the employer’s total employees across the organisation).
- Different (fixed) thresholds depending on employer size (i.e. for employers with [X] number of employees, the threshold number is [Y] or more redundancies).
- A hybrid percentage/fixed approach (i.e. the threshold number is [X]% of employees, where an employer employs fewer than [Y] employees, and [A] or more employees, where an employer employs [B] or more employees).
The government is also looking at what the threshold number or range should be. Its view is that the threshold should fall within a range of 250 to 1,000 redundancies.
The consultation closes on 21 May 2026. We will be submitting our views to the government’s consultation in collaboration with industry groups.
The government also intends to produce a Code of Practice on collective redundancy obligations following consultation this year.
What should businesses be doing now?
The direction of travel is clear: collective redundancy obligations are becoming broader and more expensive to ignore. Businesses should prioritise the following:
- Review potential exposure as a result of the increased compensation available to employees. With the maximum compensation at 180 days’ uncapped pay per employee, even a partially defective consultation process carries material financial risk. Ensure your HR teams are briefed accordingly.
- Audit your redundancy tracking. Multi-site employers will need to implement tracking systems to monitor proposed redundancies across the entire organisation (not just at single sites). By the time a final decision is made on redundancies, it may be too late to act — businesses need visibility of proposals as they develop, given that consultation obligations can be triggered at an early stage.
- Understand your corporate structure. The legal framework counts redundancies within each employing entity separately and redundancies at multiple sites are only aggregated if the employing entity is the same. Group structures can therefore have a significant bearing on exposure.
- Engage in the government’s consultation. Stakeholders may wish to engage in the consultation before 21 May 2026 to ensure their views are considered. Businesses, particularly large multi-site employers, with strong views on threshold design will have a real opportunity to shape the final regulations.
For further information, please contact:
Laurie Ollivent, Linklaters
laurie.ollivent@linklaters.com
