The Government’s Employment Rights Bill (ERB) will introduce the most far-reaching changes to employment law in a generation. Key aims of the ERB and other employment law reforms set out in the Government’s Plan to Make Work pay include ‘ending one-sided flexibility’ and strengthening collective voices at work. Proposed changes to the law on trade union access and recognition and fire and re-hire are part of this package of reforms – read more about this on our Reform Hub.
The Government has also proposed changes to the collective redundancy consultation framework. In this article, we examine those changes and the significant impact this could have for employers.
The law now
When are collective redundancy obligations triggered?
- Where an employer is proposing to dismiss as redundant 20 or more employees at ‘one establishment’ within a period of 90 days or less, it must undertake collective redundancy consultation.
- The phrase ‘one establishment’ at present means the specific unit or entity to which the employees who are being made redundant are assigned to carry out their duties. There are uncertainties as to its application in some circumstances, including regarding remote employees, but it generally has a strong geographic element, such that different sites or different retail outlets will usually be separate establishments.
What are the collective redundancy obligations?
Once the collective redundancy obligations are triggered an employer must:
- Notify the Government in advance of the proposal (using form HR1).
- Inform appropriate employee representatives of certain prescribed information about the redundancies in writing.
- Consult appropriate employee representatives of the affected employees on ways of avoiding or reducing the dismissals or mitigating the consequences of dismissals. Consultation must begin in good time and in any event at least 30 days before the first dismissals take effect (for under 100 dismissals at a single establishment) or 45 days (for 100 or more dismissals).
What are the penalties for non-compliance?
If the employer fails to notify the Government, it is a criminal offence that could lead to an unlimited fine.
If the employer fails to comply with the information and consultation obligations, it may have a protective award made against it by a tribunal. A protective award requires employers to pay each dismissed employee their normal gross pay for up to 90 days.
What changes were initially proposed?
Removal of ‘establishment’ element of the test
The ERB initially proposed the amendment of the current test for triggering collective consultation by removing the requirement for this to be at ‘one establishment’, meaning that the threshold would be assessed by looking at the number of people impacted across the employer as a whole, rather than in a single workplace.
Increased remedies for employees
The Government also consulted on increasing the remedies available to employees, including a proposal to increase the maximum period of the protective award that a tribunal can award (either by doubling it to 180 days gross pay per affected employee or simply removing the cap) and making interim relief available as a remedy for those who brought claims for the protective award.
How have these proposals evolved?
The latest version of the ERB now proposes the following changes to the existing collective redundancy framework.
Reinstatement of ‘establishment’ test and introduction of new threshold test across the employer
An employer will still be required to carry out collective redundancy consultation where it is proposing to dismiss as redundant 20 or more employees at one establishment within a 90-day period.
However, collective redundancy consultation will also be required if a threshold number of proposed dismissals is met across the employing entity as a whole, even if those dismissals are across multiple establishments. The new threshold number will be set out in separate regulations, following consultation with stakeholders. The threshold may be set as a specified number of employees or as a percentage of the overall number of employees, or a combination of the two. The trigger for notifying the Government will also be aligned to reflect the addition of this new test for collective consultation.
Separate consultations are permitted
The ERB has also been amended to make clear that an employer does not need to consult all appropriate representatives together, nor undertake consultation with a view to reaching the same agreement with all appropriate representatives.
Maximum protective award increased, but no interim relief
Following consultation, the Government has decided not to go ahead with its proposal to introduce interim relief as a remedy. However, the ERB will increase the maximum protective award to 180 days gross pay per affected employee.
What does this mean for employers?
Clearly, the level of the new threshold will determine how much this will impact employers. We will find out more when the Government launches its consultation on the regulations that will introduce it.
The revised proposals also pose some practical and legal implications for employers, which we set out below:
- Collective redundancy consultation obligations triggered more often: The introduction of the new threshold test, regardless of where it is set, means that it is highly likely that more redundancies will trigger collective consultation than is currently the case, particularly for larger employers.
- Tracking dismissals: Employers that operate from more than one site will need to track the number of proposed dismissals across those sites, even where the proposed dismissals arise from entirely unrelated redundancy projects. For example:
- an employer may propose several small unrelated redundancy projects at different sites, none of which individually amount to 20 proposed dismissals at the same establishment within a 90-day period. As the law currently stands, the employer would not be required to carry out collective redundancy consultation. However, if these redundancies cumulatively meet the new threshold test for dismissals across the employer, collective redundancy consultation will be required.
- an employer may launch a large-scale redundancy project at one establishment which triggers collective redundancy consultation, whilst also proposing a small number of unrelated redundancies at a different establishment, which would not currently trigger collective consultation. Under the ERB, the employer may need to carry out collective consultation in respect of all of the proposed dismissals if they collectively hit the new threshold. This demonstrates the risk that small unrelated redundancies at different establishments may be swept up by the new threshold test, requiring collective consultation.
- Practicalities of consultation regarding unrelated redundancies at different sites: One of the criticisms of the original version of the ERB was that the removal of the establishment element of the test (as originally envisaged) would make it difficult for employers to run a collective consultation across multiple establishments where the reasons for the proposed redundancies are unconnected. The amendments to the ERB now clarify that an employer is not required to consult all appropriate representatives together or reach the same agreement with those representatives. The Government regards this as a clarification of the existing law, but it is no doubt still welcomed given the concerns that were previously raised.
- Timing of proposals: Employers will need to ensure that the timing of the separate redundancy exercises is aligned, so that consultation is commenced at the same time in respect of all of the proposals, and that it begins no later than 30 or 45 days before the first dismissals take effect. This may be harder to do in practice where the underlying business reasons for the proposals differ across sites, and will therefore require central organisation, particularly for large multi-site employers.
- Legal uncertainties: Currently, the legislation is silent regarding overseas employees, and so case law has held that the focus is on whether the establishment at which the redundancies are proposed (as opposed to the individual employee concerned) is in or is sufficiently connected to Great Britain – if so, collective redundancy consultation obligations apply. However, as currently drafted the ERB does not clarify whether overseas employees should be included in collective consultation where collective consultation is triggered by the number of dismissals across the employer under the new threshold test, rather than at any one establishment.
- The existing law also poses other uncertainties, which the revised ERB drafting does not address, and which may be magnified under the new threshold test. For example, how different batches of proposed redundancies are treated when considering the trigger for collective consultation.
- Given the above complexities, there will clearly be an increased likelihood of inadvertent breaches by employers, particularly where different sites operate independently. The Government has promised guidance on how employers can comply with collective redundancy consultation obligations. This guidance will be welcomed by employers, given the current uncertainties in this area, the potential challenges created by the new threshold test, and the increased penalties for non-compliance.
What can employers do to prepare?
The changes to the collective redundancy consultation framework are anticipated to come into force at some time in 2026 and regulations are required to set the new threshold test, which the Government has promised to consult on first.
We will not be able to understand the full implications of the ERB in this area until we know what the new threshold will be. However, in the meantime, employers will need to consider practical solutions as to how they will:
- Track and manage redundancies over different sites.
- Conduct consultation in practice, where a union is not recognised. It may be that having a standing consultation body of employee representatives for all sites will become more attractive.
