The Employment Rights Act and collective redundancies: new threshold test fleshed out

While much public attention has focused on the changes the Employment Rights Act 2025 will make to unfair dismissal, fire‑and‑rehire restrictions, and flexible working, the reforms to collective redundancy law may have the greatest operational impact on employers—particularly multi‑site organisations.    

We now have more detail about the Government's proposals, which will have significant implications for employers.  

Current position

At present, employers must collectively consult if they propose to make 20 or more redundancies at one establishment within a 90‑day period. Consultation must begin:

• At least 30 days before the first notice of dismissal where 20–99 redundancies are proposed; or
• At least 45 days where 100+ redundancies are proposed. 

There is also a duty to submit the HR1 notice to the Secretary of State at the outset of the process (and failure to do so is a criminal offence). 

An “establishment” has been interpreted in caselaw to mean a “local employment unit”  - so, for example, in the key case in this area, each Woolworths retail store was a separate establishment.  This means that, at present, if each store operated by a business propose to make 19 staff redundant, collective consultation obligations will likely not apply. 

Collective consultation involves consulting with existing employee or recognised trade union representatives, or arranging for the election of employee representatives, giving them certain statutory information about the proposals and then consulting with them with a view to reaching agreement about the proposals. 

What's changing under the Employment Rights Act?

The ERA maintains the existing threshold for redundancies at one establishment but adds a second, organisation‑wide consultation threshold, meaning collective consultation will be required if either test is met.

This new threshold will aggregate proposed redundancies across the entire organisation within the same 90‑day window—regardless of work location or establishment. As a result, many employers who previously avoided consultation requirements due to small numbers of redundancies at each site may now be caught.

What will the new threshold be?

The Government has now published a consultation paper setting out the options it is considering: 

• A fixed number threshold of between 250 and 1,000 redundancies;
• A tiered model with different fixed thresholds based on employer size;
• A percentage‑based threshold, or a hybrid model combining fixed and percentage-based triggers (the hybrid model is currently used in various EU states).

Of these, its first preference (subject to the response to the consultation) is for a fixed numerical threshold, and its next is for fixed numerical thresholds based on employer size.   The logic is that these options offer more certainty than a percentage-based test. 

The organisation‑wide trigger is expected to come into force in 2027, after the consultation concludes.  Importantly, this will only apply per employing entity, so corporate groups will not need to aggregate redundancies across the group. 

Penalties for breach

From April 2026, the maximum protective award for failing to collectively consult doubles from 90 to 180 days’ pay per affected employee.   The objective is to discourage employers from simply “pricing in” the cost of non-compliance. 

This change significantly raises the financial stakes, especially when combined with the new employer‑wide threshold and the removal of the cap for unfair dismissal claims.  The latter comes into force on 1 January 2027, while the former is due to come into force in 2027 but the precise date is not yet known. 

Employers should ensure that this increased cost of non-compliance is factored into business planning for 2026, and that they keep abreast of the evolving proposals for the threshold multi-site redundancies.   If the passage of the ERA has taught us anything so far, it's to expect last minute changes of policy, so businesses should not assume that the proposals currently under consultation will remain static.