21 May 2026
By Steven Eckett, Partner, Employment Law, Gilson Gray
The Employment Rights Act 2025 and changes to the law on Collective Redundancies
The Employment Rights Act 2025 (the Act) represents the biggest shake-up and overhaul of UK employment law in a generation. There are 28 significant changes that are being implemented over the next couple of years and throughout the remainder of the current parliamentary term.
This article looks at the imminent changes to UK collective redundancy laws, where it must be said many of the initial provisions have been significantly watered down.
A reminder of the current laws on Collective Redundancies
The current law on collective redundancy focuses on the “one establishment rule” that was established by the authority of Usdaw and another v Ethel Austin Ltd (in administration) and others originally known as the Woolworths case. This case went all the way up to the European Court of Justice back in 2015, which decided that when deciding whether or not collective redundancy consultation obligations are triggered, the number of proposed redundancies should be measured in the entity to which the workers made redundant are assigned to carry out their duties, rather than across the whole organisation. This contradicted the Employment Appeal Tribunal’s (EAT) earlier decision, which held that such redundancy consultation obligations were triggered when 20 or more redundancies occurred across multiple sites.
Therefore, currently, an employer that is proposing 20 or more redundancies at any “one establishment” within a period of 90 days must go through a process of mandatory collective redundancy consultation in advance of making staff redundant. This will involve a process of informing and consulting (in a meaningful manner) all affected staff and their representatives, which can be Trade Union members or elected employee representatives.
Any failure to inform and consult staff and/or their representatives can result in employment tribunal claims, not only for unfair dismissal but for protective awards of up to 90 days uncapped pay for each individual affected employee.
The current consultation laws set out in clear terms that consultation with affected staff must take place in good time and at least 30 days where there are 100 dismissals or fewer. If there are 100 or more dismissals, then the statutory consultation period is currently 45 days.
What is changing under the Employment Rights Act 2025?
The Employment Rights Act 2025 keeps the establishment-based threshold, but instead of it applying to one establishment, it will apply across all establishments (and locations). This means that calculating the number of redundancies will be across the employing entity as a whole and not just a single establishment.
No changes are proposed to the current 30 and 45-day consultation periods.
The government must also introduce regulations setting out a second trigger threshold number before the changes can come into effect, which is set out in more detail below.
A Code of Practice on collective redundancy obligations will also be published in due course.
Importantly, the Act is also strengthening the penalties by doubling the maximum protective awards for an employer’s failure to collectively inform and consult on redundancies. Protective awards are therefore going to increase from the current 90 days to 180 days, and this is coming into effect from 6 April 2026.
There could also be an uplift of up to 25% in any such award, if an employer also unreasonably failed to comply with the Code of Practice on dismissal and re-engagement, if applicable and which are linked to collective redundancy exercises.
A failure to provide the notification (HR1) also risks a criminal offence.
Current government consultations
The government has launched a consultation seeking views on the level and methods by which the new organisation-wide threshold for triggering collective redundancy obligations might be set.
Two options are being considered:
The government’s preferred method is to use a single fixed number within the range of 250 to 1,000 proposed redundancies. This is believed to be the easiest way to ensure that employers understand their obligations and employees and trade union representatives can be sure when the obligation to collectively consult has been triggered.
The government is also seeking views on how an employer would be required to calculate its total number of employees. Three options are being considered:
The current period of consultation closes on 21 May 2026 and the changes to the collective consultation trigger is expected to come into force in 2027.
How are these changes going to impact employers?
These changes to the one establishment rule mean that an entity-wide threshold test is now going to impact employers more significantly where there is more than one site or establishment.
On this basis, collective redundancy consultations will be triggered by a smaller number of redundancies across different sites, which collectively and cumulatively total 20 or more redundancies. This means in practice that employers and HR teams are going to have to plan ahead and invest more time and resources into their consultation processes to ensure that they do not fall foul of the new laws.
The doubling of protective awards for any failures to inform and consult means that getting it wrong will be more expensive for employers, especially where there are class actions involving a number of staff who issue claims in the employment tribunal.
Employers who have larger, multiple sites will also need to track the numbers that it is proposed are going to be made redundant across all sites and their timings in order to avoid being in breach of the new laws.
It is also likely that for multiple-site employers, a single proposed redundancy at one site will have to be part of a collective redundancy exercise if the numbers exceed 20 across all sites. This will be more time-consuming for employers who will need to ensure that they plan ahead.
The new multi-site trigger mentioned above also means that employers and HR teams should act to collate all redundancy proposals across the employing entity on a rolling basis. This data will reduce the risk of inadvertent non-compliance when the new regulations are implemented.
Another impact on employers is that for a relatively small number of redundancies at some sites, these could be the subject of delays whilst the collective redundancy consultations across all sites are completed within the statutory timeframes.
In addition, time will need to be allowed for the election of appropriate employee representatives where there are no trade unions involved or recognised for the purpose of collective consultation.
Some larger employees may feel the need to set up standing bodies so that they can immediately start the process of informing and consulting, and to avoid wasting valuable time in arranging elected employees for each redundancy exercise. One pitfall, however, is that such bodies must be sufficiently represented by affected employees, and if they are not, then its authority may be challenged.
The government was considering introducing interim relief for affected employees, which would have required employers to continue paying dismissed employees until their tribunal claims were resolved. However, this proposal has been rejected due to concerns over complexity and the financial strain on businesses.
Recommendations for employers
While the full details and final parts of the legislation affecting collective redundancies triggers and numbers will be confirmed in forthcoming regulations, it’s very clear that redundancy consultation rules are tightening and will become more time-consuming and expensive if employers get it wrong.
It is therefore recommended that employer review their redundancy policies and procedures, ensure compliance with collective consultation requirements, and seek timely legal guidance where necessary to mitigate risks and legal exposure.
This article is part of a series being produced by Gilson Gray on the implementation of the Employment Rights Act 2025.
