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The latest amendments to the Employment Rights Bill (the “Bill”) provide substantial reforms to the UK collective redundancy framework. These changes represent an important shift, with significant financial, procedural, and legal impacts.
As the law currently stands, an employment tribunal can make a protective award of up to 90 days’ uncapped pay per employee if an employer fails to properly carry out collective redundancy consultation. As part of the “Making Work Pay” consultation, conducted in Autumn 2024, the government sought views on increasing the maximum protective award.
Following the conclusion of that consultation, in an effort to reinforce the collective redundancy framework, the government amended the Bill to double the maximum protective award, increasing it from 90 days’ to 180 days’ pay. When combined with the potential uplift in compensation of up to 25% under the Code of Practice on Dismissal and Re-engagement (which came into effect on 20 January 2025), a protective award could reach up to 225 days’ uncapped pay. This hike serves as a stern warning to employers from the government, that non-compliance will carry severe financial penalties.
The government has said that it will issue further guidance in due course for employers of all sizes on best practice when fulfilling their collective redundancy obligations to help avoid the risk of inadvertent breach of the rules. However, while employers have been promised guidance, employment tribunals lack clear instructions on applying the new maximum protective award, with the government simply stating that employment tribunals will continue to have discretion to vary such award as they consider just and equitable in all the circumstances, having regard to the seriousness of the employer’s actions, as well as any mitigating factors. This absence of precise guidelines may lead to inconsistent tribunal decisions, and unpredictability for businesses. In particular, it would be helpful to clarify whether the current default starting position of an award of 90 days’ pay, where there has been no genuine attempt to consult, will be converted to a starting position of 180 days’ pay, under the new regime.
As part of the “Making Work Pay” consultation, the government also sought views on applying interim relief to collective redundancy scenarios. Interim relief is a tribunal order that requires an employer to re-employ (or at the very least continue to pay) an employee from the date of their dismissal until the final hearing or settlement of their claim. In its response to the consultation, the government acknowledged the complexity of implementing interim relief measures, including increased pressure on tribunals, employees and employers, and confirmed that interim relief will not be introduced as a remedy.
Revival of the “establishment” trigger and introduction of alternative trigger
As the law currently stands, the collective redundancy regime is triggered if an employer is proposing to dismiss as redundant 20 or more employees at one “establishment” (which usually means one workplace or site) within a period of 90 days or less.
The Bill originally included a change to the method of calculating the thresholds for triggering collective redundancy consultation, such that numbers of employees were aggregated across the organisation, rather than at a single establishment.
However, amendments have been made to the Bill:
The amendments to the Bill also include clarification that collective consultation does not require consultation with all appropriate representatives together, or with a view to reaching the same agreement with all appropriate representatives. The amendments would allow employers to conduct separate consultations across different sites and reach varied conclusions. This flexibility provides opportunities to tailor consultations to the specific needs of each site.
While the doubling of the maximum protective award is an unwelcome outcome to the consultation, the reversal of the proposal to remove “establishment” from the collective consultation trigger is a positive development for employers. It remains to be seen how the alternative trigger might operate but it appears that the government’s intention is to capture workforce-wide redundancy exercises which may entail only a small number of employees at each individual site.
We are continuing to track all Employment Rights Bill developments on our UK Employment Law Reform Tracker.
31 March 2025
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