New threshold for redundancy & collective consultation – Employment Rights Act 2025

On 26 February, the government issued two consultation papers under the Employment Rights Act 2025. One considers how protections from detriment should operate during industrial action. The other, summarised here, focuses on when employers must undertake collective consultation.

Collective consultation background

Currently, employers must collectively consult when proposing 20 or more redundancies at a single establishment within a 90-day period. This requirement has led to uneven outcomes: employees may miss out on consultation simply because redundancies are spread across multiple sites, each falling below the 20-person threshold. The government is concerned that the current system creates unfairness, as access to consultation and the protective award depends heavily on how redundancies are geographically distributed.

To address this, the Employment Rights Act 2025 introduces a second, organisation-wide trigger, requiring consultation when redundancies across the whole organisation reach a new ‘threshold number’. This threshold will be set by future regulations, with changes expected to take effect in 2027.

Going forward, an employer must engage in collective consultation when it proposes any of the following within a 90-day period:

• 20 or more redundancies at one establishment, or
• At least the company-wide threshold number (which cannot be lower than 20).

The consultation paper requests input on how this company-wide trigger should operate.

Threshold methods

The government outlines four possible approaches to setting the company-wide threshold. Each raises different practical and fairness considerations.

1. Fixed number

This method would involve a single number applied to all employers, irrespective of size. It is the simplest method but difficult to calibrate:

• A low number could keep large employers in ‘constant consultation’.
• A high number might exclude SME’s altogether.

2. Variable percentage-based threshold

This sets the threshold as a percentage of the organisation’s entire workforce. However, calculating percentages introduces complexity, especially for organisations with fluctuating employee numbers.

3. Fixed tiers based on employer size

Different thresholds would apply based on employer headcount. While more proportionate, this could have drastic consequences, where a small change in workforce size shifts an employer into a different threshold band, potentially leading to a disproportionate effect on employers who are just outside the applicable tier.

4. Combined variable and fixed method

Both fixed numbers and percentages would be used. This allows tiering with an upper cap but retains the complexity of percentage-based calculations.

Whichever method is chosen, organisations will need a reliable way of calculating their total workforce. Options include using an average over several months or assessing headcount when redundancies are proposed. The Act also allows exclusions of certain employees, such as those on short-term seasonal contracts, to prevent distorted figures.

Employers planning organisational change should also review our guidance on redundancy procedures for employers, which explains how to manage redundancies lawfully and reduce the risk of claims.

5. Threshold levels

The existing one-establishment threshold of 20 redundancies remains in place. The government is now seeking views on where the new company-wide trigger should be set.

Data shows that 76% of organisations with 20 – 249 employees operate from a single site, meaning they are already subject to collective consultation obligations. The government therefore considers that an organisation-wide threshold below 250 would add little value. Conversely, it believes the threshold should not exceed 1,000 redundancies.

The suggested range of between 250 and 1,000 redundancies would, according to government estimates, extend new protections to as many as 2.1 million employees.

Where redundancies form part of a wider restructuring exercise, early legal advice is often critical. Our team advises employers on restructuring and redundancy planning to help organisations manage risk and maintain trust with employees.

Government proposals

The government has indicated a preference for a single fixed threshold within the 250 – 1,000 range, considering it to be the clearest approach and least likely to result in disputes.

A second option is a tiered fixed threshold, set according to organisation size:

• 250 redundancies for organisations with 0 – 2,499 employees.
• 500 redundancies for those with 2,500 – 9,999 employees.
• 750 redundancies for those with 10,000 or more employees.

The final options, percentage-based and mixed methods, are acknowledged but described as more complex and therefore less desirable.

Protective awards

The Act also increases the maximum protective award for failure to engage in collective consultation, doubling it from 90 to 180 days’ pay from 6 April 2026.

What this could mean for employers planning redundancies

Although the proposed reforms will not take effect immediately, employers should already be considering how the changes may affect future restructuring exercises.

If a company-wide threshold is introduced, organisations with multiple sites may find themselves required to undertake collective redundancy consultation, even where redundancies at individual locations fall below the existing 20-employee threshold. Such a change would represent a significant shift from the current establishment-based approach.

For employers, the practical implications may include:

• Earlier legal planning when restructuring is being considered
• Closer monitoring of total redundancy numbers across the organisation
• Increased risk of protective award claims where consultation obligations are overlooked

Taking advice early can help organisations understand whether collective consultation obligations may arise and how to manage the process lawfully.

If you need advice about redundancy consultation or dismissal, our redundancy solicitors can help you understand your options and protect your position.

Meredith Hurst