Collective redundancy consultation – triggering of the duty, and developments under the Employment Rights Act 2025

In this economic climate, many employers are contemplating redundancies.

Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the requirement to consult collectively with employee representatives under section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A) is triggered. Failure to comply leaves an employer facing claims for protective awards. This article considers a recent decision on when this requirement is triggered, before looking at the changes to collective consultation introduced by the Employment Rights Act 2025.

Ellard and ors v Alliance Transport Technologies Ltd

In this case, the Employment Appeal Tribunal (EAT) upheld claims for protective awards brought by three employees who were dismissed on the day that their employer entered administration. In doing so, the EAT overturned the decision of the Employment Tribunal (ET), which had found that the duty to consult collectively was not triggered until several days later when it was confirmed that no buyer could be found.

Facts

ATT Ltd, a manufacturing business, entered administration on 2 May 2023. 15 employees were dismissed as redundant on that date, with the majority of the remaining workforce being let go three days later, when it became clear that the sole prospective buyer of the business was not going to proceed with the purchase. A number of these employees (including three of those who were dismissed on 2 May) brought claims for protective awards.

The ET found that the employees who were dismissed on 5 May were entitled to a protective award, but those on the earlier date were not. On 2 May, fewer than 20 employees were made redundant, and at that stage the administrator’s ‘clear intention’ was to sell the business as a going concern.

The three claimants who were dismissed on 2 May appealed to the EAT.

EAT decision

The EAT upheld the employees’ appeal, finding that the obligation under TULR(C)A is not only triggered where there is a fixed proposal to dismiss 20 or more employees within the 90 day period, but also where there is a provisional decision. This involves current and ongoing consideration of future events, even of events which are not certain.

The EAT noted that the ET judgment referred variously to ‘a’ or ‘the’ proposal to dismiss, which in its view indicated that the ET was not looking at what was being proposed, but rather at whether or not there was a fixed certain proposal at a point in time. This was an incorrect approach. Furthermore, the evidence suggested that there was only one likely outcome, because, as of the date of the appointment of the administrators, it appeared very likely that the employer was proposing to dismiss as redundant 20 or more employees and that there was a ‘fixed, clear, albeit provisional intention to close that business, which would have given rise to an obligation to consult under section 188’.

The EAT therefore held that the three claimants were entitled to protective awards for a period of 90 days (the maximum possible award at that time).

Key takeaways

Although this case involved a business in administration, its findings apply to all businesses who are faced with the prospect of redundancies. The duty to consult collectively can be triggered before there are any concrete proposals to dismiss 20 or more employees within a period of 90 days or less – meaning it can be triggered where the intention is merely provisional.

ERA 2025 changes

For dismissals taking effect on or after 6 April 2026, the maximum protective award has been increased from 90 to 180 days’ pay, meaning a failure to comply with collective consultation requirements risks being more costly than ever before. A day’s pay is not subject to any statutory cap but represents the employee’s actual pay. In practice, employers who ignore their collective consultation duties could face awards of 50% of the annual wage bill in respect of the affected employees.

2027 will see further changes to collective consultation requirements under ERA 2025, with more redundancy situations being likely to be caught. The original proposal that the current requirement for redundancies to take place ‘at one establishment’, would be removed, was understandably unpopular with employers and abandoned. Instead, an alternative threshold where redundancies are made across the business will be introduced, with the Secretary of State having the power to set this threshold.

The government has consulted over what that threshold will be. Four options are being considered, with the most likely appearing to be a fixed number approach or a tiered approach. If the former is adopted, a single fixed number would apply to all employers regardless of size. This is the simplest option, but the government acknowledges that it needs to be set at a high enough level to avoid the largest employers being left in a constant state of collective consultation, and setting this threshold somewhere between 250 and 1,000 redundancies.

The tiered approach would involve setting different fixed thresholds for employers of different sizes, for example:

• 250 redundancies for employers with up to 2,500 employees;
• 500 redundancies for employers with 2,500-9,999 employees; and
• 750 redundancies for those with 10,000 or more employees.

While this approach is slightly more complicated, as it involves having to do a headcount calculation, in practice this would only be needed for employers on the cusp of a particular tier.

Whatever the threshold adopted, the changes are likely to mean that collective consultation requirements will be triggered more often for the largest employers making lots of small batches of redundancies across multiple sites. Employees in small sites will have the right to be included in company-wide large-scale collective consultation. Larger employers may wish to consider setting up standing bodies, so they are ‘ready to go’ as and when needed, to avoid the need for repeated elections of employee representatives. Larger multi-site employers may need to implement tracking systems to track proposed redundancies across the business. Employers with multiple employer entities are advantaged, however, as each corporate entity will be treated separately.

Employer organisations will be reassured, however, that the proposed thresholds are not as low as had been feared, suggesting that the government is, perhaps unusually, listening to concerns raised by large employers that any organisation-wide test could result in them being in a constant state of collective consultation.

The government consultation closed on 21 May. Whatever the final proposals, it is clear that employers will need to be alert to the possibility of making large-scale redundancies across their business, and be ready to commence collective consultation at an early stage in the process, to minimise the risk of expensive claims for protective awards.