The Labour Government's Employment Rights Bill (ERB) will introduce the most far-reaching changes to UK employment law in a generation. Key aims of the ERB and other employment law reforms set out in their Plan to Make Work pay include “ending one-sided flexibility” and strengthening collective voices at work. We have written previously about the proposed reforms to trade union access and recognition and fire and rehire that are part of these package of reforms.

In addition, the Labour Government has proposed changes to the collective redundancy consultation framework. In this article, we examine the proposed changes and the significant impact this could have for employers.

The law now

When are the collective redundancy obligations triggered?

• Where an employer is proposing to dismiss as redundant 20 or more employees at “one establishment” within a period of 90 days or less, it must undertake collective redundancy consultation.
• The phrase “one establishment” at present means the specific unit or entity to which the employees who are being made redundant are assigned to carry out their duties. There are uncertainties as to its application in some circumstances, including as to remote employees, but it generally has a strong geographic element, such that different sites or different retail outlets will usually be separate establishments.

What are the collective redundancy obligations?

Once the collective redundancy obligations are triggered an employer must:

• Notify the Government in advance of the proposal (using a form HR1).
• Inform appropriate employee representatives of certain prescribed information about the redundancies in writing.
• Consult appropriate employee representatives of the affected employees on ways of avoiding or reducing the dismissals, or mitigating the consequences of dismissals. Consultation must begin in good time and in any event at least 30 days before the first dismissals take effect (for under 100 dismissals at a single establishment) or 45 days (for 100 or more dismissals).

What are the penalties for non-compliance?

If the employer fails to notify the Government it is a criminal offence that could lead to an unlimited fine.

If the employer fails to comply with the information and consultation obligations, it may have a protective award made against it by a tribunal. A protective award requires employers to pay each dismissed employee their normal gross week’s pay for up to 90 days.

What changes are being proposed?

The proposed changes, if passed, are potentially significant for employers and affect two main areas:

1. Removal of “one establishment”: The ERB is currently proposing to amend the current test triggering collective redundancy consultation by removing the requirement for this to be at “one establishment.” This means that the threshold will be assessed by looking at the number of people impacted across the employer as a whole, rather than in a single workplace.
2. Potential increases to the remedies available to employees: The Government launched a consultation on October 21,2024, which is now closed, seeking views on increasing the remedies available to employees if employers fail to comply with their collective redundancy consultation obligations. This includes:
   • A proposal to increase the maximum period of the protective award that a tribunal can award, either by doubling the protective award from 90 days’ gross pay per affected employee to 180 days or removing the cap on the protective award, entirely leaving it to tribunals to determine what is just and equitable in all the circumstances.
   • Whether interim relief should be available “to employees who bring claims for the protective award.” It is not clear how this would work in practice as in many cases it is the employee representatives rather than employees themselves who can bring a claim for a protective award. However, the proposal seems to envisage that there could be an order for dismissed employees to either be re-instated or re-engaged by the employer or continue to be paid pending the full hearing, where it is likely that their claim for a protective award would succeed.

The same consultation also stated that the Government intends to gather further views on strengthening the collective redundancy framework during this year, including consulting on doubling the minimum consultation period when an employer is proposing to dismiss 100 or more employees from 45 to 90 days. This is a new development that was not included in the Plan to Make Work Pay.

What does this mean for employers?

Removing the “one establishment” threshold means that large employers with multiple sites will have to engage in collective redundancy consultation if they are carrying out multiple small-scale unrelated redundancy processes across different sites (but which collectively add up to 20 or more redundancies) within a 90-day period. This will have a number of consequences:

• Employers will need to keep track of unrelated redundancies across different sites and it is likely that collective consultation is going to be triggered more regularly. This could also lead to inadvertent breaches by employers where different sites operate independently.
• There will be practical challenges in such situations. For example, how will employers appoint appropriate representatives across different worksites and when the redundancies are unconnected? How will employers consult across multiple unconnected worksites? How will employers keep track of individual redundancies that may not have been traditionally centrally managed?
• There will also be uncertainty in relation to the circumstances in which overseas employees should be included in collective consultation. As the legislation is silent on this issue, case law suggests that in these circumstances the focus is on whether the establishment at which the redundancies are proposed (as opposed to the individual employee concerned) is in or is sufficiently connected to Great Britain – if so collective redundancy consultation obligations apply. However, if the concept of establishment is removed, it is likely that this test will need to be revisited.

There are already a number of uncertainties in this area of law, including how different batches of proposed redundancies are treated when considering the trigger for collective consultation. These uncertainties are likely to be exacerbated by the proposed changes, which makes the potential increase in penalties for non-compliance even more concerning for employers.

We have yet to see the Government’s proposals for the new penalty regime following its recent consultation, but it is to be hoped that if changes are made it will still be possible to differentiate between flagrant or serious disregard for the obligations and inadvertent or minor breaches.

Future developments

The ERB is currently making its way through the Parliamentary process, so the change to “one establishment” still needs to pass. In fact, there are rumours in the press that there may be compromises on this to ensure that employers are not in endless consultation over unconnected redundancies at different sites. The ERB is set to hit report stage imminently, although at the time of writing a date hasn’t been set. We await developments.

We also await the Government’s response to the consultation that closed in December 2024. It may be that, given current pressures on the Government from businesses in light of the upcoming increases in employer National Insurance Contributions and National Minimum Wage rates, the Government may change and adapt its approach.

What can employers do to prepare?

Employers will need to keep a careful eye on developments to see if this is an area where the Government will amend its current approach or provide further clarity to employers.

If it looks as if the proposals to remove the concept of “one establishment” are going to pass, employers will need to consider:

• How it will track and manage redundancies over different sites.
• How it will conduct consultation in practice, where a union is not recognised. It may be that having a standing consultation body of employee representatives for all sites will become more attractive.