UK Government Consults on Company-Wide Redundancy Threshold Under Employment Rights Act 2025
What Happened
The UK government has launched a consultation on implementing a new organization-wide threshold for triggering collective redundancy consultation obligations under the Employment Rights Act 2025 (ERA 2025), which is set to take effect in 2027. Currently, the requirement to consult applies when 20 or more employees at one establishment face redundancy within 90 days. The ERA 2025 introduces an additional threshold based on redundancies across the entire business, and the consultation seeks input on setting this threshold to balance business needs and employee protections.
Two main proposals are under consideration:
- Option 1 – Single Fixed Number: A threshold between 250 and 1,000 redundancies across the whole organization.
- Option 2 – Tiered System: A threshold based on employer size, e.g., 250 for small employers, 500 for medium, and 750 for large employers.
Additionally, from April 6, 2026, penalties for non-compliance will double to 180 days' gross pay per employee, making it more critical than ever for employers to get redundancy processes right.
Why It Matters
For multi-site employers, the current establishment-based threshold can be easier to manage locally, but it may also allow companies to avoid consultation by spreading redundancies across sites. The proposed organization-wide threshold would close this loophole, requiring centralized workforce planning and enhanced record-keeping.
If adopted, the new threshold could significantly increase the number of redundancy situations that trigger consultation. For example, a company with 300 redundancies across five locations would currently not trigger consultation at any single site, but under the new rules it would be required to consult. This means HR teams must update their processes to track redundancies organization-wide rather than per establishment.
Key implications for employers include:
- Increased compliance burden: More redundancy events may trigger consultation, requiring earlier and broader engagement with employee representatives.
- Need for centralized data: Employers will need systems to monitor redundancy numbers across all business units in real-time.
- Higher penalties: With fines doubling to 180 days' pay per employee, non-compliance becomes significantly more expensive.
What Organizations Should Do
Employers should prepare now for the changes expected in 2027. Recommended actions include:
- Review current redundancy policies to assess how they would function under an organization-wide threshold.
- Implement centralized workforce planning tools to track redundancy numbers across all sites and business units.
- Train HR and management on the new obligations and increased penalties.
- Respond to the consultation to have a say in the final threshold design.
- Monitor regulatory updates to stay ahead of implementation timelines.
How AIGovHub Can Help
Staying on top of evolving UK HR compliance obligations is challenging. AIGovHub's HR Compliance Checker and regulatory alert system help HR teams track changes like the ERA 2025 redundancy threshold, assess their impact, and manage compliance obligations efficiently. Sign up for AIGovHub alerts to receive timely updates on this consultation and other UK employment law developments.
This content is for informational purposes only and does not constitute legal advice.