Employment Rights Act 2025: New Penalty Regime for Redundancy Consultation Breaches

There are a number of significant changes to employment law on the horizon as a result of the passing of the Employment Rights Act 2025. An important development for employers and HR professionals is the increase in penalties for failing to properly inform and consult with employees in collective redundancy situations. These reforms will take effect from 6 April 2026, and it is vital that employers understand their obligations well in advance to avoid potentially large financial liabilities.

Increased Penalties for Failing to Consult

The maximum penalty for failing to inform and consult on collective redundancies is set to increase from up to 90 days’ pay per affected employee to up to 180 days’ pay per affected employee. Because there is no cap on the amount that can be treated as a day’s pay, an employer who fails to comply could face the prospect of having to pay the equivalent of six months’ pay to each affected employee.

What Is a Collective Redundancy?

Employers proposing collective redundancies have an obligation to inform and consult appropriate representatives of affected employees about those redundancies. A collective redundancy occurs where 20 or more employees at one establishment are proposed to be made redundant over a rolling period of 90 days or less. Employers must start this consultation in good time, and there are minimum periods between the start of the consultation process and the date on which the first redundancy can take effect. Those minimum periods (currently of 30 and 45 days) depend on the number of redundancies involved.

For the purposes of the collective consultation requirements, the definition of “redundancy” is wider than the ordinary definition of redundancy. It includes any dismissal for a reason not related to the individual concerned, or for multiple reasons, all of which are not so related. It covers reorganisations and cases where an employee is being re-engaged into a different role on different terms, or is being moved from one group company to another. Employees do not have to lose employment for the collective information and consultation requirements to apply.

Practical Impact for Employers

Although these provisions have been in place for some time, the penalty for failure to comply is now much greater than in the past. The information and consultation process is relatively straightforward, if somewhat administratively burdensome, particularly if no existing employee representatives such as trade union representatives exist. In such a case, the employer must run an election process to elect those representatives. 

At a later date, the government is proposing to amend the thresholds at which collective redundancy consultation obligations arise, but this is subject to further consideration and consultation.

Please contact Catrina Smith with any queries regarding this Client Alert.