Redundancy & reorganisation: Top tips amid changing consultation rules

The Employment Rights Bill is set to introduce major changes to collective consultation obligations and the controversial practice of fire and rehire. We set out below the key reforms proposed by the Bill and how employers can prepare for such changes.

Whilst the developments under the Employment Rights Bill (Bill) aim to strengthen employee protections, they will also create greater accountability for employers when handling redundancies and implementing restructuring plans.

The key reforms

1. If employers fail to conduct collective consultation, the maximum protective award for employees will increase from 90 to 180 days’ gross pay (approximately six months’ pay). Tribunals will retain discretion over the amount awarded, based on the seriousness of the breach, therefore, whilst an award of 180 days’ pay is possible, it is not necessarily automatic. It does, however, mean that the stakes are higher for employers and could prove costly for those who misjudge their obligations or fail to comply with the collective consultation requirements.

2. The Bill will keep the ‘at one establishment’ trigger for collective consultation (i.e. where an employer proposes 20 or more redundancies at one establishment within a 90-day period, collective consultation is required). However, the Bill proposes adding a new trigger based on the total number or percentage of redundancies across the whole workforce, with details of what the threshold will be and how it will apply to be set out in future regulations. While the exact threshold is yet to be confirmed, early indications suggest it could be based on a percentage as low as 5% or 10%. This means that even relatively small-scale restructures, when aggregated across multiple sites, could trigger collective consultation obligations.

3. The trigger for the obligation to notify the Secretary of State will be aligned with the new trigger for collective consultation. However, where the employer is proposing to dismiss as redundant 100 or more employees, notification will be required at least 45 days before the first dismissal takes effect (instead of 30 days).

4. Employers must inform employee representatives about planned redundancies and their locations, but they are not required to consult all representatives simultaneously or reach identical agreements in respect of the proposed redundancies across all locations. This change gives employers more flexibility in collective consultations.

5. The Bill aims to limit employers from firing and rehiring staff, making such dismissals automatically unfair unless the employer faces financial hardship and contractual changes are unavoidable. This will make it significantly harder for employers to change contracts without mutual agreement. Even where there is financial hardship and contractual changes are unavoidable, an employer will still need to follow a fair process in order to ensure there is no ordinary unfair dismissal and various factors will be taken into account in determining fairness, including the level of consultation carried out.

How can employers prepare for these changes?

There are various changes being introduced through the Bill, which could be costly for employers in the event of non-compliance. Accordingly, in preparation of the enforcement of the above changes, we recommend that employers:

1. Review their redundancy and reorganisation policies to identify what changes need to be made in anticipation of these provisions of the Bill coming into force. Although the Bill is expected to receive Royal Assent in the Autumn 2025, indications from the government are that the increase to the protective award will not come into force until April 2026, the changes to fire and rehire will not come into force until October 2026 and the addition to the collective consultation trigger will not happen until 2027.

2. Introduce a centralised tracking system so that redundancies can be monitored across the entire organisation (this will be critical once collective consultation obligations are triggered where a threshold number of employees across the wider workforce are being made redundant).

3. Consider establishing or refreshing standing employee representative bodies to ensure readiness for any collective consultation process that might be required.

4. Ensure the relevant personnel, such as managers and HR teams, receive training on the proposed legislative changes so that they are aware and prepared for the implementation of the changes under the Bill.

5. Consider whether any contractual changes are required and if so whether these can be implemented before the restrictions on fire and rehire come into force. Review benefit packages to identify current contractual entitlements that will be difficult to change once the restrictions are in place.

6. Stay up to date with any further government consultations that are carried out in relation to the reforms and actively participate in these consultations. The government has confirmed it will publish collective consultation guidance in due course, and this will be a key document for all employers seeking to make redundancies once the changes come into effect.

We will continue to write updates as we learn further details of the many changes being introduced by the Employment Rights Bill.