UK Parliament Proposes Increased Penalties for Failure to Consult in a Collective Redundancy

Quick Hits

• In March 2025, the UK government announced amendments to the Employment Rights Bill following a series of consultations.
• The penalty “protective award” payable to employees when an employer fails to consult properly in a collective redundancy situation would be doubled from 90 to 180 days’ pay.
• Collective redundancy consultation obligations (which apply when twenty or more redundancies are proposed) would continue to be determined separately for each “establishment” (meaning “workplace”), removing the original proposal that the determination should be based on the total number of proposed terminations in the whole company.
• “Fire and rehire” would be automatically considered unfair unless carried out under very limited circumstances.

Redundancy

Amongst the bill amendments is an adjustment to collective redundancy rules. Employers are currently required to consult collectively when making twenty or more redundancies at a single establishment. The new amendments maintain this threshold, meaning that original plans to scrap this establishment test are no longer on the agenda. However, the amendments introduce a yet-to-be-defined threshold for multisite redundancies. This alternative threshold is expected to be based on redundancies across entire organisations and may be a specified percentage of employees.

Additionally, when carrying out collective redundancy consultations employers would not need to consult with all employee representatives together or reach the same agreement with all representatives.

The government intends to increase the maximum protective award duration from 90 days to 180 days of pay, which is applicable in successful claims for violations of collective redundancy obligations. The doubling of the protective award is “to ensure that employers will not be able to deliberately ignore their obligations,” the government stated in response to the consultation on strengthening remedies against unfair practices in collective redundancy and “fire and rehire” (which also requires following redundancy rules). It also stated that “it should never be the case that it is financially beneficial to [ignore the rules].”

Employment tribunals would retain the authority to adjust the duration of the protected period, with a maximum limit of 180 days, as deemed fair and appropriate based on the circumstances. This decision would take into account the severity of the employer’s actions as well as any mitigating factors.

The government plans to provide additional guidance to employers on adhering to best practices in meeting their collective redundancy consultation responsibilities.

‘Fire and Rehire’

To address the practice of “fire and rehire,” where employers impose harmful contractual changes on employees by threatening dismissal and reengagement on new contractual terms, the amendments stipulate, among other things, that dismissing an employee “to vary the employee’s contract of employment” would be automatically deemed unfair except in situations where organisations are in extreme financial distress and “the reason for the variation [is] to eliminate, prevent or significantly reduce … any financial difficulties” affecting “the employer’s ability to carry on the business as a going concern.”

Improving business efficiency alone does not satisfy these criteria; there would need to be a clear absence of alternatives. Consequently, in practice, this exception would likely apply only in rare and limited circumstances. However, when such situations do occur, employers would need to comply with the Code of Practice on dismal and re-engagements, which is also proposed to receive updates under the current government.

Employers effectively may want to provide justifications for any proposed contractual changes and demonstrate that all alternative solutions have been explored. Failure to comply with these requirements could result in significant penalties, including compensation for negatively impacted employees.

In response to the consultation on enhancing protections against the misuse of collective redundancy and fire-and-rehire practices, the government has confirmed that the earlier proposal to introduce interim relief in unfair dismissal cases linked to collective redundancy will not be implemented. This is due to concerns about the excessive burden it would place on employers and the challenges of enforcement.

Ogletree Deakins’ London office will continue to monitor developments and will provide updates on the Cross-Border, Employment Law, Global Reorganizations, and Reductions in Force blogs as additional information becomes available.

Roger James is a partner in the London office of Ogletree Deakins.

Lorraine Matthews is a practice assistant in the London office of Ogletree Deakins.

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