The maximum penalty for not properly consulting about collective redundancies will double from 90 to 180 days' pay per employee from April 2026. This will be one of the first measures in the Employment Rights Bill to take effect – although exactly when it will bite is unclear, as our article explains.
The Employment Rights Bill is now in its final stages and expected to pass in the next few weeks, when it will become the Employment Rights Act. Among the sweeping reforms in this new legislation are some key changes to the rules around collective redundancy consultation.
Under the current law, employers proposing 20+ redundancies "at one establishment" within a period of 90 days must go through a process of collective consultation before making any redundancies. If employers don't comply, employers are liable to pay a protective award of up to 90 days' pay per employee. There's no cap on the daily amount.
One of the changes made by the Bill relates to the maximum protective award. It will double from 90 to 180 days' pay. This means that failing to meet the detailed collective consultation requirements will, in future, attract a much higher penalty. Taking shortcuts or attempting to "buy out" collective consultation requirements will become significantly riskier and more expensive.
According to the government's roadmap for implementing the Employment Rights Bill, the doubled penalty will apply from April 2026, making it among the first measures to take effect (most reforms having been pushed back to October 2026 or 2027).
The new penalty will, therefore, apply soon. If you are among the many employers thinking about potential redundancies or restructurings in the coming months, it should be factored into your compliance strategy. There is, however, a degree of uncertainty over exactly when the new penalty will bite.
There are broadly two options:
Option 1 – the new penalty could bite on redundancy proposals formulated after April 2026.This would be in line with what happened in 2013, when the government halved the length of collective consultation for 100 + redundancies from 90 to 45 days. When that change was introduced, the new consultation period applied for "redundancy proposals made on or after 6 April 2013".
Option 2 – the new penalty could bite on redundancies taking effect from April 2026. There would be a logic to choosing this approach because it would more closely tie in with how protective awards are calculated. If this option is picked, the new penalty will bite much sooner.
We will need to wait and see the commencement regulations to know what the government will do, but it's worth bearing this lack of clarity in mind if you will be formulating a proposal for collective redundancies early in 2026.
Of course, the increased penalty is less relevant for those employers who are expecting to comply in full with the detailed collective redundancy consultation requirements. Nonetheless, in our experience, most employers will need to consider the impact of this penalty, for example if they wish to explore whether employees might wish to leave employment early under settlement agreements.
The Bill makes other changes to the threshold for collective redundancy consultation, but those are not expected to take effect until 2027. For more details of those changes, and the other measures in the Bill, see our (regularly updated) Employment Rights Bill dashboard.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
