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20th May 2026
When businesses begin planning restructures or workforce reductions, timing becomes critical. One of the most common and costly mistakes employers make is assuming consultation obligations only arise once redundancy decisions are finalised. In actuality, the legal duty to collectively consult often begins much earlier.
For SMEs in particular, the redundancy process can feel overwhelming. Employers are balancing commercial pressures, employee relations, operational continuity, and legal compliance all at the same time.
However, failing to understand when collective redundancy consultation rules apply can expose businesses to significant financial penalties and reputational damage.
Recent tribunal decisions have reinforced that employers must think proactively rather than reactively. Consultation duties are increasingly being scrutinised closely, with tribunals placing greater emphasis on whether businesses engaged meaningfully with employees at the correct stage of the process.
Collective redundancy consultation exists to make sure employees are informed and consulted before large-scale dismissals take place. It is designed to encourage meaningful discussion around avoiding redundancies, reducing numbers, and mitigating the impact on affected employees.
For employers, the stakes have risen significantly in recent years. Protective awards for failing to collectively consult can now reach up to 180 days’ gross pay per affected employee. Even businesses acting in good faith can find themselves exposed if procedures are rushed or consultation begins too late.
Importantly, Employment Tribunals are increasingly focused on process. Employers may have genuine commercial reasons for restructuring, but if consultation obligations are ignored or delayed, the redundancy process itself can still be found unlawful. This is why understanding the trigger point for collective redundancy obligations is essential.
Under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), employers must collectively consult when they are proposing to dismiss 20 or more employees at one establishment within a 90-day period.
This duty applies before dismissals take effect and before final decisions are made. The consultation process must involve either recognised trade unions or elected employee representatives, depending on the structure of the workplace.
Many employers mistakenly believe the obligation only applies to traditional job losses. However, the legal definition of redundancy for collective consultation purposes is much broader. It can include wider restructuring exercises, changes to contractual terms, and some dismissals categorised as ‘Some Other Substantial Reason’ (SOSR).
The key point is this: collective consultation obligations arise at the proposal stage, not once redundancies are formally confirmed. This distinction is where many businesses encounter problems.
One of the most important recent cases in this area is Ellard v Alliance Transport Technologies Ltd, which highlighted how early consultation duties can arise.
In this case, a company entered administration and began dismissing employees while still exploring potential alternatives, including a possible sale of the business. Initially, fewer than 20 redundancies were planned. However, further dismissals followed shortly afterwards when rescue options fell away.
The employer argued that consultation obligations had not yet been triggered because no final decision had been made regarding large-scale redundancies. The Employment Appeal Tribunal disagreed.
The tribunal confirmed that a proposal to dismiss does not need to be fully settled or formally approved. Consultation duties can arise even while plans remain fluid and alternative options are still being explored. What matters is whether large-scale dismissals are realistically being contemplated within a 90-day period.
This is particularly important for SMEs facing financial pressure or uncertainty. Employers often delay consultation because they hope circumstances may improve, investment may arrive, or alternative business solutions may emerge. However, waiting too long can create serious legal exposure if redundancies later become unavoidable.
The Ellard decision reinforces that businesses should seek HR and legal advice at the earliest stage of restructuring discussions rather than waiting until plans become definitive.
Another area of confusion is determining which dismissals count towards the 20-employee threshold. Many employers assume collective redundancy only applies to straightforward job cuts. In reality, the scope is much wider.
The most obvious category includes employees dismissed because a role is no longer required, workplace closures, or reduced demand for certain work. Employers managing a compulsory redundancy process should carefully assess whether collective consultation obligations may apply from the outset.
Voluntary redundancies are generally included when calculating numbers for collective consultation purposes. This catches some employers by surprise, particularly where businesses initially hope to reduce headcount through voluntary exits alone.
Dismissals linked to business reorganisations may also count towards the threshold, even where the underlying business remains operational. For example, restructures involving role consolidation, departmental mergers, or location changes can still trigger collective redundancy obligations.
Collective consultation obligations can also arise during ‘fire and rehire’ exercises where employees are dismissed and offered re-engagement on new contractual terms. Although these situations are not always viewed as traditional redundancies, the law can still treat them as dismissals for collective consultation purposes.
Some dismissals categorised as SOSR may also count. This can include restructures driven by operational necessity or irreparable workplace relationship breakdowns.
Fixed-term contract dismissals require careful assessment. If a fixed-term contract simply expires naturally at the agreed end date, it will usually not count towards the threshold.
However, if the contract is terminated early because of redundancy or restructuring, it is likely to count. Because the rules are highly fact-specific, employers should avoid making assumptions without advice.
Once collective redundancy consultation obligations arise, employers must follow a structured process.
The law sets minimum consultation timescales:
These are minimum periods, not targets. Consultation must still be meaningful throughout.
Employers must also notify the Secretary of State using an HR1 form. Failing to submit an HR1 is a criminal offence, which many SMEs are unaware of. The form must be filed before consultation begins and within the relevant statutory timeframe.
Consultations must take place with either recognised trade unions or properly elected employee representatives. Where no recognised union exists, employers may need to organise representative elections before consultation can begin. As you might expect, this can add significant time and complexity to the process.
Consultation is not simply a procedural exercise. Employers must genuinely engage with representatives about ways to avoid dismissals, reducing the number of redundancies, and minimising the consequences for affected employees.
Tribunals expect employers to approach consultation with an open mind. Decisions that look as though they were predetermined can weaken an employer’s position. Thus, meaningful communication is essential throughout the whole process.
The consequences of mishandling collective redundancy consultation can be severe. Let’s explore some examples of what can happen to employers in this scenario.
Tribunals can award up to 180 days’ gross pay per affected employee where employers fail to collectively consult properly. These awards are punitive rather than compensatory. Businesses can therefore face substantial liabilities even if employees suffer limited financial loss. For SMEs, this level of exposure can be devastating.
Poorly managed redundancy processes also increase the likelihood of wider claims, including wrongful dismissal, discrimination, failure to collectively consult, and breach of contract.
Redundancy situations are often highly visible internally and externally. Employees who feel poorly treated may raise concerns publicly, damaging morale, retention, recruitment efforts, and client confidence. For smaller businesses, reputational harm can be particularly difficult to recover from.
Weak documentation is another common issue. Employers should maintain clear records showing:
Without robust evidence, defending tribunal claims becomes considerably harder. Where investigations or disputes arise during restructuring exercises, proper workplace investigations may also become necessary.
The best way to manage collective redundancy risk is through early preparation and proactive planning. Here’s a quick guide to how employers can get ahead of things.
Employers should monitor restructuring discussions carefully and identify potential redundancy exposure as early as possible. Waiting until financial pressures become critical often leaves too little time for compliant consultation.
Businesses should regularly reassess whether alternative options remain realistic. As the Ellard case demonstrated, consultation obligations can arise even while rescue plans or business sales are still being explored.
One of the most common mistakes employers make is communicating redundancies internally before taking HR advice. Early announcements can inadvertently strengthen arguments that decisions were already predetermined. Obtaining support before formal communication helps employers structure the process correctly from the start.
Line managers play a key role during restructuring exercises. They should understand when consultation duties arise, how to handle employee conversations, the importance of avoiding informal assurances or commitments, and escalation procedures for employee concerns. This helps reduce both confusion and legal risk.
Tribunals expect employers to actively consider alternatives before proceeding with dismissals. This may include:
Employers should document these discussions thoroughly. Businesses may also need to consider issues such as redundancy and bumping during the selection process.
Managing a collective redundancy process is rarely straightforward, particularly for SMEs without dedicated internal HR support. Alongside the legal obligations involved, employers are often balancing commercial pressures, employee wellbeing, operational continuity, and reputational risk all at the same time.
Knowing when consultation obligations arise, how to structure the process correctly, and what documentation is required can quickly become overwhelming without the right guidance.
At Sapphire HR, we help businesses navigate restructures and workforce changes with practical, commercially focused HR support tailored to their organisation. Our role is not simply to explain legislation, but to help employers apply it confidently and realistically within the context of day-to-day business operations.
We support employers from the earliest stages of redundancy planning, helping businesses identify when collective consultation obligations may be triggered before formal decisions are made.
We also assist with drafting consultation documents, managing timelines, supporting HR1 submissions, coordinating employee representative elections, and helping managers handle sensitive conversations professionally and consistently.
The key lesson for employers is that collective redundancy consultation duties can arise far earlier than many businesses expect. Waiting until plans are finalised or announcements are ready may already leave organisations exposed to legal and financial risk. With protective awards now potentially reaching up to 180 days’ pay per employee, tribunals are placing increasing scrutiny on both timing and process.
Handled correctly, collective consultation can help businesses manage difficult change in a structured, lawful, and commercially sensible way while preserving employee confidence wherever possible. Handled poorly, the consequences can be significant both financially and reputationally.
If your business is considering restructuring, redundancies, or organisational change, contact us for practical HR advice and support tailored to your organisation.
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The information contained in this blog presented for general informational purposes only. While we strive to provide accurate and up-to-date content, legal and HR practices can evolve rapidly. This blog is not a substitute for professional advice.
For specific questions or concerns regarding your unique situation, we highly recommend taking professional advice and booking a consultation with a Sapphire HR Consultant. Our consultants are experts in the field and can provide tailored guidance to address your specific needs.
We aim to work truly in partnership with our client organisations and to develop a high-quality, competent HR Service for all clients, the HR Provider that they can rely on and who gets to understand the culture and vision of your business.
