UK: Getting the maths right in collective redundancy exercises

Knowing when the duty to collectively consult is triggered has always been an important question, not least because of the financial implications of getting it wrong. The penalties for non-compliance are set to double in April 2026, making this question, and the need for risk minimisation strategies, a matter that needs careful consideration.

The numbers test: a forward-looking calculation

Welcome news for employers has just arrived via the recent EAT decision in Micro Focus v Mildenhall. It has clarified that the correct test for whether an employer is ‘proposing’ 20 or more dismissals at one establishment within 90 days is forward-looking. There is no need to calculate the numbers by using a rolling approach of looking both backwards and forwards, as an earlier ECJ decision had indicated.

Although the calculation may be more straightforward, the EAT made it clear that decisions will be subject to scrutiny by tribunals, and any artificial splitting or staggering designed to avoid consultation will come under the spotlight.

In practice, this means employers should document when proposals crystallise, how they evolve, and why any sequencing is driven by genuine business needs rather than threshold avoidance.

Why non-compliance will be more expensive

The price tag of non-compliance or tactical ‘buyouts’ will increase significantly. Protective awards are currently capped at 90 days' uncapped pay per affected employee, with maximum awards where there was no consultation, and awards reducing in value where there had been some consultation that was deficient in some aspects. Micro Focus reaffirms an earlier decision that the touchstone for assessing the ‘protected period’ focuses on the seriousness of default.

With the overall risk increasing from April 2026, employers also need to factor in the existing potential of up to a 25% uplift for unreasonable non-compliance with the statutory code of practice. This materially raises the settlement ‘ask’ where employers seek to buy out consultation. Additionally, from 2027, more redundancy exercises are likely to require collective consultation. There will be an additional consultation trigger for proposals to dismiss a ‘threshold number’ of employees across the whole business within 90 days. This could be a set number (no lower than 20) or a set percentage of employees. Further details are awaited.

Although a non-compliance claim cannot technically be waived in a settlement agreement, employers often still ‘buy out’ the risk in exchange for a payment. In less than three months, employees and their representatives are likely to price in the higher ceiling and code-related uplift exposure, driving up settlement costs in any buy-out. Employers may wish to revisit their enhanced redundancy packages to reflect these escalating costs.

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