Why the Redundancy Consultation Penalty Just Doubled to 180 Days

For years, the rules governing collective redundancies in the UK followed a predictable, costly script for businesses that cut corners. If an employer failed to properly consult staff during large-scale layoffs, an Employment Tribunal could issue a financial penalty known as a Protective Award. For decades, that penalty maxed out at 90 days’ pay per employee.

Not anymore.

Under the Employment Rights Act 2025, the maximum penalty for failing to collectively consult has officially doubled to 180 days’ actual pay per affected employee.

This monumental shift fundamentally alters the financial risk calculation for businesses restructuring their workforce. Here is a breakdown of everything employers and employees need to know about this major change.

What is a Protective Award?

A Protective Award is not redundancy pay, nor is it compensation for unfair dismissal. Instead, it is a strictly punitive award designed to penalise employers who fail to follow the legal process of informing and consulting their staff.

Crucially, this award is calculated using actual, uncapped weekly pay—not the statutory weekly caps used for standard redundancy calculations. For high earners, a 180-day (approximately 26-week) penalty can easily equal half a year’s salary per person.

When Does the 180-Day Rule Trigger?

The duty to collectively consult—and the risk of the new 180-day penalty—is triggered under specific conditions:

• The Threshold: An employer proposes to make 20 or more employees redundant.

• The Timeline: The redundancies are planned to take place within a 90-day window.

• The Location: The layoffs occur at a single establishment (e.g., one office, factory, or branch).

If these conditions are met, the employer must enter into a formal consultation process with recognized trade unions or elected employee representatives before any dismissal notices are handed out.

Key Details of the New Legislation

1. No Minimum Length of Service Required

Unlike standard unfair dismissal claims, which usually require two years of continuous employment, employees are protected by collective consultation rules from day one. Any affected worker, regardless of how long they have been with the company, can claim their share of the 180-day protective award.

2. Tribunals Retain Discretion

The 180 days represents the maximum possible penalty, not a mandatory flat rate. Employment Tribunals start at the maximum and work their way down. The final amount depends entirely on the severity of the employer's breach. If a company completely ignores the law and consults no one, they will likely face the full 180 days.

3. The "Special Circumstances" Defense is Narrow

Employers can only avoid or reduce the penalty if they can prove "special circumstances" made consultation genuinely impossible (such as a sudden, unpredictable disaster). However, courts define this incredibly strictly; sudden insolvency or financial distress rarely qualifies as a valid excuse for skipping consultation.

4. Criminal Liability Remains

Skipping employee consultation is a civil matter, but failing to notify the government is not. Employers must still submit an HR1 Form to the Insolvency Service before making large-scale redundancies. Failing to do so remains a criminal offence punishable by an unlimited fine for the company and its directors.

What This Means Going Forward

For Employers:
The era of treating the 90-day protective award as a manageable "cost of doing business" or a line item in a restructuring budget is over. Doubling the penalty to 180 days means a flawed redundancy process could easily push a struggling business into insolvency. Meaningful, early consultation with staff is no longer just best practice—it is an absolute financial necessity.

If you want to ensure your business remains compliant or need to verify your rights during a restructure use Redundly.

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