The Cost of Getting Redundancy Wrong Just Doubled. Most Businesses Don’t Know Why.

From 6 April 2026, the maximum protective award for failure to comply with collective redundancy consultation obligations increased from ninety to one hundred and eighty days’ full pay per affected employee. Every HR briefing has mentioned this. Every employment law update has noted the number. And almost none of them have explained where the real risk lies, which is not in the size of the award but in the definition of the word that determines whether the obligation applies at all.

The word is “establishment.” Under Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992, the obligation to collectively consult is triggered when an employer proposes to dismiss twenty or more employees “at one establishment” within a period of ninety days or less. The entire question of whether a business is exposed to a protective award that has just doubled turns on how that single word is interpreted.

Most businesses making redundancies have never interrogated the question. They count the heads at each site, conclude that each site falls below twenty, and proceed without collective consultation. Under the old regime, the cost of getting this wrong was ninety days’ pay per affected employee, which was substantial but bounded. Under the new regime, the cost has doubled. And the case law on what constitutes an establishment has been anything but clear.

The Number That Should Concentrate Minds

Before examining the definitional question, the financial exposure deserves to be modelled plainly, because the abstract concept of “one hundred and eighty days’ pay per affected employee” does not produce the visceral reaction that the actual figure warrants.

Consider a business making thirty employees redundant. The average salary across the affected group is £35,000, which equates to a daily rate of approximately £135 based on a 260-day working year. The maximum protective award per employee is one hundred and eighty days at £135, which is £24,300 per person. Across thirty employees, the total exposure is £729,000.

This is not compensation for unfair dismissal. It is not a negotiated settlement. It is a penalty for a procedural failure: the failure to collectively consult before implementing the redundancies. The underlying redundancies may have been entirely justified. The business reason may have been genuine. The selection may have been fair. The individual consultation may have been thorough. None of this matters if the collective consultation obligation was triggered and not met. The protective award is payable regardless of the merits of the redundancy itself.

Under the old regime, the same thirty employees would have generated a maximum exposure of £364,500. The doubling of the maximum award means that the cost of the procedural failure has moved from a significant but absorbable figure to one that could threaten the financial stability of a mid-market business, particularly one that is already making redundancies because of financial pressure.

30 employees × 180 days’ full pay. The financial impact of getting collective consultation wrong has doubled. The question of what constitutes an “establishment” is where most businesses discover they were exposed.

The Establishment Question

The word “establishment” in Section 188 has been the subject of litigation that has produced genuinely contradictory guidance. The USDAW v Woolworths decision examined whether each individual Woolworths store was a separate establishment or whether the company should be treated as a single establishment for the purposes of collective consultation. The Lyttle v Bluebird UK Bidco decision addressed the same question in the context of a care home business with multiple sites. Subsequent decisions have provided further interpretation without definitively resolving the underlying ambiguity.

The practical effect of this uncertainty is that businesses with multiple sites, distributed workforces, or shared service functions cannot be confident about whether their employees are at one establishment or several. A retail business with fifteen redundancies across four shops may or may not have a collective consultation obligation, depending on whether those shops are treated as separate establishments or as a single operation. A professional services firm making redundancies across a London head office and three regional offices may or may not be at one establishment, depending on the degree of operational integration between the sites.

The factors that tribunals have considered include the degree of local management autonomy, whether each site has its own management structure, the extent to which employees move between sites, whether there is centralised HR and finance, and the overall organisational structure of the business. These are questions of fact and degree, which means they cannot be answered definitively in advance and are determined by a tribunal after the event, when the protective award is already at stake.

The Scenarios Where Businesses Get Caught

At Esbee, the cases where clients have been caught by the collective consultation obligation, or have narrowly avoided being caught, follow a consistent pattern. The business counts the redundancies at each individual location, concludes that no single location reaches the twenty-employee threshold, and proceeds without collective consultation. The tribunal subsequently determines that the locations are a single establishment, that the threshold was met, and that the failure to consult attracts a protective award.

The scenarios where this risk is highest are predictable. Multi-site operations with centralised management: a business with a head office and several branches, where HR, finance, and strategic decisions are centralised, is likely to be treated as a single establishment regardless of the number of physical locations. A PE-backed business making redundancies across a portfolio company that has recently integrated two acquisitions may find that the combined operation is one establishment, not three.

Distributed workforces with remote workers: the growth of remote and hybrid working has made the establishment question more complex. An employee who works from home but reports to a manager in the London office, attends meetings at the London office, and is managed as part of the London team is arguably at the London establishment regardless of their home address. If a business making redundancies excludes its remote workers from the headcount at their reporting location, it may be undercounting.

Matrix organisations and shared services: businesses where employees are members of functional teams that span multiple locations, or where shared service functions provide central support across several operational units, may find that the functional structure creates a single establishment even where the physical locations suggest otherwise.

The Interaction with the Fixed-Term Contract Question

The collective consultation obligation is triggered by a proposal to dismiss, not by the reason for dismissal. As the fixed-term contract article in this series explores, the expiry of a fixed-term contract is legally a dismissal by reason of redundancy. For businesses that use fixed-term contracts at scale, the interaction between the establishment question, the fixed-term contract expiry classification, and the doubled protective award creates a compounding risk that deserves careful assessment.

A university department with twenty-five research contracts expiring at the end of an academic term, if treated as one establishment, may face a collective consultation obligation that it has never previously considered. The protective award for failure to consult, at up to 180 days’ pay per affected employee, represents a financial exposure that the institution’s HR processes were not designed to manage.

How to Assess Your Position

Esbee’s HR services team advises businesses planning redundancies to assess the establishment question before, not during, the process. This assessment involves examining the organisational structure, the degree of centralisation in management and decision-making, the mobility of employees between locations, and the reporting relationships that determine where each employee is functionally based.

The assessment does not produce a guarantee, because the case law does not provide one. What it produces is an informed basis for deciding whether to proceed with or without collective consultation, and a documented rationale for that decision that can be presented to a tribunal if the question is subsequently challenged. A business that has considered the establishment question, taken legal and HR advice, and documented its reasoning is in a materially stronger position than one that never asked the question at all.

For businesses planning a restructuring of any scale, the redundancy process article in the HR services series provides a detailed examination of the procedural requirements that apply regardless of whether collective consultation is triggered. The combination of fair individual process and proper assessment of the collective consultation obligation is what separates a defensible restructuring from an expensive one.

For PE-backed businesses where restructuring is part of the value creation plan, the cost of getting the collective consultation question wrong is particularly acute. A protective award of several hundred thousand pounds, triggered by a procedural failure that could have been prevented with proper assessment, is a direct deduction from the value the restructuring was supposed to create. Operating partners and portfolio company boards need to understand this risk before the process begins, not after a claim is brought.

The Uncomfortable Conclusion

The doubling of the protective award has changed the economics of getting collective consultation wrong. A procedural failure that was previously costly is now potentially devastating, particularly for mid-market businesses making redundancies at a scale that sits near the twenty-employee threshold.

The real risk is not the size of the award. It is the uncertainty about whether the obligation applied in the first place. The definition of “establishment” remains genuinely ambiguous for businesses with multiple sites, distributed workforces, and centralised management. The businesses that discover they had a collective consultation obligation only after a claim is brought are the ones that will pay the doubled award.

The cost of assessing the question in advance, of examining your organisational structure, counting your heads correctly, and making an informed decision about whether to consult, is negligible against the exposure. The cost of not assessing it, and discovering the answer in a tribunal, has just doubled.

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If you’re planning redundancies and aren’t certain whether collective consultation applies, or if you want to ensure your process is defensible under the new 180-day regime, talk to us. Esbee’s HR consultancy team designs and manages redundancy processes for businesses of all sizes, including PE-backed companies where the stakes are highest.