Redundancy Consultation Failures: 2026 Employer Guide to Protective Awards

In March 2026 an employment tribunal ordered the administrators of the collapsed contractor ISG to pay protective awards to 1,686 former employees after the company failed to consult before making them redundant. The bill ran to several million pounds, with each affected worker entitled to up to 90 days' gross pay.

That case landed just weeks before the financial stakes rose again. From 6 April 2026, the maximum protective award for failing to consult on collective redundancies doubled from 90 days' pay to 180 days' pay per affected employee under the Employment Rights Act 2025. The same restructuring mistake now costs twice as much.

For SMEs, redundancy consultation failures are one of the most common and most expensive employment law errors. The duty is procedural, the timescales are fixed, and the financial exposure does not depend on whether the redundancies themselves were justified. This guide explains the rules and how to run a consultation that holds up.

When Collective Consultation Is Triggered

The collective consultation duty sits in the Trade Union and Labour Relations (Consolidation) Act 1992, section 188. It applies when an employer proposes to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less.

Below that threshold, individual consultation obligations still apply, but the collective rules and the protective award regime do not. The 20-employee count includes any dismissal for a reason not related to the individual, so it can be triggered by restructures and contract changes, not just classic redundancies.

Where the duty applies, the employer must inform and consult appropriate representatives in good time and complete that consultation before the first dismissal takes effect. The minimum periods are fixed:

• 30 days before the first dismissal where 20 to 99 redundancies are proposed.
• 45 days before the first dismissal where 100 or more redundancies are proposed.

These are minimum windows, not target dates. Consultation must also be genuine, which means it has to begin while proposals are still at a formative stage and the outcome can still be influenced.

What Counts as One Establishment

The 20-employee threshold is counted at one establishment, and the meaning of that phrase has been heavily litigated. Following the Woolworths and Ethel Austin litigation, the position is that establishment means the local unit to which the affected workers are assigned, such as a single shop, site or office, rather than the business as a whole.

This matters because it cuts both ways. An employer with several small sites may stay below the threshold at each one, while an employer concentrating cuts on a single large site can cross it easily. Counting heads across the wrong unit is a frequent source of error, and getting it wrong in either direction is risky. The safe approach is to take advice on the establishment question whenever the numbers are close to 20.

What the Doubled Protective Award Means

If an employer fails to comply with the consultation duty, an affected employee or their representative can bring a claim for a protective award under section 189 of the 1992 Act. The tribunal sets the award at what it considers just and equitable, up to a statutory maximum, with the focus on the seriousness of the employer's default rather than the loss suffered.

Before 6 April 2026 the maximum was 90 days' gross pay per affected employee. From that date it is 180 days' gross pay per affected employee. The award is uncapped by the statutory week's pay limit, so it is calculated on actual gross earnings.

The scale of exposure follows quickly. A redundancy exercise affecting 50 employees, each earning around £150 a day, carries a worst-case protective award of roughly £1.35 million under the new 180-day maximum, before any other claims. A serious failure to consult is usually treated as warranting the full award, not a token sum.

There is a further multiplier. Where dismissal and re-engagement is involved, the 25% uplift for failing to follow the statutory Code of Practice on Dismissal and Re-engagement can apply, pushing the theoretical maximum towards 225 days' pay per employee.

The "Special Circumstances" Defence Is Narrow

Employers facing insolvency often assume that financial distress excuses the duty to consult. It does not. The Act provides a limited defence where special circumstances render compliance not reasonably practicable, but the employer must still take all reasonably practicable steps to comply.

The courts have read this defence narrowly. Insolvency or administration is not, by itself, a special circumstance. The ISG award is a clear illustration: the company was in administration, and the tribunal still found the failure to consult attracted the protective award.

The practical lesson is that consultation cannot be skipped because the business is in trouble. If anything, a struggling employer faces the highest risk, because rushed closures are exactly where consultation is most often cut short.

The Notification Duty Most Employers Miss

Alongside consultation, an employer proposing 20 or more redundancies must notify the Secretary of State using form HR1, sent to the Insolvency Service, before the first dismissal and within the same 30 or 45-day windows.

Failure to notify is a criminal offence punishable by an unlimited fine, and directors can be personally liable. This is a separate duty from consultation, and it is frequently overlooked in fast-moving restructures and pre-pack situations.

Who Counts, and Who Pays When the Employer Is Insolvent

The headcount for the threshold includes employees proposed for dismissal as redundant, and it captures fixed-term employees being let go early as well as permanent staff. Genuine agency workers are not employees of the hirer, so they do not count towards the hirer's threshold, though the agency relationship needs to be checked rather than assumed.

Where a protective award is made against an insolvent employer, employees can claim a capped element from the National Insurance Fund through the Redundancy Payments Service, with the balance ranking as a debt in the insolvency. This is why administrators, as in the ISG case, are routinely pursued for these awards, and why the failure to consult does not simply disappear when a company collapses.

Reduced Qualifying Period Raises the Individual Stakes Too

Collective consultation failures are not the only redundancy risk increasing. From 1 January 2027, the unfair dismissal qualifying period falls from two years to six months.

That change means far more employees will be able to challenge the fairness of an individual redundancy selection, including the pool definition, the scoring criteria and the search for alternative employment. Employers will no longer be able to rely on short service to shut down a weak selection process.

Taken together, the doubled protective award and the shorter qualifying period mean redundancy exercises now carry higher exposure at both the collective and the individual level. Process discipline is the only reliable defence.

The Failures That Lead to Claims

Protective award claims rarely turn on a single dramatic mistake. They usually follow a familiar set of shortcuts taken under time pressure.

• Starting too late. Consultation that begins after the decision has effectively been made is not genuine consultation, even if the calendar days are observed.
• Consulting the wrong people. Talking to staff individually when collective representatives should have been elected or recognised is a standalone breach.
• Issuing notices early. Serving notice of dismissal before the minimum period has elapsed cuts the consultation short and triggers the award.
• Treating it as a formality. Failing to provide the prescribed written information, or refusing to engage with counter-proposals, undermines the whole process.
• Skipping form HR1. Missing the Insolvency Service notification is a separate criminal offence that is easy to overlook in a fast closure.

Each of these is avoidable with a written procedure and a realistic timetable agreed before any announcement is drafted.

How to Run a Consultation That Holds Up

A defensible collective redundancy process follows a consistent shape. The detail varies by sector and size, but the structure does not.

1. Identify the trigger early. Count proposed dismissals across the 90-day window and at the relevant establishment. If the number could reach 20, plan for collective consultation from the outset.
2. Arrange representatives. Consult recognised trade unions where they exist, or arrange the election of employee representatives where they do not. Consulting individuals instead of proper representatives is itself a breach.
3. Submit form HR1. Notify the Insolvency Service before the first dismissal and keep a copy on file.
4. Disclose the required information in writing. Set out the reasons, the numbers and categories affected, the selection method, the dismissal procedure and how redundancy pay will be calculated.
5. Consult genuinely on the right subjects. Cover ways of avoiding dismissals, reducing the numbers and mitigating the consequences. Respond to representatives' counter-proposals on the record.
6. Respect the minimum period. Do not issue notices of dismissal until the 30 or 45-day window has run and consultation is genuinely complete.
7. Document everything. Keep dated minutes, written responses and a clear audit trail. In a tribunal, the records are the defence.

Government guidance on the employer's obligations is set out at GOV.UK: redundancy consultations, and the ACAS guide to managing staff redundancies remains the practical benchmark for a fair process.

A Realistic Timetable for 30 Or 40 Redundancies

For a proposal affecting between 20 and 99 roles, a workable timetable starts well before the 30-day clock. In the fortnight before consultation opens, the employer confirms the establishment count, arranges representative elections where needed and prepares the written disclosure pack.

Day one is the formal opening of consultation, the issue of the written information and the submission of form HR1. The following weeks are used for genuine consultation meetings, with responses to representatives' questions recorded in writing. Only once the 30-day period has run and consultation is complete are notices of dismissal issued, with notice periods running on top of that.

Compressing this into a fortnight to hit a closure date is the single most common way employers convert a lawful redundancy into a protective award claim.

How Policy Pros Can Help

Most redundancy claims succeed because the process was rushed or undocumented, not because the redundancies were unjustified. The fix is a clear, written framework that managers follow under pressure.

Policy Pros writes the redundancy policies and consultation procedures that set out the triggers, timescales, representative arrangements and documentation requirements in plain terms. These sit within your wider HR policies and procedures so that selection, appeals and redeployment are handled consistently.

For employers planning a restructure now, our legal consultation services provide a pre-redundancy review of your process before any announcement is made. For the wider reform picture, see our 6 April 2026 employer checklist and the ERA 2025 timeline summary.