What businesses need to consider as they increase their headcount

Employment and HR Paralegal Stephen Jones, from Co-operative UK’s Advice Team, explains how an increasing workforce can impact your compliance obligations. 

As your co‑operative business grows, so does its exposure to wider regulations and rules that activate with employee headcount. There are eight main considerations relevant to growing businesses that co‑operative HR personnel need to be aware of. These are triggered, not just by business activity, but by workforce size. 

Crossing key headcount thresholds, namely the 50-employee mark, can significantly change an organisation’s exposure – and some obligations arise automatically, while others are contingent on specific events or employee action. 

1. Trade union activity: 21 employees 

Under the Employment Rights Act 2025 (the “Act”), certified trade unions will gain enhanced rights, including a new statutory right to request access to workplaces for defined “access purposes.” Such purposes include general meetings, supporting, representing, recruiting or organising workers – and the facilitation of collective bargaining. However, organising industrial action is explicitly excluded from the permitted premises. 

From October 2026, employers with more than 21 workers will be required to comply with the right of access framework and a minimum of 5 days’ notice will be required before the first access visit. 

The draft Code encourages unions to agree access voluntarily before using the statutory route. Any voluntary agreement is not enforceable by the Central Arbitration Committee (“CAC”) and does not prevent another union later seeking statutory access. If statutory access is pursued, the process is as follows: 

• Stage one: The union submits a written request via the standardised template form to “the person or department with authority to grant access.” 
• Stage two: The employer must respond within 15 working days, accepting or refusing, in whole, or part, again, using the standardised template form. 
• Stage three: If not agreed, a 25-working day negotiation period follows, which can continue informally beyond this.  
• CAC: In failing to reach an agreement or to provide a response, the union can apply to the CAC within 55 working days of the original request. 

NB: Although employers with fewer than 21 employees are exempt, the threshold is calculated on an employer-wide basis rather than by individual site(s).  

2. Information and Consultation of Employees Regulations (“ICE”): 50 employees 

When reaching the 50-employee benchmark, if you receive a request from employees then you need to consider implementing measures to consult with employees about significant workplace matters. 

The ICE Regulations apply when employees request a consultative body to be formed within undertakings of 50 or more employees in the UK and provide employees with the right to request information and consultation arrangements with their employer. 

The duty does not arise automatically; it is triggered either by a written request from at least 2% of the workforce (minimum: 15; maximum: 2,500), or the employer’s voluntary decision to introduce such arrangements. Once triggered, the employer must: 

1. Confirm the headcount, and be prepared to provide this number to employees on request (Regulation 5).
2. Review any existing staff consultation mechanisms, as these may already qualify as a pre-existing agreement under Regulation 8.
3. Commence negotiations within three months of a valid request and either reach a negotiated agreement or fall back to the Standard Provisions within six months (this is extendable by consent).
4. Maintain appropriate records and designate a HR contact to manage employee requests.
5. Consider establishing a voluntary consultation forum early, which may encourage engagement and reduce the risk of complaints to the CAC. 

If an employer refuses to negotiate or breaches an agreement, employees, or their representatives, may complain to the CAC. The CAC may order corrective steps, declare agreements invalid, or require enforcement measures such as ballots. 

The ICE Regulations apply only where an organisation receives a request, and they are rare in practice. Such regulations only usually arise when there are difficult employee relations issues or issues surrounding trade union recognition.  

3. IR35: 50 employees 

As headcount increases, organisations may fall outside the “small company” exemption for IR35 purposes. To qualify for the exemption, a company must meet at least two of the following criteria: 

• Annual turnover not exceeding £10.2m.
• Balance sheet total not more than £5.1m. 
• An average of no more than 50 employees for the company’s financial year. 

Exceeding the employee threshold removes one limb of the exemption. If you cannot meet the small business exemption through turnover and balance sheet, you must follow the IR35 requirements. 

Given the complexity of the IR35 regime, employers approaching or exceeding these thresholds should review their contractor arrangements and ensure appropriate processes are in place. For further information, see government guidance Understanding off-payroll working (IR35).

4. Transfer of Undertakings (“TUPE”): 50 employees  

All organisations must comply with the duty to inform employees in a TUPE transfer, but small businesses are exempt from the duty to consult collectively with employee representatives, or if you don’t have them to elect people for that purpose, or a trade union. When an organisation’s headcount reaches 50, it has a duty to collectively consult, as well as a duty to inform. 

In organisations of any size, where fewer than 10 employees are transferring, the requirement to consult collectively is waived. The small business exemption does not mean that you are exempt from having to consult, it just means that you can consult with staff individually regardless of the number transferring. When you have 50 employees, or more, and the transfer involves 10 or more people, you will need to elect employee representatives and consult with them over the transfer. 

While the detailed TUPE regime is complex, the key point is that workforce growth increases the likelihood of formal, representative, consultation obligations arising in the context of business transfers. 

5. Equal pay auditing: 50 employees 

The Equality and Human Rights Commission (EHRC) recommends that organisations with 50 or more employees undertake equal pay audits. While not mandatory in most cases, such audits are increasingly viewed as good practice and may help identify and mitigate legal and reputational risks. 

As organisations scale, proactive reviews of pay structures can support compliance with equal pay legislation and broader diversity and inclusion objectives. See the ACAS guidance here. 

6. Pensions consultation obligations: 50 employees 

Under the Pensions Act consultation regime, employers with 50 or more employees must consult affected employees where they propose certain “listed changes” to pension arrangements. These numbers relate to the total number of employees, not just employees who are pension scheme members. In a multi-employer scheme, each employer who meets the threshold has its own obligation to consult. 

These obligations are technical, and highly prescriptive, but the key consideration is that workforce size determines whether formal consultation requirements apply. Employers contemplating changes to pension provision(s) should factor in both timing and process requirements. There are several employers that are excluded entirely from the consultation requirements, such as those that participate in an occupational pension scheme with fewer than two members, and small occupational pension schemes. 

7. Health and Safety: no statutory trigger 

In addition to the ICE Regulations, you should consider how consultation on health and safety matters is managed as the workforce expands. While there is no new statutory obligation that automatically arises at a specific employee headcount, consultation duties under existing legislation become more operationally significant. 

Where no trade union is recognised, The Health and Safety (Consultation with Employees) Regulations 1996 apply, regardless of your number of employees. Under these regulations: 

• The employer must still consult employees on health and safety issues.
• Consultation may take place directly with employees, or through elected representatives, if either the employer or the workforce chooses that approach.
• A circa 50+ employee mark simply makes formal representative consultation practically desirable, not legally compulsory. 

If no representatives exist, you must still consult employees directly on issues such as risk assessments, policy changes and new equipment. At this size, it is good practice to consider establishing a simple health and safety committee or representative structure to demonstrate effective compliance. 

8. Protected characteristic pay gap reporting: 250+ employees 

Mandatory gender pay gap reporting currently applies to employers with 250 or more employees, and similar frameworks are being developed for ethnicity and disability pay gap reporting. From 2027, these large employers will also be expected to develop mandatory gender pay gap and menopause action plans. 

While these thresholds are not immediately relevant for smaller businesses, there is an increasing expectation, whether regulatory or market-driven, for transparency in this area. Some organisations choose to report voluntarily ahead of the legal requirement. 

As part of long-term workforce planning, employers should consider whether they are capturing the necessary data to support future reporting obligations, particularly as expectations in this area continue to evolve.  

Final considerations 

Headcount growth is not simply an operational milestone – it’s a regulatory one too. In crossing key thresholds, particularly at 50 employees, organisations are exposed to new obligations across consultation, tax, pensions and employee relations. 

Although not all requirements are triggered automatically, the direction of employment regulation is clear, larger workforces require more structured and transparent processes. In order for co‑operatives to ensure best practice, they should take a proactive approach in reviewing their relevant policies and governance frameworks to guarantee they remain compliant and scalable, as the business grows.  

For more advice and guidance around your regulatory obligations as a growing employer, members of Co-operatives UK should contact our Advice Team on [email protected].