Yes, "letting" is a gerund in the sentence, and "letting them go" serves as an object. In general, you consider something (a noun). For example, consider the cost. (In this case, you don't have a gerund.) Another example, consider going to the party. (Here "going" is a gerund.)

[you should] consider letting them go letting = gerund them go = gerund object letting them go = object of consider New Oxford American Dictionary consider | kənˈsɪdər | verb [with object] think carefully about (something), typically before making a decision: • think about and be drawn toward (a course of action): he had considered giving up his job. he had considered GIVING UP his job. (giving up = gerund)

It's the object of the sentence. The gerund has nominative function, and the structure is consider + something (noun or noun equivalent)