Redundancy

The Risks

Under the Unfair Dismissals Acts 1977-2021, redundancy is explicitly cited as a fair reason for the termination of employment. However, the redundancy must of course be genuine, and the selection of the employee must be fair. Although a redundancy situation may exist, employees may have grounds for complaint if the manner of the selection for redundancy was deemed unfair or that a genuine redundancy situation does not exist. An employee can take a case under the Unfair Dismissals legislation and be awarded up to two years of salary. 

How Do You Calculate Redundancy Payment?

Under the Redundancy Payments Acts 1967 – 2007, an eligible employee is entitled to a statutory redundancy payment for every year of service. The Acts provide for a payment of two weeks gross pay for each year of service plus an additional week.

An eligible employee is one over the age of 16 with 104 weeks of continuous employment with an employer whose position has ceased to exist. The calculation of gross weekly pay is subject to a ceiling of €600.00.

Examples of Redundancy Payment

For example, the calculation of a statutory redundancy payment for an employee with 5 years of service earning €700 as a gross weekly wage would be as follows:

Employment start date: 1^st May 2019

Employment end date: 1^st May 2024

Number of years of service 5.01

Bonus week: 1

Total weeks: 11.02

Statutory redundancy entitlement: 11.02 X €600.00 = €6,612.00
(Weeks multiplied by Gross weekly Wage. Gross weekly wage capped at €600)

Statutory redundancy pay would be: €6,612.00

Employers should start by obtaining an estimate of the total statutory redundancy costs to give a clear understanding of the financial implications for the business. The calculator where statutory redundancy payments may be calculated at MyWelfare.ie can be accessed here. 

Voluntary Redundancy

Before an employer commences the selection process for potential redundancies, the first point to consider is whether to implement a voluntary redundancy scheme, allowing employees to volunteer for redundancy.

The Selection Process

Employers must ensure they satisfy a fair selection process. In order to avoid a successful claim for unfair dismissal, the redundancy needs to be genuine, and the relevant employee must be fairly selected. 

Employers have a lot of latitude in deciding on the selection criteria, provided the criteria are fair and objective. It is crucial for employers to ensure that the criteria do not result in discriminating against a certain cohort of employees. For example, the ‘Last In, First Out’ method can be used as a valid means of selection, but if the most recent hires of an employer are all young compared to the employees not selected, this could potentially give rise to a high-risk discrimination claim on the grounds of age.

The employer should begin by notifying all employees that there are risks of redundancies within their role type and the selection criteria that is to be used.

It is important to explore all options at this stage, including potential alternatives within the organisation. If an alternative position is available, it must be offered to affected employees. Refusal of a reasonable offer may result in the loss of entitlement to redundancy payments. Employees have the right to trial an alternative position for up to four weeks.

Under the Unfair Dismissals’ legislation, selection for redundancy based on certain specific grounds is considered unfair. These include redundancy as the result of an employee’s trade union activity, pregnancy or religious or political opinions. The Employment Equality legislation also prohibits selection that is based on any of the following nine grounds: gender, civil status, family status, age, disability, religious belief, race, sexual orientation or membership of the Traveller community.

Consultation Phase

The Redundancy Payments Acts of 1967 – 2007 requires that the Company must consult with the employees as soon as is reasonably practical. It is important to hold a number of consultations with effected employees and offer them the opportunity to provide alternative suggestions to the possible redundancy. This will help employees understand that the employer is doing everything in their power to find an alternative.

Failure to Consult 

Failure to hold a consultation period may lead to the employee filing a claim with the WRC who has jurisdiction to award up to four weeks’ salary. Failure to comply with any other requirement under the Redundancy Acts may result in compensation of up to two years’ salary, reinstatement or re-engagement of the employee. 

How many Positions are being made Redundant?

A collective redundancy occurs where a defined minimum number of employees are made redundant within a period of 30 consecutive days. The minimum number depends on the size of the workforce.

• 5 employees where 21-49 are employed
• 10 employees where 50-99 are employed
• 10% of the employees where 100-299 are employed
• 30 employees where 300 or more are employed

Under the Protection of Employment Acts 1977-2014, an employer is obliged to enter into consultations with a view to agreement with employee representatives.

The employer is also obliged to provide the following information in writing to the employees’ representatives:

• The reasons for the redundancy
• The number and descriptions of the employees affected
• The number and descriptions of employees normally employed
• The period in which the redundancies will happen
• The criteria for selection of employees for redundancy
• The method of calculating any redundancy payment

Where a collective redundancy occurs, the employer must inform the Minister for Employment Affairs and Social Protection in writing of the proposed redundancies at least 30 days before the occurrence of the first redundancy.

Find out more info in our Navigating Collective Redundancy article here.

Resignation

Employees facing redundancy may choose to leave before the designated redundancy date, possibly to accept alternative employment. Failure to notify the employer using the Form RP6 – Leaving Before a Redundancy Ends, in writing, may leave them at risk of losing any entitlement to redundancy compensation. A request of this nature may be granted or denied at the employer’s discretion. The employee’s eligibility for a payout may be impacted if they leave without the employer’s consent within the notice period.

Lay-Offs and Short-Time Working

If an employee has been laid off or placed on short time working for four consecutive weeks, or for 6 weeks out of the previous 13 weeks, they may notify their employer by using the Form RP9 – Lay Off and Short-Time Processes, of their decision to request a redundancy pay-out. 

Seek Redundancy Advice from Professionals

Redundancy law is complex and employers must recognise the significance of redundancy legislation compliance not only as a legal requirement but as a commitment to fairness and transparency. It is therefore crucial for businesses to seek professional advice when considering the implementation of a redundancy process to assist them during this difficult time and to mitigate risks to the business.

This article was written by Sharon Sweeney, HR Consultant at Action HR Services

Contact any of our consultants if you are in need of expert HR Advice.

DISCLAIMER:
The information in this article is provided as part of the Action HR Services Blog. Specific queries should be directed to a member of the Action HR Services Team and it is recommended that professional advice is obtained before relying on information supplied anywhere within this article. This article is correct on 10th May 2024.