Are you an employer who needs to carry out a redundancy?
And you are not sure what to do?
You are afraid you will get it wrong and leave yourself open to a costly claim?
Let me explain what’s involved and some things to avoid to ensure you don’t make a mess of it. (Note: this piece is aimed at small employers making one or two people redundant, not a collective redundancy situation).
What can go wrong?
There are two main claims that an employee can bring arising from a redundancy:
For unfair dismissal, on the basis that it is a “sham” redundancy and not a real one
For unfair dismissal, on the basis that the employee has been unfairly selected, and someone else should have been chosen.
You should apply fair criteria for deciding whose position will be made redundant.
Also, you should not depart from a previously established procedure, unless you have good reason for doing so.
If you have always used last in,first out to choose you need to stick with it or you leave yourself open to an allegation of unfair selection.
In a non collective redundancy the procedure, once you have chosen fairly, is straightforward: you need to give the required notice period and pay the statutory redundancy entitlement on the day the person is dismissed.
Ensure that you retain proof of payment of the redundancy payment, if the employee is entitled to one. He will need 104 weeks’ continuous employment to qualify. The employee’s continuous service will not be broken by illness, layoff, statutory leave, and some other limited circumstances.
How to calculate it? The employee is entitled to 2 weeks’ pay for each year of continuous employment over the age of 16 years and an additional one week’s normal earnings.
However, if the employee refuses a reasonable offer of alternative work he/she may become disentitled to a redundancy payment.
The notice period is a minimum of two weeks, but depends on how long the employee is in the employment. Here are the minimum notice periods:
Between 2-5 years: 2 weeks
Between 5-10 years: 4 weeks
Between 10-15 years: 6 weeks
Over 15 years: 8 weeks
Reasonable paid time off
The Redundancy Payments act 1979, section 7 provides that you must give the employee reasonable paid time off to look for another job. This should be taken during the last two weeks prior to termination.
The employee is also entitled to pay in lieu of untaken holidays.
Unable to pay? You need form RP50
If you are not able to pay the redundancy amount you need to fill out a form-RP50-and submit it to Department of Employment Affairs and Social Protection.
You will also need a letter from your accountant or solicitor stating you are unable to pay. You will also need evidence, such as audited accounts supporting your contention.
If you have lost your job due to redundancy, or your employer has become insolvent-that is, in receivership or liquidation-there are approximately 8 types of claim you can bring to the Workplace Relations Commission.
The Protection of Employment Acts, 1977 to 2007, applies to employers who normally have more than 20 employees and must be followed by these employers when carrying out a programme of collective redundancies.
The acts, and various regulations, set out the procedure that must be followed by these companies.
Collective redundancies are defined in S.I. No. 370/1996 — Protection of Employment Order 1996 as:
6. (1) For the purpose of this Act, `collective redundancies’ means dismissals effected by an employer for one or more reasons not related to the individual concerned where in any period of 30 consecutive days the number of such dismissals is —
(a) at least 5 in an establishment normally employing more than 20 and less than 50 employees,
(b) at least 10 in an establishment normally employing at least 50 but less than 100 employees,
(c) at least ten per cent. of the number of employees in an establishment normally employing at least 100 but less than 300 employees, and
(d) at least 30 in an establishment normally employing 300 or more employees.
The Protection of Employment Act, 1977 to 2007 applies to all employees, regardless of the amount of service they have.
Consultation and Notification
If a collective redundancy is to be carried out, the employer must consult employees’ representatives on
The possibility of avoiding redundancies and
How employees will be chosen for redundancy.
The employer must supply the employees or their representatives with all relevant information such as
The reason for redundancies
The number of employees it is proposed to make redundant
The number of employees normally employed
The time period over which it is proposed to carry out the redundancies
The criteria for selection of workers
The method of calculating and redundancy payments.
The employer must also supply this information to the Minister for Enterprise, Trade and Employment and allow at least 30 days to expire before issuing redundancy notices to employees. Failure to abide by this will leave the employer open to criminal prosecution.
The Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007 provides that some dismissals will be considered to be ‘exceptional collective redundancies’ if they fall into the following category:
an employee who is dismissed shall be taken not to be dismissed by reason of redundancy if—
(b) the dismissals concerned were effected on a compulsory basis,
(c) the dismissed employees were, or are to be, replaced, at the same location or elsewhere in the State, (except where the employer has an existing operation with established terms and conditions) by—
(i) other persons who are, or are to be, directly employed by the employer, or
(ii) other persons whose services are, or are to be, provided to that employer in pursuance of other arrangements,
(d) those other persons perform, or are to perform, essentially the same functions as the dismissed employees, and
(e) the terms and conditions of employment of those other persons are, or are to be, materially inferior to those of the dismissed employees.”.
This act allows for the referring of disputes to a Redundancy Panel which can invite the parties to make submissions in relation to the proposed collective redundancies.
The Redundancy Panel will then make a decision as to whether the proposed redundancies fall within the definition of ‘exceptional collective redundancies’ or not in which case the matter is referred to the Labour Court.
Firstly let’s take a look at what a redundancy is..
What is redundancy?
The definition of redundancy in Ireland is set out in the Redundancy Payments Act 1967 and amended by the Redundancy Payments Act 1971 and 2003-
an employee who is dismissed shall be taken to be dismissed by reason of redundancy if for one or more reasons not related to the employee concerned the dismissal is attributable wholly or mainly to—
(a) the fact that his employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased or intends to cease, to carry on that business in the place where the employee was so employed, or
(b) the fact that the requirements of that business for employees to carry out work of a particular kind in the place where he was so employed have ceased or diminished or are expected to cease or diminish, or
(c) the fact that his employer has decided to carry on the business with fewer or no employees, whether by requiring the work for which the employee had been employed (or had been doing before his dismissal) to be done by other employees or otherwise, or
(d) the fact that his employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) should henceforward be done in a different manner for which the employee is not sufficiently qualified or trained, or
(e) the fact that his employer has decided that the work for which the employee had been employed (or had been doing before his dismissal) should henceforward be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained.
Key factors in redundancy: impersonality and change
There are two critical factors to be gleaned from this definition-
The redundancy should arise from the doing away with the job, not the person. This feature of impersonality is necessary in a genuine redundancy situation.
Change-the change must arise as a result of change in the workplace which might range from a closing down of the business to a simple reduction in number of employees.
The employer can then give the employee a counter notice which must inform the employee that their employment will recommence not later than four weeks after the notice and this period of employment will be at least 13 weeks without lay off or short time.
Disentitlement to Redundancy
An employee is not entitled to a redundancy payment in the following circumstances:
Termination of the employment contract due to misconduct
If the employer offers a new contract of employment or to renew his existing contract of employment (see note)
Note: the new contract or the offer of a renewed contract must contain the same terms and conditions as the previous contract of employment and must involve the same place and capacity as the previous contract.
If these are different, then the offer of employment must be ‘suitable’ in relation to that employee. If the employee unreasonably refuses an offer of employment then she will be disentitled to a redundancy payment.
These types of cases often involve offers of employment at a different location and each case will be judged on its merits as to whether the offer is reasonably or unreasonable refused by the employee.
An employee who is entitled to a redundancy payment (service of at least 104 weeks) are entitled to at least 2 weeks notice.(Section 17 Redundancy Payments Act, 1967). However, longer serving employees have greater entitlements under the Minimum Notice and Terms of Employment Act, 1973.
In addition contractual notice provisions must be complied with to avoid a claim for wrongful dismissal.
A copy of the RP 50 form is given to the employee; this form combines RP 1 (notice of redundancy), RP 2 (certificate of redundancy), RP 3 (rebate claim), and RP 14 (employee’s application for a lump sum from the Social Insurance Fund).
The employer then sends the RP 50 form to the Minister for Enterprise, Trade and Employment to obtain a rebate of the payment made.
There is now no need to issue RP 50 forms as no redundancy rebate applies where the date of dismissal by reason of redundancy occurs on or after 1st January 2013. Please refer to this page on the Department of Social Protection website for the procedure.
In a collective redundancy situation there will be additional requirements on the employer imposed by the Protection of Employment Acts 1977 to 2007 and various regulations and other legislation.
As indicated already in relation to unfair dismissals, redundancy is a defence to a claim for unfair dismissal.
However it must be a genuine redundancy within the terms of the Redundancy Payments Acts 1967 to 2003 which sets out 5 redundancy definitions/situations.
1. The employer has ceased or intends to cease the business for which he employed the employee;
2. The requirements of the business have changed to the point where the employee is no longer required for the particular work for which he was employed;
3. The employer intends carrying on business with fewer or no employees;
4. The employer has decided the work which is being done by the employee will be done in a different way in the future and the redundant employee is not qualified or trained;
5. The employer has decided that the work will be done by another employee who is capable of doing other work for which the redundant employee is not trained or qualified.
Conduct of the employer in carrying out redundancies
In non-collective redundancies in Ireland there are no specific procedural requirements set out to carry out a redundancy dismissal.
What the employer must be very aware of though is the Unfair Dismissals (Amendment) Act, 1993 as this act holds that if the conduct of the employer is unreasonable in carrying out a redundancy then it may amount to unfair dismissal.
So it is vital that the employer act reasonably in carrying out a redundancy and a principal factor in how reasonable the behaviour was will be how the employer selected the employee(s) for redundancy and whether there were other alternatives to redundancy such as alternative employment or some other type of work in the employer’s business.
From an employer’s perspective it is important to be able to point to the reasonableness of his conduct when faced with the necessity for redundancy.
As well as the reasonableness of the employer’s conduct in making a position redundant, she would be well advised to carry out the following steps:
The employers should consider all options before deciding on redundancy. Are there alternatives? The employer should record this decision making process.
Is alternative employment an option for the employee?
Has the selection for redundancy been fair? (see below)
Even though it is not a procedural requirement from a legal perspective it is good practice for the employer to hold meetings and discussions to explore any alternatives and it would be prudent for the employer to make a record of these discussions and proposals.
The ability of the employer to be able to point to a paper trail of how the decision to carry out redundancies was arrived at can prove invaluable at a later date, for example at an EAT or Rights Commissioner hearing (now, the Workplace Relations Commission service deals with these claims).
Because the onus is on the employer to justify the selection for redundancy.
Fair Selection for Redundancy
The key point for an employer is to be able to demonstrate that people were selected fairly for necessary redundancies and that the employer acted reasonably at all stages of the process. This obviously only arises in circumstances where the employee is made redundant and there are other employees in similar employment who were not dismissed.
The selection of employees for redundancy has led to many employers paying quite a high price at a later date before the Employment Appeals Tribunal and unfortunately there are no criteria laid down in legislation for the selection of employees.
It is up to the employer to set her own criteria for selection for redundancy.
Some factors to be considered by the employer should include
While many employers employ a policy of “last in, first out”.
If there is a procedure in place in the workplace to deal with redundancy, as there is with most unionised workplaces, the employer will have to be able to show that the procedure was used to select each employee made redundant.
Nevertheless, no matter what criteria are used, the employer may well have to stand over his/her selection procedures at a later date and being able to objectively justify his choice will be his best defence.
Fair Procedure and Reasonableness
Fair procedure is essential when selecting employees for redundancy. Clear communication to ensure staff are aware of developments is also vital.
Employees should be encouraged to come forward with their own ideas as to how the business might be run more efficiently and consideration should be given to temporary layoff or short week options. Any ideas brought forward by the employees to reduce costs should be given fair consideration.
Objective and fair selection criteria should be used to select what positions are to be made redundant and regard may be had as to whether the dismissal was an unfair one or not by looking to the reasonableness or otherwise of the conduct (whether by act or omission) of the employer in relation to the dismissal, (Section 6 Unfair Dismissals Act 1977 (as revised)).
When applying criteria to assist with selection for redundancy it is up to the employer to choose, and he may apply different criteria for different parts of the business. The onus is on the employer to be able to justify the criteria chosen on objective grounds.
A good way for an employer to approach a scenario where employees might be seen to be equally at risk is to use a ‘skills matrix’ which involves setting out the skills needed to keep the business going. Then, the employees at risk of redundancy are measured against this matrix and those who score lowest are made redundant.
This is a legally defensible way to ensure a redundancy decision is not later held to be an unfair dismissal on the grounds of unfair selection.
Decided Redundancy Cases
Here are two cases concerning redundancy which should be instructive.
Coincidentally they both involve solicitor’s firms losing out.
The first case involved fair procedure and the reasonableness of the employer in terminating the employment.
The Tribunal is mindful of the fact that the burden of proof rests with the respondent to show that it has acted fairly and reasonably in all the circumstances surrounding the termination of this employee.
On balance the Tribunal accepts that the telephone call from France during which the claimant was told that a decision had been made to make him redundant was an unfair way to treat a loyal and exemplary employee. No forewarning was given and no alternative was considered.
In considering compensation to be awarded the Tribunal acknowledges that the respondent’s Principal’s intention was to become a sole practitioner which the claimant did confirm in evidence. The Tribunal accepts therefore that with more consideration a lawful and fair termination of employment would have been implemented ultimately.
The Tribunal therefore awards €17,984.00 payable by the respondent under the Unfair Dismissals Acts, 1977 to 2007.
The second case involves unfair selection for redundancy:
The Tribunal found that no meaningful consultation took place between the respondent and the claimant. The respondent failed to give advance warning of the nature of the meeting of 1 May 2013 when the claimant was informed that the decision had been made to make her redundant. The claimant was not afforded an appeal procedure. Furthermore, she was not offered the opportunity of having representation at the aforementioned meeting and at the follow-up meeting on 24 May 2013. There were no written notes or memos of the said meetings. There was no attempt to secure a voluntary redundancy. No consideration was given to an alternative to redundancy, such as a pay cut or reduced hours. The respondent did not consider a last in, first out policy. At the meeting on 24 May 2013 the claimant was offered a full time position in the Sligo office. This was not a viable option due to her domestic situation, and Sligo being 48km from the claimant’s home.
The respondent acted unreasonably in failing to apply objective criteria to the selection of the claimant for redundancy.
The Tribunal finds that the claimant was unfairly selected for redundancy and accordingly unfairly dismissed. The Tribunal awards the claimant the sum of €12,765.06 under the Unfair Dismissals Acts 1977 to 2007.
Payments are then calculated by reckonable service, not the period of continuous employment.
Reckonable service does not include time absent from work due to
absence in excess of 52 weeks due to an occupational accident or disease
absence in excess of 26 weeks due to illness
absence due to lay-off by the employer.
An employee who is being made redundant is entitled to two weeks’ notice and must be given a redundancy certificate by the employer. The employer was entitled to a rebate from the Irish government of 60% of the statutory element of each lump sum payment, provided he has given the requisite two weeks’ notice.
However from January 1st 2013, the employer statutory redundancy rebate was abolished. Where the date of dismissal occurred in 2012 the employer rebate is 15%. If the date of dismissal was in 2011 or earlier the employer rebate is 60%.
Collective redundancies place specific statutory obligations on the employer, for example the requirement to consult with employees. Failure to do so or advise the government of a collective redundancy situation can lead to a criminal conviction and hefty fines of up to €5,000.
The upper age limit of 66 years for entitlement to redundancy was removed by the Protection of Employment Act 2007.
Ex Gratia Payments
An ex gratia payment is an extra redundancy payment over and above the statutory entitlement. The employee is not entitled to one but it may be negotiated between the parties.
Statutory redundancy is not taxable; ex gratia payments are.