Let’s admit it.
Redundancy is not a pleasant topic to discuss.
But not discussing it, and not understanding your obligations if you are an employer, or entitlements as an employee can prove very costly.
Therefore, this piece about redundancy in Ireland will look at:
- what is a redundancy,
- redundancy payments,
- where to access a redundancy payment calculator,
- fair selection for redundancy
- short time and lay offs
- disentitlement to redundancy.
Hopefully it will give both employers and employees a good overview of non collective redundancies.
An employer’s obligations in redundancy situations will depend on whether a collective redundancy is proposed or it is a “normal” redundancy (non-collective redundancy) in a small business in Ireland.
The focus of this piece is non collective redundancies; elsewhere on this site you can read about collective redundancies.
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.
Required period of employment
The required period of employment is 104 weeks of continuous employment.(Section 7(5) Redundancy Payments act 1967).
Dismissal by the employer
To qualify for a redundancy payment, the employee must be dismissed.
This does not occur if the employee’s employment is renewed or re-engaged by the same employer and the terms and conditions do not differ from the previous one.
So if an employee resigns, redundancy payments are not available to him/her.
Short time/lay offs
You can be placed on short time or laid off where the employer is unable to provide work but only where the employer reasonably believes that the lay off will not be permanent.
Short time is the situation where the employee’s pay is less than one half of his normal weekly pay or his hours of work are reduced to less than half his normal weekly hours.
The employer is generally obliged to pay the employed during this time although there are exceptions to this general rule depending on custom and practice in specific situations.
There is no general right to lay off employees and not pay them; in fact, without an implied or express term in the employment allowing lay off the employer may well be in breach of contract.
The right to lay off without pay may be permissible in pretty limited circumstances established through custom and practice.
However EAT decisions in the past have held that the custom and practice in Ireland since the introduction of the legislation is that there is no obligation to pay during lay off.
You can learn more about the EAT’s decisions in relation to payment during lay off in this article.
An employee who has been laid off for 4 or more consecutive weeks can give a written notice to his employer indicating his intention to claim redundancy.(Section 12 Redundancy Payments act, 1967).
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.
See section 15 of Redundancy Payments Act, 1967.
Notice of Redundancy
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.
UPDATE
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.
Collective Redundancies
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.
Genuine Redundancies
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.
These are:
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
- Attendance record
- Ability
- Disciplinary record
- Skill level
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.
Brendan Campbell and Anthony Conleth Pendred Practicing As A.C. Pendred And Company Solicitors
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.
Redundancy Entitlements
Calculating your redundancy entitlements is pretty straightforward with the redundancy calculator provided online by the Department of Social Protection.
Redundancy payment entitlement
To be entitled to a redundancy payment you must have the requisite period of service served which is:
- 104 weeks of continuous employment attained after the age of 16 years.
- Dismissal
To be entitled to redundancy you will need to have been dismissed from your job; if you are given a new contract of employment or your old contract is renewed you will not be entitled to redundancy.
Therefore if you resign from your job you will not be entitled to a redundancy payment.
Redundancy payments
Redundancy payment entitlements are calculated by reference to weeks per year of service and is basically calculated as follows:
- 2 weeks’ pay for each year of continuous employment over the age of 16 years
- An additional one week’s normal earnings.
Normal weekly earnings is her normal weekly wage at the date she was declared redundant together with her normal average overtime earnings.
All earnings over €600 per week are disregarded though in calculating statutory redundancy payments and redundancy payments are tax free.
(Continuous employment is not broken by layoffs, holidays or sickness.)
NOTE: the definitions of ‘continuous employment’ and ‘reckonable service’ are important ones and can be seen in Schedule 3 of the Redundancy Payments Act,1967.
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.
Redundancy calculator
You can access a redundancy calculator on the website of the Department of Social Protection to calculate your redundancy entitlements.
Here’s an excellent guide to the redundancy payments scheme from the Department of Enterprise, Trade and Innovation. It dates from 2010 but, nevertheless, explains redundancy very well. Do check with a professional-solicitor or accountant-for any changes since then, though.
UPDATE
The December, 2012 budget made some significant changes re
- redundancy rebates
- prsi
- maternity leave and
- termination/ex gratia payments.
Since January, 2013 there is no employer rebate in respect of redundancy. See Department of Social Protection.
Disputes about Redundancy Payments Acts, 1967-2007
Disputes about redundancy payments and entitlements are dealt with by the Workplace Relations Commission.
Relevant Legislation
The Redundancy Payments Act, 1967