In many cases organisations are experiencing redundancies for the first time after a decade of unprecedented growth and prosperity. In addition, the Government has announced its intention to implement measures which will lead to redundancies in the State sector, although to date redundancies have been on a voluntary basis.
Redundancies typically arise in circumstances of:
- Business closure;
- Rationalisation, where certain roles are cut or the numbers carrying out certain roles are reduced;
- Reorganisation, where job specifications are changed so that people with different skills/qualifications are required to do the job; or
- Mergers/takeovers, where two workforces are combined and numbers need to be reduced.
The Redundancy Payments Acts 1967 to 2007 (the ?Redundancy Acts?) set out the legal basis for redundancy dismissal. It is vitally important that the redundancy is genuine and that employees are selected for redundancy in accordance with fair and objective selection criteria.
The employer first needs to identify the ?pool? of employees within which redundancy arises. It must then carry out a process of selecting which employees from that pool will be made redundant. Identifying appropriate selection criteria is critical and is an area in which employers frequently go wrong. Criteria should be based on measurable data rather than on individual opinion and might include:
- ?Last in, First Out? (LIFO) - LIFO was a common formula in the past but is applied less now because it is a blunt instrument which does not take the requirements of the role or the attributes of the candidates into account, other than length of service.
- Performance rating - It is important to ensure that ratings can be verified, ideally by written records such as performance appraisals.
- Attendance record - While an employee?s attendance record can be taken into account, employers should be careful to ?adjust? for absences such as certified sick leave, maternity leave and parental leave, in order to avoid indirect discrimination on grounds of disability, gender and family status.
- Qualifications and training - Employers should consider what qualifications/training are relevant to the new role and whether the employee has resulting skills which are likely to transfer well to the new role.
- Relevant experience - Consider whether the employee?s past experience is relevant to the needs of the new role. Also consider whether periods on secondment or on project-based work should be counted towards the employee?s overall experience.
Employers are obliged by law to consult with employees in a collective redundancy situation (where the numbers of redundancies in a give period reach certain minimum thresholds). The consultation process must be initiated at least 30 days before the first dismissal notice is issued and must cover matters such as the reason for redundancy, any potential alternatives and the selection criteria to be applied. Employers are also required to notify the Minister for Enterprise, Trade and Employment.
When engaging in consultation, employees who are absent on sick leave, maternity leave and other types of leave should be contacted and given an opportunity to participate. Employers should not assume that simply because an employee is not at work, he/she can be excluded.
While not expressly required by the Redundancy Acts, it is advisable, even in small scale or individual redundancy situations, to engage in dialogue with employees likely to be affected. Employers should bear in mind that the news of redundancy may be a shock to the employee. It is preferable to communicate that news in a way which gives employees the opportunity to consider their options (including any alternative roles) and to put forward their own views.
It is also important to remember that an employer?s conduct in implementing a dismissal (whether on grounds of redundancy or otherwise) can be taken into account by the Employment Appeals Tribunal (the ?EAT?) when assessing the fairness or otherwise of a dismissal. While employers are not required to create a position for redundant employees where none exists, the EAT has found an employer?s failure to look into the availability of alternative positions and to offer them to the employee to be unfair.
An employer who dismisses an employee by reason of redundancy must ensure that the employee receives:
- the notice provided in the contract or the minimum statutory notice, whichever is the greater;
- an employee with 104 weeks? continuous service is entitled to a redundancy lump sum of two weeks? pay per year of service up to a maximum of ?600 per week, plus an additional week. An employer who makes a lump sum payment to an employee is entitled to a rebate from the State of 60% of the statutory component.
In addition to the statutory lump sum, employers often offer an ex gratia payment. The amount of any ex gratia element is affected by the particular circumstances of the redundancy and by custom and practice within that particular company or sector. Typically, such packages lie in the range of 3 ? 6 weeks? pay per year of service in the particular employment, whether in addition to or inclusive of the statutory lump sum. No rebate is available in respect of the ex gratia element of any severance package.
If making an ex gratia payment, it is advisable to require employees to enter into an agreement accepting the payment in return for waiving any right to claim against the employer in respect of the termination of their employment. Such agreements require careful drafting in order to ensure that they are enforceable.
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