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Redundancy - A Brief Guide

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This "Brief Guide" gives information regarding individual and collective redundancy - including compulsory and voluntary redundancy - in the Republic of Ireland. This document can be downloaded at http://www.collierbroderick.ie/Services/HR%20Support/Redundancy.asp

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Redundancy - A Brief Guide

  1. 1. Brief Guide to Redundancies (this is a brief guide only and should not be considered as a comprehensive guide to redundancies) Page | 1
  2. 2. 1. Prepared by CollierBroderick Management Consultants Tel: +353 1 8666426 Fax: +353 1 8666457 E-mail: enquiries@collierbroderick.ie Web: www.collierbroderick.ie Disclaimer Whilst every care has been taken by CollierBroderick Management Consultants to ensure that the information contained in this guide is accurate and up-to-date, as the guide is for information purposes, the contents of these pages should not be relied upon as a substitute for your own independent HR or legal advice. We recommend that you always consult a suitably qualified HR or legal professional on any specific matter before relying on any information in this guide. No responsibility or liability is accepted by or on behalf of CollierBroderick Management Consultants or anyone associated with its production for any errors or omissions in the guide, nor for any use the information may be put to. Page | 2
  3. 3. Redundancy Information Sheet Relevant Legislation - Redundancy Payment Act, 1967-2007 - Individual Redundancy - Protection of Employment Act, 1977 - Collective Redundancy - Employees (Provision of Information and Consultation) Act, 2006 - more than 50 employees Legitimate Reasons for Redundancy A redundancy situation occurs where there is a dismissal of an employee by an employer (not due to any act of the employee) and the dismissal results “wholly or mainly” from one of the following situations: 1. Where an employer has ceased, or intends to cease, to carry on the business, or where the employer has ceased or intends to cease to carry on that business in the place where the employee was employed i.e. closure of business or moving it to another location. 2. Where the requirements of that business for an employee to carry out work of a particular kind in the place where he was so employed has / is expected to ceased or diminish i.e. no longer a requirement for that employee. 3. Where the employer has decided to carry on business with fewer or no employees whether by requiring the work for which the employee has been employed to be done by other employers or otherwise i.e. a reorganisation with fewer staff / outsourcing. 4. Where an employer has decided that the work for which the employee has been employed should from now on be done in a different manner for which the employee is not sufficiently qualified or trained i.e. a reorganisation with employee not sufficiently trained and training would cost too much. 5. Where an employer has decided that the work for which the employee has been employed should from now on be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained i.e. job enlargement so that employee would have to do current job plus more and is not sufficiently trained and training would cost too much. Collective Redundancies Collective redundancies arise where, during any period of 30 consecutive days, the employees being made redundant is: • 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 In such a situation, under the Protection of Employment Act, 1977 the employer is obliged to enter into consultations with employee representatives “with a view to reaching agreement”. . These consultations must take place at the earliest opportunity and at least 30 days before the first dismissal. The aim of the consultation is to consider whether there are any alternatives to the redundancies. These talks must include Page | 3
  4. 4. the possibility of avoiding the proposed redundancies (or reducing the number effected by them) as well as discussion as to how it will be decided who will be made redundant. Case law from the EU has meant that the consultation process must have concluded before any redundancy notices can issue to the employees i.e. if an employer chooses to announce the number of employees who are to be made redundant and only then commences consultations with the Union / employee representatives, it may well be in breach of consultation obligations under the 1977 act. Under the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007 a Redundancy Panel is being set up by the Department of Enterprise, Trade and Employment in accordance with the partnership agreement Towards 2016. The Panel will deal with collective redundancies to ensure that they are genuine redundancies as opposed to situations where workers are replaced by new workers doing the same job for lower wages. In addition, under Section 12 of the Protection of Employment Act, 1977, the employer must notify the Minister for Enterprise, Trade and Employment at the earliest opportunity – but not later than 30 days prior to the first dismissal – of a redundancy situation. When an employer is consulting their employees as required by the Act, the employer must supply the employee’s representatives with all relevant information relating to the proposed redundancy. This includes (but is not limited to): (a) The reason for the proposed redundancies, (b) The number and descriptions or categories of employees whom it is proposed to make redundant, (c) The number of employees and description of categories, normally employed, (d) The period during which it is proposed to affect the proposed redundancies, (e) The criteria proposed for the selection of the workers to be made redundant, (f) The method of calculating any redundancy payments other than those methods set out in the Redundancy Payment Acts, 1967-2003. Note: This Protection of Employment Act, 1977 is separate piece of legislation from the Redundancy Payments Acts 1967–2007. Unlike the Redundancy Payment Act, 1967-2003, the Protection of Employment Act, 1977 applies to all employees with a contract of service regardless of the length of time they are employed or the hours they work. Informing the Minister The employer is also obliged to inform the Minister for Enterprise, Trade and Employment in writing of the proposed redundancies at least 30 days before the occurrence of the first redundancy, and to provide the information outlined above. In a separate piece of legislation, The Employees (Provision of Information and Consultation) Act 2006 requires employers to consult with employees on substantial changes in the workplace, including proposals for collective redundancies. From 23 March 2008 the Act applies to employers of 50 people or more. Individual Redundancies (Non-Collective Redundancy Situation) Under the Redundancy Payment Acts 1967-2007, the employer is required to give a minimum of 2 weeks’ notice (which cannot be paid in lieu) of termination of employment to those who are entitled to redundancy payments. Notwithstanding this, long-serving employees will have longer notice periods as dictated by the Minimum Notice and Terms of Employment Act, 1973, (as shown in the table below) and / or notice specified in the contract of employment (whichever is the greater). The employer is required act “reasonably”. Thus, in order to be reasonable, the employer must hold some form of hearing with the individual employee. Notice from the employer Page | 4
  5. 5. Employees are entitled to a minimum of two weeks' notice of redundancy. This notice period goes up depending on the period of service. Period of service Notice required Between 2-5 years 2 weeks Between 5-10 years 4 weeks Between 10-15 years 6 weeks Over 15 years 8 weeks Notification Process No matter what type of redundancy, the employer must give the employee notice of dismissal for redundancy. He/she can do so by giving Part A (Notification of Redundancy) of Form RP50 to the employee. Voluntary Redundancy Voluntary redundancy occurs when an employer, faced with a situation where he requires a smaller work force, asks for volunteers for redundancy. This should occur as soon as possible. The people who then volunteer for redundancy are, if they fulfil the normal conditions, eligible for statutory redundancy. Of course, there must be a genuine redundancy situation in the first place. Selection for Redundancy Although “redundancy” is an absolute defence against unfair dismissal, if the employee can show that there was technically no case of redundancy under the Redundancy Payments Acts, 1967-2003 or that he/she was unfairly selected for redundancy, he/she can claim unfair dismissal. Once an employee establishes a prima facia case, the onus is on the employer to prove that a genuine redundancy situation existed and that the employee was not unfairly selected for redundancy. Selection issues arise where the employee is employed in similar employment to one or more other employees with the same employer. Therefore, those who are employed in “stand alone” position – such as management – normally find it very difficult to argue that they were unfairly selected for redundancy. A redundancy will be deemed unfair for the purposes of the Unfair Dismissals Acts if either of the following selection criteria are broken: (a) The selection of the employee resulted wholly or mainly from: 1. Membership / Trade union activity 2. Religious / Political opinions of the employee 3. Civil or criminal proceedings against the employers being taken by the employee 4. Race 5. Sexual Orientation 6. Age 7. Membership of the travelling community 8. Pregnancy 9. Gender 10. Family Status 11. Marital Status (b) The employee was selected for redundancy counter to an agreed procedure (between employer and union for example) and there was no special reasons justifying a departure from that procedure. Where an employee claims unfair selection for redundancy, an employer must be able to objectively justify the criteria chosen and the rating under each criteria of the employee selected. Page | 5
  6. 6. In the absence of specifically agreed procedures, where there are two or more employees engaged in similar employment, the employer is obliged to adopt some sort of objective criteria for differentiating between one employee and another. Criteria could include, for example, qualifications, skills, experience, timekeeping, attendance record, performance on the job, relevant experience, etc. Otherwise, failure to do so may render the dismissal unfair. All things being equal, and with no objective criteria to select between one employee and another, an employer will be expected to resort to the “last-in- first-out” (LIFO) rule. For example, in the case of Dawson v Eir Imports Limited where there was no employer / union procedures and a LIFO procedure was not followed, the EAT found that the company was right in comparing the performance of all similar staff [provided that the poor performance of the individual was addressed with the employee]. Redundancy Payment All earnings in excess of €600 per week are disregarded in making the statutory redundancy payments. This means that in calculating a week’s pay, if an employee earns €600 or less gross per week then his actual weekly remuneration is used in formulating the amount due. The formula for making the payment is as follows: - 2 weeks pay for each year of continuous employment over the age of 16 years, plus - An additional 1 week’s normal earnings. The final year of service is calculated on a pro-rata basis. The employer may pay an employee monies over and above the statutory minimum (ex-gratia payment), although there is no legal compulsion to do so. However, if custom and practice means that the employer has previously paid an ex-gratia payment when making staff redundant, it will most likely prove difficult to persuade employees to accept anything less than previously paid, and it may be difficult to defend. The redundancy calculator on the Department of Enterprise, Trade and Employment website can be used to help calculate statutory redundancy entitlements. Conditions Necessary to Qualify for Redundancy Payment The Redundancy Payments Acts 1967-2007 provide a minimum entitlement to a redundancy payment for employees who have a set period of service with the employer. Not all employees are entitled to this statutory redundancy payment, even where a redundancy situation exists. To be eligible for a redundancy payment under the Acts, employees must satisfy the following requirements: • Be aged 16 or over • Be in employment that is insurable under the Social Welfare Acts. Full-time employees must be paying Class A PRSI. (This insurability requirement does not apply to part-time workers - see below.) • Must have worked continuously for the employer for at least 104 weeks (2 years) Continuous employment In deciding whether an employee has worked continuously for the employer for at least 104 weeks, the following situations will not break the continuity of service: • Maternity leave, adoptive leave, parental leave or carer's leave • Off work through illness, agreed absence, holidays or lay off • Dismissed due to redundancy before reaching 104 weeks' service and then taken back by the employer within 26 weeks of that dismissal Page | 6
  7. 7. • Been re-employed within 4 weeks of dismissal by an associate company of your previous employer • Been voluntarily transferred to another employer and it is agreed that the continuity of service will not be broken • Placed back in your employment under the unfair dismissals legislation • On strike or locked out of your employment • There has been a transfer of the business and the employee works for to a new owner The same rules apply for apprenticeships and they may qualify for redundancy payment unless they are dismissed within one month after the end of your apprenticeship. Agency employees are also protected under redundancy legislation. If the employment agency pays the wages, it is responsible for paying the statutory redundancy payment. Part-time workers The Redundancy Payments Act 2003 amended the insurability requirements for redundancy to ensure the rights of part-time workers to statutory redundancy. This amendment brings them into line with the Protection of Employees (Part-Time Work) Act 2001 which provides that part-time employees cannot be treated in a less favourable manner than comparable full-time employees in relation to conditions of employment. It means that the right of certain part-time workers (such as those in casual employment or in employment of inconsiderable extent) to statutory redundancy is now recognised. They must still meet the requirement for 2 years' continuous service as described above. Page | 7
  8. 8. For Redundancy Advice & Support Outplacement or Executive Services for Redundant Personnel Contact Helena Broderick Managing Consultant Tel: +353 1 8666426 E-mail: hbroderick@collierbroderick.ie Services are available nationwide through our team of experienced HR practitioners and employment law consultants Web: www.collierbroderick.ie Page | 8
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