Redundancy Management (Ca)


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Redundancy Management (Ca)

  1. 1. Chartered Accountants Tralee – 10 November 2009 Gene Boyd Boyd Associates Limited 2009
  2. 2. <ul><li>Management Consultant/Chartered Accountant </li></ul><ul><li>Based in Tralee </li></ul><ul><li>Previously General Manager of Fujisawa Ireland Ltd. (Astellas) in Killorglin </li></ul><ul><li>Pharmaceutical assignments </li></ul><ul><li>Focus on local Small & Medium Enterprises and Expanding Indigenous Businesses </li></ul><ul><li>Helping to Grow your Business and Support your People </li></ul><ul><li>Seminars </li></ul>Boyd Associates Limited 2009
  3. 3. <ul><li>Increasing in current economic environment </li></ul><ul><li>To be carried out successfully certain procedures to be followed </li></ul><ul><li>Main issues around: </li></ul><ul><ul><li>Reasons/Grounds for Redundancy </li></ul></ul><ul><ul><li>Alternatives </li></ul></ul><ul><ul><li>Selection </li></ul></ul><ul><ul><li>Regulations (Notice, Forms) </li></ul></ul><ul><ul><li>Payment (Statutory, Ex-Gratia) </li></ul></ul><ul><li>Best to be prepared rather than approaching it without a clear view on what needs to be done </li></ul>Boyd Associates Limited 2009
  4. 4. <ul><li>Dismissal from Employment in particular circumstances </li></ul><ul><li>Main Legislation is Redundancy Payments Acts, 1967 – 2003 </li></ul><ul><ul><li>Definitions </li></ul></ul><ul><ul><li>Minimum Statutory Payments </li></ul></ul><ul><ul><li>Payment and Procedural Obligations on Employers </li></ul></ul><ul><li>Also need to be aware of other legislation (Unfair Dismissals & Equality Acts) as well as Custom & Practice </li></ul>Boyd Associates Limited 2009
  5. 5. <ul><li>Dismissal from Employment in particular circumstances </li></ul><ul><li>Dismissal is wholly or mainly because </li></ul><ul><ul><li>Ceasing to carry out the business (complete or partial cessation or in a particular location) </li></ul></ul><ul><ul><li>Reduced business (overall or specific) </li></ul></ul><ul><ul><li>Reorganisation (outsourcing/increased use of technology) </li></ul></ul><ul><ul><li>Work done in a different manner (lack of employee skills) </li></ul></ul><ul><ul><li>Combination of work (lack of employee skills) </li></ul></ul><ul><ul><li>Combination of more than one of the above </li></ul></ul>Boyd Associates Limited 2009
  6. 6. <ul><li>Two important characteristics are present in all of the above Reasons/Grounds </li></ul><ul><ul><li>Impartiality (dismissal relates to the job not the person) </li></ul></ul><ul><ul><li>Change (business level, different way of doing things, new technology etc.) </li></ul></ul>Boyd Associates Limited 2009
  7. 7. <ul><li>If the redundancy is for one of the reasons set out in the Unfair Dismissals Acts 1977-2001 then, by definition, the redundancy is not legitimate </li></ul><ul><ul><li>Trade Union membership </li></ul></ul><ul><ul><li>Religious or political opinions </li></ul></ul><ul><ul><li>Involvement of an employee in civil proceedings against his/her employer </li></ul></ul><ul><ul><li>Matters relating to pregnancy </li></ul></ul><ul><ul><li>Exercise of statutory leave rights </li></ul></ul><ul><ul><li>Etc. </li></ul></ul>Boyd Associates Limited 2009
  8. 8. <ul><li>Applies to Employees with more than one year’s continuous service </li></ul><ul><li>Dismissal of Employee deemed to be unfair unless Employer can prove otherwise </li></ul><ul><li>‘ Fair Dismissals’ </li></ul><ul><ul><ul><li>Capability, Competence or Qualifications </li></ul></ul></ul><ul><ul><ul><li>Conduct </li></ul></ul></ul><ul><ul><ul><li>Redundancy </li></ul></ul></ul><ul><ul><ul><li>Employee unable to work in the position </li></ul></ul></ul><ul><li>Procedures vital </li></ul><ul><li>Constructive Dismissal </li></ul>Boyd Associates Limited 2009
  9. 9. <ul><li>Selection process must be fair and non-discriminatory </li></ul><ul><li>Where redundancy is not voluntary it is expected that it will be on last in, first out basis unless business cannot select on this basis </li></ul><ul><ul><li>because those employees remaining would not have the necessary abilities to do the remaining work to an acceptable level of performance and where training the remaining employees would not be a viable solution for reasons of cost or other valid reasons </li></ul></ul><ul><li>Onus on employer to justify approach </li></ul>Boyd Associates Limited 2009
  10. 10. <ul><ul><li>Prohibits Discrimination by Employers on the following nine grounds: </li></ul></ul><ul><ul><li>Gender </li></ul></ul><ul><ul><li>Age </li></ul></ul><ul><ul><li>Marital status </li></ul></ul><ul><ul><li>Family status </li></ul></ul><ul><ul><li>Sexual orientation </li></ul></ul><ul><ul><li>Religion </li></ul></ul><ul><ul><li>Race </li></ul></ul><ul><ul><li>Disability </li></ul></ul><ul><ul><li>Membership of the Travelling Community </li></ul></ul>Boyd Associates Limited 2009
  11. 11. <ul><li>All companies now required to consider the Alternatives to redundancy </li></ul><ul><li>Need to document that Alternatives were considered otherwise risk of Unfair Dismissal </li></ul><ul><li>Common Alternatives include the following but beware of getting Employee’s Consent: </li></ul><ul><ul><li>Reorganisation </li></ul></ul><ul><ul><li>Pay Cuts </li></ul></ul><ul><ul><li>Career Breaks </li></ul></ul><ul><ul><li>Extended Holidays </li></ul></ul><ul><ul><li>Timebanking </li></ul></ul><ul><ul><li>Lay-off & Short-time </li></ul></ul>Boyd Associates Limited 2009
  12. 12. <ul><li>Discrimination can be </li></ul><ul><ul><li>Direct </li></ul></ul><ul><ul><li>Indirect </li></ul></ul><ul><li>Need to be very careful! </li></ul><ul><li>Need for reliable and accurate records to be available for the selection process </li></ul><ul><li>If selection is not on ‘last in, first out’ basis then there must be adequate records and evidence to support the chosen basis </li></ul>Boyd Associates Limited 2009
  13. 13. <ul><li>If employee unhappy with selection process then he/she has the option of making a claim to the Employment Appeals Tribunal or Rights Commissioner depending on claim </li></ul><ul><li>Main focus of EAT will be on whether objective criteria were used in deciding who would be made redundant </li></ul><ul><li>Employer needs to be clear that the procedures chosen will stand up as being fair, equitable and objective </li></ul>Boyd Associates Limited 2009
  14. 14. <ul><li>Definition comes from Protection of Employment Act 1977 </li></ul><ul><li>Occurs when a certain number of employees are made redundant within a 30 day period </li></ul><ul><li>Only applies to businesses employing more than 20 employees </li></ul><ul><li>Certain procedures need to be followed around notifying the Department of Enterprise, Trade & Employment </li></ul>Boyd Associates Limited 2009
  15. 15. <ul><li>Employee who has been laid-off or is on short-time working may be entitled to claim redundancy </li></ul><ul><li>Lay-off or short-time for longer than four consecutive weeks or at least six weeks over a period of thirteen consecutive weeks </li></ul><ul><li>Employee must serve notice </li></ul><ul><li>Employer can serve counter notice (13 week’s work within a period of four weeks) otherwise employee entitled to redundancy payment subject to normal conditions </li></ul>Boyd Associates Limited 2009
  16. 16. <ul><li>Employer required to issue notice in accordance with the minimum notice periods set out in the Minimum Notice & Terms of Employment Acts </li></ul><ul><ul><li>13 weeks to 2 years – 1 week </li></ul></ul><ul><ul><li>2 years to 5 years – 2 weeks </li></ul></ul><ul><ul><li>5 years to 10 years – 4 weeks </li></ul></ul><ul><ul><li>10 years to 15 years – 6 weeks </li></ul></ul><ul><ul><li>More than 15 years – 8 weeks </li></ul></ul><ul><li>Must be written notice either directly to the employee or posted to his/her home address </li></ul>Boyd Associates Limited 2009
  17. 17. <ul><li>Statutory Entitlements </li></ul><ul><li>Lump sum based on length of reckonable service and his/her weekly rate of remuneration at the time the employer declares the redundancy </li></ul><ul><li>Must be paid on or before date of termination </li></ul><ul><li>Only applies if employee has more than 104 weeks of service (two years) and is between 16 and 66 years of age </li></ul>Boyd Associates Limited 2009
  18. 18. <ul><li>Statutory Entitlements </li></ul><ul><li>Weekly rate of remuneration includes all other benefits such as car allowance, lunch allowance etc. subject to a maximum of €600 </li></ul><ul><li>Calculation of lump sum based on two weeks’ remuneration per year of service plus one week’s remuneration </li></ul><ul><li>Part-years also included in calculation </li></ul><ul><li>Statutory redundancy payments are tax-free </li></ul>Boyd Associates Limited 2009
  19. 19. <ul><li>Reckonable Service </li></ul><ul><li>Following leave is allowable as reckonable service </li></ul><ul><ul><li>Adoptive leave </li></ul></ul><ul><ul><li>Maternity-related leave </li></ul></ul><ul><ul><li>Parental leave </li></ul></ul><ul><ul><li>Force majeure leave </li></ul></ul><ul><ul><li>Carer’s leave </li></ul></ul><ul><ul><li>Other absence allowed by the employer </li></ul></ul><ul><ul><li>General leave (sickness, holidays, lay-off) </li></ul></ul>Boyd Associates Limited 2009
  20. 20. <ul><li>Non-reckonable service </li></ul><ul><li>Only applicable in the three years immediately prior to the redundancy </li></ul><ul><ul><li>Absences in excess of 52 weeks for occupational accident or disease </li></ul></ul><ul><ul><li>Absences in excess of 26 weeks other than for occupational accident or disease </li></ul></ul><ul><ul><li>Absence by reason of lay-off by the employer </li></ul></ul><ul><ul><li>Absence due to a strike </li></ul></ul>Boyd Associates Limited 2009
  21. 21. <ul><li>Employer’s Rebate </li></ul><ul><li>Employer is entitled to 60% rebate of the Statutory Redundancy payment from the Social Insurance Fund </li></ul><ul><li>Only applies to the statutory redundancy payment </li></ul><ul><li>Form RP50 must be completed by the employer and employee and submitted to the Department of Enterprise, Trade & Employment within six months of the redundancy </li></ul>Boyd Associates Limited 2009
  22. 22. <ul><li>Ex-Gratia Payments </li></ul><ul><li>These are payments made in addition to the statutory redundancy payment </li></ul><ul><li>These are determined by what is typical in the particular business sector, precedent, strength of negotiation of employee and employer discretion </li></ul><ul><li>Usually calculated on a similar basis as the statutory redundancy payment i.e. No. of weeks per year of service </li></ul>Boyd Associates Limited 2009
  23. 23. <ul><li>Ex-Gratia Payments </li></ul><ul><li>These payments are subject to tax but reliefs available </li></ul><ul><li>Basic Exemption </li></ul><ul><ul><li>€ 10,160 plus €765 for each complete year of service </li></ul></ul><ul><li>Increased Exemption </li></ul><ul><ul><li>€ 10,000 extra, subject to Revenue approval, if no claim for relief has been made in the past ten years </li></ul></ul><ul><ul><li>Reduced by any tax-free lump-sum paid or payable under an approved pension scheme </li></ul></ul>Boyd Associates Limited 2009
  24. 24. <ul><li>Ex-Gratia Payments (cont’d) </li></ul><ul><li>Standard Capital Superannuation Benefit (SCSB) </li></ul><ul><ul><li>Calculated (A x B/15) – C where </li></ul></ul><ul><ul><li>A = average annual remuneration over the last three years’ service </li></ul></ul><ul><ul><li>B = number of complete years of service </li></ul></ul><ul><ul><li>C = value of any tax-free lump-sum received/receivable under an approved pension scheme </li></ul></ul><ul><li>Get tax advice to apply this relief! </li></ul>Boyd Associates Limited 2009
  25. 25. <ul><li>Ex-Gratia Payments (cont’d) </li></ul><ul><li>Top-Slicing Relief </li></ul><ul><ul><li>Tax payable on an ex-gratia payment is limited to the employee’s average tax rate for the previous three years </li></ul></ul><ul><ul><li>Any refund to be claimed in the year following the redundancy </li></ul></ul><ul><li>Issue for employee to follow-up </li></ul>Boyd Associates Limited 2009
  26. 26. <ul><li>In the two weeks prior to the redundancy the employee is entitled to reasonable time-off to look for new employment </li></ul><ul><li>Paid time-off </li></ul><ul><li>Applies also to making arrangements for training </li></ul><ul><li>Employer entitled to ask the employee for evidence of such arrangements </li></ul>Boyd Associates Limited 2009
  27. 27. <ul><li>Considered best practice to support employees who are being made redundant </li></ul><ul><li>Non-financial supports include </li></ul><ul><ul><li>Time-off to seek training/work </li></ul></ul><ul><ul><li>Assistance with preparation of CV </li></ul></ul><ul><ul><li>Assistance with interview skills </li></ul></ul><ul><ul><li>Counselling </li></ul></ul><ul><ul><li>Advice on management of redundancy lump sum </li></ul></ul><ul><ul><li>Leaving drinks party </li></ul></ul><ul><li>Support for redundant employees but also a positive message for remaining employees </li></ul>Boyd Associates Limited 2009
  28. 28. <ul><li>Set out clearly Reasons/Grounds for Redundancy </li></ul><ul><li>Must be legitimate (Impartial and involving Change) </li></ul><ul><li>Determine Selection Procedure based on the Reasons/Grounds </li></ul><ul><li>Must be fair and non-discriminatory </li></ul><ul><li>Voluntary versus Compulsory </li></ul><ul><li>Be clear why ‘last in first out’ selection procedure does not apply </li></ul><ul><li>Review Employees to see how they fit into selection procedure </li></ul><ul><li>Be aware of potential claims by employees and how you can defend against these (importance of records) </li></ul>Boyd Associates Limited 2009
  29. 29. <ul><li>Confirm Notice Period for selected employees </li></ul><ul><li>Determine Redundancy Payment (statutory & ex-gratia) </li></ul><ul><li>Be aware of any custom & practice issues </li></ul><ul><li>Determine what non-financial supports will be provided to employees </li></ul><ul><li>Inform Employees giving background and rationale </li></ul><ul><li>Pay Redundancy Payment prior to or on date of redundancy </li></ul><ul><li>Complete Form RP50 (with employee)prior to or on date of redundancy </li></ul>Boyd Associates Limited 2009