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Redundancy

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Redundancy generally occurs where an Employee loses their job due to circumstances such as the closure of the business or a reduction in the number of staff. A genuine redundancy is taken to exist where an Employee’s position ceases to exist, and the Employee is not replaced. The Redundancy Payments Acts 1967–2014 provide a minimum entitlement to a redundancy payment for Employees with a set period of service with the Employer. Not all Employees are entitled to this statutory redundancy payment, even where a redundancy situation exists. However, the Employee and Employer may agree a redundancy payment above this statutory minimum and in such circumstances, Employees who have not reached the statutory minimum period of service may also receive a payment.

 

What is Redundancy

The definition of redundancy has been outlined where, “An employee is dismissed by reason of redundancy if, ' for one or more reasons not related to the employee concerned', his dismissal is attributable 'wholly or mainly' to one of the five situations outlined in s 7 (2) of the Redundancy Payments Acts as set out below:

• the fact that the Employer has ceased, or intends to cease, to carry on the business in the place or for the purposes of which the Employee was employed, or

• the fact that the requirements of that business for Employees to carry out work of a particular kind in the place where the Employee was so employed have ceased or diminished or are expected to cease or diminish, or

• the fact that the Employer has decided to carry on the business with fewer or no Employees, or

• the fact that the Employer has decided that the work for which the Employee had been employed should be done in a different manner for which the Employee is not sufficiently qualified or trained, or

• the Employer has decided that the work for which the Employee had been employed should be done by a person who is also capable of doing other work for which the Employee is not sufficiently qualified or trained.

 

VOLUNTARY REDUNDANCY

A Voluntary redundancy situation arises when an Employer is considering redundancies and seeks to get volunteers for redundancy prior to making any compulsory redundancies. In such situations, the redundancy must still be genuine.

 

COLLECTIVE REDUNDANCY

A collective redundancy means the dismissal for redundancy reasons over any period of 30 consecutive days of at least:

  • five persons in an establishment normally employing more than 20 and less than 50 Employees.
  • ten persons in an establishment normally employing at least 50 but less than 100 Employees.
  • ten per cent of the number of Employees in an establishment normally employing at least 100 but less than 300 Employees.
  • thirty persons in an establishment normally employing 300 or more Employees.

When an Employer proposes to implement collective redundancies they must, under the Protection of Employment Act 1977 (as amended), give the Minister for Jobs, Enterprise & Innovation written notice of their proposals at the earliest opportunity and at least 30 days before the first dismissal takes effect.

The Act also provides that an Employer contemplating collective redundancies must, with a view to reaching an agreement, similarly consult the representatives of the Employees affected not later than 30 days before the first dismissal takes effect.

 

SELECTION FOR REDUNDANCY

  • Care must always be exercised when selecting a position for redundancy. In the first instance, the Employer must demonstrate that a redundancy situation existed. Having demonstrated that a genuine redundancy situation exists, it is essential to use fair selection criteria in selecting an Employee for redundancy.
  • To fairly select an Employee for redundancy, the Employer should first establish which position/positions are to become redundant. Having established that certain positions are no longer required, Employees of that category must be considered against the criteria for selection.
  • When setting out the criteria for selection, Employers should consider precedence (has the Organisation had redundancies previously and if so what selection methods were used). The two main methods of selection used are ‘last in first out’ or ‘matrix selection criteria’ which may be based on qualifications, skills, experience or a combination of all three.
  • If the Organisation has an agreed selection procedure or one they have used in the past they must have a specific reason if they wish to depart from an agreed selection procedure or custom and practice.
  • If the Employer decides to select Employees for redundancy on a ‘last in first out’ (LIFO) basis, then lengths of service of the Employees eligible for redundancy should be compared, and the Employee with the shortest service, i.e. the last in, will be made redundant.
  • Alternatively, if the selection is to be made on the basis of qualifications, skills, experience etc., then these should be considered for all Employees of that grade, and the least qualified/skilled/experienced should be selected for redundancy.

 

ALTERNATIVES TO REDUNDANCY

  • The decision to make redundancies should be the last resort. All other suitable alternatives should be explored prior to initiating redundancies. One of the conditions looked at in determining whether a dismissal by redundancy is fair or not is whether the conduct of the Employer was reasonable.
  • An Employer may have an ‘at risk’ meeting with the Employees prior to making the decision to dismiss due to redundancy. This can be viewed as being fair and reasonable. The purpose of these meetings is to inform the Employees that there is a possibility that redundancies may arise and that the Organisation is looking at all suitable alternatives to making redundancies. Employers should at this stage give Employees an opportunity to explore other options that they may see as an alternative to redundancy.
  • Following on from the ‘at risk’ meeting, Employers should meet again with Employees to discuss whether any alternatives have been discovered and whether they can reduce the number of or prevent the redundancies. If at this stage it is found that there are no suitable alternatives, it is then that formal notice of redundancy would be given.

 

LAY OFF / SHORT TIME 

People often use the term ‘lay off’ to refer to redundancies. Lay off in this context is not the same as a redundancy. Lay off and short time are temporary situations where an Employer is no longer able to retain the Employee in their normal capacity. This may be viewed as a favourable alternative to redundancy.

Lay off occurs where Employees are not required to work for a specified period of time, until trading conditions improve, or until the reasons behind the lay off no longer exist. Advance notice of lay off must be given.

Short time occurs where an Employee’s working week decreases to less than half of his/her normal weekly hours or his/her pay is less than half of his/her normal take home pay; and the situation is not considered to be permanent and advance notice is given.

After a period of 4 consecutive weeks (or a broken period of six weeks) on lay off or short time the Employee may request redundancy. If at this time the Employer cannot guarantee that within 4 weeks of the Employee’s notice that they can provide 13 weeks unbroken employment, the Employer must pay redundancy to the Employee provided they qualify for a statutory redundancy payment.

 

RE DEPLOYMENT

Another alternative to redundancy is redeployment. This is where Employees are moved from one area to work in another area in the business as an alternative to redundancy.

 

NOTICE OF REDUNDANCY

Under the Minimum Notice and Terms of Employment Acts 1973 – 2005 Employers are required to give the following notice:

For Service Between

Notice Period

Thirteen weeks to 2 years

1 week’s notice

2 and 5 years

2 weeks’ notice

5 and 10 years

4 weeks’ notice

10 and 15 years

6 weeks’ notice

over 15 years

8 weeks’ notice

Under the Redundancy Payments Acts, a minimum of two week’s notice is required. Employers should check what contractual notice is detailed within the Employees’ terms and conditions. The greater of the statutory and contractual notice must be given to the Employee.

 

TIME OFF TO LOOK FOR WORK

An Employee is entitled, during the redundancy notice period, to reasonable, paid time-off to look for new employment or to make arrangements for training for future employment.

 

MATERNITY LEAVE AND REDUNDANCY

An Employee cannot be given Notice of Redundancy while on maternity leave or additional maternity leave. Under the Maternity Protection Act 1994 and the Maternity Protection (Amendment) Act 2004, the date of an Employee’s notice in a redundancy situation under the Redundancy Payments Acts 1967 to 2012 is deemed to be the date of her expected return to work as notified to her Employer under the maternity protection legislation above. An Employer should consider all alternatives and also ensure a fair process is followed.


STATUTORY REDUNDANCY PAYMENT

In order for an Employee to be entitled to a redundancy lump sum they must:

  1. Have at least two years continuous service (104 weeks);
  2. Be in employment, which is fully insurable under the Social Welfare Acts;
  3. Be over the age of 16;
  4. Have been made redundant as a result of a genuine redundancy situation.

An eligible Employee is entitled to two weeks for every year of service, plus a bonus week. When calculating a week’s pay, any other payment normally received by the Employee, such as average regular overtime and benefit in kind, should be added to the gross weekly wage. This total is then subject to a Wage Ceiling, which is currently €600. All statutory redundancy payments are tax free.

Employees are not entitled to a redundancy payment if the Employee:

  • Is re-engaged by the Employer with immediate effect, on a contract that does not differ from their previous contract;
  • Accepts an offer of employment from the Employer on terms which differ from the previous contract, within four weeks from the ending of the previous contract;
  • Is offered a new contract from the Employer which is effective from the date of dismissal, with terms that do not differ from the previous contract and the Employee unreasonably refuses the offer;
  • Is offered a suitable alternative work by the Employer and takes place not later than four weeks from the ending of the previous contract and the Employee unreasonably refuses the offer.

 

INABILITY TO PAY

In the event that an Employer is unable to pay the statutory redundancy amount, they must be able to prove this by sending in the following information along with a signed RP50 to the Department of Social Protection:

  • A letter from an Accountant or Solicitor stating that the Organisation is not in a position to pay and accepting liability for the 100% owing to the Social Insurance Fund, and
  • Documentary evidence i.e Audited accounts/statement of affairs.

The statutory redundancy payment will then be processed and paid to the Employee through the Social Insurance Fund.

 

CONTINUOUS SERVICE

As a general rule, employment will be regarded as continuous unless it has been terminated by dismissal or the Employee leaves his or her employment voluntarily. The Employment Appeals Tribunal normally presumes that a person’s employment was continuous unless the contrary is proven.

 

NON-RECKONABLE SERVICE

The following breaks in service are not reckonable for redundancy payment purposes, if they took place in the 3 years prior to the date of termination of employment:

  • Occupational illness in excess of 52 weeks
  • Ordinary illness in excess of 26 weeks
  • Lay off
  • Strike

 

NON-STATUTORY PAYMENTS

An Employer may choose to pay additional ex-gratia amounts to Employees upon termination of Employment. This is often the case with voluntary redundancies in particular. Care should be taken in the taxation of these payments as they are not treated the same as the statutory redundancy payment. 

 

EMPLOYER’S REBATE

There is no Employer rebate on statutory redundancy where the date of termination due to redundancy is on or after the 1st January 2013.

For terminations by reason of redundancy with a termination date in 2012, the Employer is entitled to a 15% rebate on the statutory redundancy amount paid to the Employee.

Once the signed RP50 form is sent to the Department of Social Protection (if applicable), the rebate will be processed. 

 

REDUNDANCY FORMS

RP9

The RP9 form is used in lay off or short time situations to notify the Employee of temporary lay off or short time.

  • Part A of the form is for the Employer to fill out when notifying the Employee that they are being put on lay off or short time.
  • Part B of the form is for the Employee to fill out if they are requesting Redundancy having been on lay off or short time for 4 weeks (or a broken period of six weeks) or more.
  • Part C is for Employers if they are in a position to give counter notice to the Employee who has requested redundancy (provided they can guarantee at least 13 weeks unbroken employment beginning within 4 weeks of the Employee’s notice).

This form should be sent into the Department of Social Protection with the RP50, where an Employee is being made redundant following a period of short time or lay off, where the Employer or Employee is applying for a lump sum payment from the Social Insurance Fund. 

RP50

For all redundancies with a termination date on or after 1st January 2013, the RP50 form will only be used where an Employer or Employee is applying for the statutory lump sum to be paid out of the Social Insurance Fund, due to an Employer’s inability to pay.

  • The RP50 can be completed online.
  • RP50s should be signed in blue pen and sent to the Department of Social Protection as soon as it has been signed off.
  • Online claim submissions are processed quicker than manual ones.

RP6

The RP6 is filled out when an Employee wishes to finish up prior to the expiry of their notice period.

  • Part 1 is for the Employee to give notice to the Employer that they wish to terminate their employment earlier.
  • Part 2 is counter notice by Employer if they do not accept the notice.
  • Part 3 is consent from the Employer that the end date is brought forward.
This form must be sent into the Department of Social Protection along with the RP50, where the Employer or Employee is applying for a lump sum payment from the Social Insurance Fund.