How to Manage Redundancy Risks

With Ireland’s open economy being highly exposed to changes in the global trade system, recent geopolitical developments signal that there may be increased uncertainty in the medium term impacting Irish Organisations and their Employees. Should these international trade issues influence domestic affairs, many Organisations may need to consider large or smaller scale restructures. To help Organisations prepare for this possibility, this article examines redundancy risks and why external expertise is often required to protect an Organisation during what is a difficult process for both Employers and Employees.

Redundancy Risks

If redundancies are being contemplated, it is vital to comply strictly with the requirements of the Redundancy Payments Acts which include:

• Establishing a business case for redundancies (for instance, new technology render roles redundant, business relocation or declines in revenue/profits)
• Applying fair and objective criteria in the redundancy selection process
• Engaging with at risk Employees in a redundancy consultation process
• Calculating and paying applicable statutory redundancy payments and all outstanding Employee entitlements at the time of dismissal.

Collective Redundancy

The Protection of Employment Acts govern collective redundancies which are situations where, during any period of 30 consecutive days, the number of redundancies in an Organisation is:

If any of the above thresholds are met, there is a specific compliance obligation to initiate consultations with Employee representatives at the earliest opportunity and at least 30 days before the first notice of dismissal is given.

Another specific compliance requirement of collective redundancies is the obligation to notify the Minister for Enterprise, Trade and Employment of the impending dismissals. The notification should be sent by electronic means, registered post or by hand.

Unfair Dismissal

Organisations must note that a redundancy is a type of dismissal. While the Unfair Dismissals Acts recognise the right of an Employer to dismiss an Employee by reason of redundancy, a genuine redundancy situation does not remove the Employer’s requirement to apply fair procedures in their dealings with any Employees being made redundant. Organisations must carefully consider each redundancy situation and engage in a fair and meaningful consultation process with at risk Employees to minimise the risk of unfair dismissal claims.

Constructive Dismissal

Employers are also exposed to constructive dismissal risks during a restructure. If an Employee does not agree to a proposed change to a fundamental term of their contract of employment (salary or hours of work for example), they may claim that the Organisation has unilaterally changed the employment contract. In these circumstances and without written confirmation from the Employee that they have agreed to the change, there is a risk of receiving a constructive dismissal claim.

 Discrimination

If Organisations fail to conduct a transparent redundancy selection process that applies objective criteria, it will be exposed to the risk of discrimination claims. Discrimination risks exist during a restructure as any decisions involving either reallocation of human resources or a reduction of headcount must not treat one cohort of Employees more favourably than another. There are nine grounds of discrimination in the Employment Equality Acts including age, gender, and family status. Restructures must therefore be carefully considered to avoid allegations that decisions have had either a direct or indirect discriminatory effect on certain Employees.

Minimum Notice and Payment of Outstanding Benefits

Employees are entitled to receive their contractual minimum notice as part of their redundancy termination package. Whether or not the Employee is required to work out their notice period is a matter for the Employer. It is common for Employers to provide a payment in lieu of notice. Organisations should take care to ensure that all applicable statutory and voluntary redundancy payments are correctly paid along with any unused annual leave or agreed contractual benefits owing at the time of the redundancy.

The Benefits of External Expertise

Restructures involving either individual or collective redundancies involve some of the most technical aspects of Irish employment law. There are also frequent employment law updates to consider, and it can be a challenge for Organisations to stay on top of the latest compliance developments. On the other hand, the emotional impact of redundancies on Employees must not be ignored. While it is important not to make a difficult situation worse by ensuring that all the relevant compliance risks are closed off, it is just as important to handle the entire process with sensitivity and respect for any Employees whose roles are being made redundant.

To help Organisations restructure effectively, Adare’s professional HR consultancy supports Employers throughout the whole redundancy process by addressing key procedural tasks including the management of consultations, selection of fair redundancy criteria, and navigation of all legal technicalities and communications requirements.

Irish employment law has been changing rapidly in recent years, and it can be very challenging for businesses to stay on top of their compliance. If you would like to know more or get support from our experts on Gender Pay Gap Reporting, please contact us at 01 561 3594 or email info@adarehrm.ie.