With an uncertain geo-political climate and signs of potential economic downturn, organisations across the country are looking at their cost bases and considering next steps. For many, this will result in a decision to restructure and, in some cases, implement redundancies.
We set out the ten most important considerations for employers to consider in advance of implementing any reduction in workforce.
- Redundancy is about the removal of the role and not the person.
- The redundancy legislation sets out several scenarios when a redundancy situation arises. This includes situations such as a reduction in the number of roles, a reduction in the requirement for work of a particular kind or in a particular place etc.
- In terminating an employee’s employment on grounds of redundancy, an employer is still required to go through a fair process. A fair process usually includes beginning the redundancy exercise with the discussion around the need for redundancies. It also means that if two or more employees occupy the same or similar roles, an employer is required to go through a fair selection exercise to determine who remains and who goes.
- Once an employee’s role is identified as potentially redundant, the onus is on the employer to try to find a suitable alternative position within the organisation for the affected employee. What is suitable for one employee may be completely different for another employee. When considering suitable alternative roles, employers should not make any assumptions about what an employee is prepared or qualified to do.
- If the number of employees who are terminated on grounds of redundancy reach a particular threshold, a “collective” redundancy situation arises. When a “collective” redundancy arises, there is a much more stringent and lengthier process required. It includes, for example, an obligation to notify the Minister for Enterprise, Trade and Employment at least 30 days before the first redundancy takes effect. It also includes an obligation to facilitate the election of employee representatives (if there are none already in place) with whom the employer must inform and consult for a period of 30 days prior to the first redundancy taking effect.
- Employees with over two years’ service are entitled to a redundancy payment, which redundancy payment can be paid tax free. Many employees also offer an ex gratia payment, the quid pro quo for which is a requirement for the employee to sign a waiver and release of claims.
- There is no ‘normal’ ex gratia payment. Often ex-gratia payments are measured in weeks’ pay per year of service, therefore someone who has been with their employer longer typically receives a larger ex gratia payment than more recent hires.
- In order for a waiver and release of claims to be binding, employers should insist on employees taking independent legal advice prior to signing the waiver and consider offering a contribution towards these legal fees.
- Beware of backfilling redundant roles shortly after the redundancy process has completed. The risks include an unfair dismissal claim that it was not a genuine redundancy situation (albeit, this risk is mitigated if the employees sign a waiver). Additionally, if a statutory redundancy payment has been made, there may be a risk that the Irish Revenue Commissioners could take issue with the tax-free treatment of the payment if there is a very short gap between the redundancy and the back-fill.
- For more practical and timely advice on these matters, contact a member of our Employment & Benefits team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.