Redundancy Rebate Reduced From 1 January 2012

08 December 2011

Employers who are currently considering implementing a redundancy exercise should consider the implications of waiting until next year to do this. Budget 2012 provides that the employer rebate on statutory redundancy payments will be reduced from the current rate of 60% to 15% with effect from 1 January 2012. This will make redundancies a much more costly exercise for employers from the start of next year.

Employers implementing redundancies need to ensure that they comply with the Redundancy Payment Acts 1967-2007 and that the redundancy process which is carried out is fair in order to minimize the risk of, and to defend, claims. This normally involves engaging in consultation with employees, carrying out a fair selection process and considering alternatives to redundancy.

There are additional requirements for collective redundancies (i.e. where a certain minimum number of employees are made redundant within a 30 day period with the numbers depending on the size of the workforce). These requirements include issuing a notification to the Minister for Jobs, Enterprise and Innovation and carrying out a 30 day consultation period with employee representatives. Given that the rebate reduction will take effect from 1 January 2012, it will not be possible for employers to implement a collective redundancy exercise now and avail of the 60% rebate on statutory redundancy payments unless they have already commenced their 30 day consultation process and notified the Minister.

Although not always possible or indeed appropriate and depending on the specific wording of employees’ contracts of employment, employers currently undergoing or considering redundancy exercises could potentially consider paying employees in lieu of notice, or implementing voluntary schemes whereby employees waive their right to notice in order to bring forward termination dates to before 31 December 2011 in order to avail of the higher rebate. That said, given the two week statutory redundancy notice requirement under the Redundancy Payment Acts 1967-2007, notice would have to be issued on or before Friday, 16 December next.

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