Redundancy

Redundancy occurs when an employed individual loses their job due to the changing circumstances of their employer. It is important to understand redundancy is not related to poor performance, and as such, you have done nothing wrong to make yourself redundant.

The Redundancy Payments Acts 1967 to 2003 outlines the contexts which legally constitute redundancy for employers:

• The business ceases to trade

• Business requirements have changed which mean a role is no longer needed

• The business requires less staff

• Work will be undertaken in a different way for which the employee does not possess the requisite skills, qualifications, or training

• A role will be undertaken by another member of staff because it requires more skills, training, or qualifications

Dismissal of staff for other reasons may be deemed unfair under the Unfair Dismissals (Amendment) Act, 1993.

Under the Protection of Employment Order 1996, Collective Redundancy is applicable whereby a large number of individuals are being made redundant.  This number, however, depends on the scale of your business, as follows:

• At least 5 in an establishment normally employing more than 20 and less than 50 employees,

• At least 10 in an establishment normally employing at least 50 but less than 100 employees,

• At least ten per cent of the number of employees in an establishment normally employing at least 100 but less than 300 employees, and

• At least 30 in an establishment normally employing 300 or more employees.

Due to the quantity of staff being considered for redundancy, it is more typical for the employer to engage with a representative on their behalf, on matters including:

• The number of proposed redundancies

• Why redundancies are being considered

• Timescales

• What is being done to avoid redundancies

• The selection criteria for redundancies, and;

• How redundancy pay will be calculated.

Under the law, the employer must also inform the Minister for Enterprise, Trade and Employment of the intention to undertake a process of collective redundancy – at least 30 days prior to notifying employees, or face prosecution.

According to the Redundancy Payments act 1967, redundancy pay will need to be provided to staff with at least 2 years of continuous employment.

However, in some cases of extended absence, the continuous service period will be reduced; see our Severance & Compromise Agreements page for more details.

Employers must follow a strict process for redundancy, as follows:

1. Selection of Staff for Redundancy: This must be fair and reasonable; otherwise, your employer may face a claim for unfair dismissal.

2. Consultation: Those selected for redundancy should be consulted with prior to a decision being made to make that employee redundant.  During this stage, your employer should consider and explain all other available options to you, including alternative employment.  If you refuse the alternative role, you may lose entitlement to statutory redundancy payment; however if the role necessitates a reduction in status or imposes unreasonable changes in working circumstances (e.g. being located a long distance away), you may be justified in refusing the alternative – in which case you may still be entitled to a redundancy payment.

3. Notice: Once a decision had been made to make your position redundant, you must be notified in writing – the amount of notice depends on the length of service and ranges from 2 to 8 weeks.

4. Seeking new employment: Once notified, you are entitled to reasonable paid time off to find alternative employment.

You will also be entitled to any holidays owing either in the form of time off or as payment.

This will depend on you how long you have worked for your employer as follows:

• 2-5 years’ continuous employment – 2 weeks’ notice

• 5-10 years’ continuous employment – 4 weeks’ notice

• 10-15 years’ continuous employment – 6 weeks’ notice

• 15+ years’ continuous employment – 8 weeks’ notice

Redundancy is based on the length of your continuous employment by your employer and your weekly earnings. For the purposes of calculating redundancy pay, your weekly earnings includes your wage, average regular overtime and benefits-in-kind.

If you qualify for redundancy pay, you will be entitled to 2 weeks’ pay for each year of continuous employment plus an additional week’s pay. This payment is capped at €600 per week and will be tax-free.

Under the Redundancy Payments Acts 1967–2014, employees who are being made redundant are entitled to a minimum redundancy payment. 

Under this scheme, you will receive a lump sum which equates to two weeks’ pay for every year of service (over the age of 16) and one further week’s pay. This is capped at €600 per week, and your payment will be tax-free.

When calculating your length of service, your employer will take into account any ‘non-reckonable’ service (which does not count towards to your length of service), which includes periods of injury-related absence over 52 weeks, periods of sickness absence over 26 weeks, time spent on strike, and any period when you were laid off from work.

If your employer remains in business, they are required to pay employees statutory redundancy. However, if your employer has become insolvent, you can still secure statutory redundancy pay from the Social Insurance Fund.

Under the Insolvency Payments Scheme, certain outstanding entitlements related to your pay may be covered by the department of Employment Affairs and Social Protection out of the Social Insurance Fund.

To qualify for statutory redundancy pay, you must have been made redundant by your employer and:

• Be aged 16 or over (there is no upper age limit)

• Have been in employment that is insurable under the Social Welfare Acts.

• Be paying Class A PRSI (if you are a full-time employee under the age of 66)

• Have worked continuously for your employer for at least 104 weeks (2 years) where you were over the age of 16