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An employer is entitled to dismiss an employee where that employee’s role is no longer needed i.e. redundant.
A genuine redundancy is a defence to a claim for unfair dismissal, provided it is carried out in a fair and reasonable manner.
The statutory basis and rules for redundancy are outlined in the Redundancy Payments Acts 1967 to 2014 (the “Act”).
What is a genuine redundancy?
A genuine redundancy situation arises where an employee is dismissed by an employer on grounds unrelated to the employee concerned, and the dismissal is for one of the following reasons:
Where an employer ceases to carry on business in a place where the employee worked;
The requirements of a business for employees of a particular category cease;
The employer decides to carry on business with fewer or no employees;
The work which the employee carried out can be done in a different manner and the employee is not sufficiently qualified or trained;
The work which the employee carried out can be done by someone capable of doing other work for which the employee is not sufficiently qualified or trained.
The definition of what constitutes a redundancy is quite extensive. Redundancies must reflect a change in the employer’s business. Examples include business restructuring, change of job requirements, a reduction in numbers required or a change in the way work is done and business closures to name a few.
Impersonality
It is an essential feature of redundancies that the position is made redundant and not the employee personally. Redundancies must be completely impersonal. This means that the role must be made redundant and not the individual employee. If an employee who has been made redundant is replaced this would suggest an invalid redundancy.
The consultation process
An employer must engage in some form of consultation with employees in advance of implementing redundancies and must always follow fair procedures, otherwise the employer will be in a difficult position to defend a claim in the event that the termination is challenged. Employers should be able to demonstrate that the redundancy process is fair and be able to show that the redundancy is a genuine redundancy and that they conducted themselves reasonably.
Employers have an obligation to consult with and provide information to the affected employees and it is important for this to be followed before any redundancies are implemented. The initial meeting should inform the employees that the decision has been made to implement redundancies (or make the employee’s position redundant) and outline why this decision was made. Affected employees must be informed of the consequences of this decision, i.e. that they are now at risk of redundancy.
Employees must be informed that the employers are entering into a period of consultation, but no decision will be made until the consultation period has expired. Employees should be informed that the purpose of the consultation with employees is to deal with any questions which the employees may have and to explore any suitable alternative roles which may be available and whether the employee has any views on alternatives to redundancies. In certain circumstances, an offer of alternative employment may bar an employee from a redundancy payment.
Following this initial meeting employers should meet with their employees on a one-to-one basis to discuss their positions. If there are no suitable alternatives to redundancy or the employee chooses not to accept an offer made, the employee should be informed of the fact that they are redundant and the terms of their redundancy package. Employers should write to all employees following the final meeting confirming the position in writing. It is important that employees are not informed that their role has become redundant until the consultation process has concluded.
Entitlement to a statutory redundancy payment
The Act applies to all individuals in employment (both in the public and private sector) who have a minimum of two years’ continuous service, this is known in the Act as the “Requisite Period”. Any period prior to the employee attaining the age of 16 is excluded when ascertaining the Requisite Period. In order to be entitled to a statutory redundancy payment, employees must be in employment which is insurable for all benefits under the Social Welfare Acts or have been in insurable employment for the period of two years before their dismissal. In general, employment will be considered continuous unless terminated by dismissal or by the employee voluntarily leaving their employment. Absence from work due to temporary lay-off does not break the continuity of service.
Statutory entitlement and ex gratia payments
Statutory redundancy payments and ex gratia payments are the two types of redundancy payments in Ireland.
Statutory redundancy payment is calculated by two weeks’ remuneration for each year of service plus one additional weeks’ remuneration. A weeks remuneration is defined as gross weekly wage plus average regular bonus or overtime or any allowance which does not vary in relation to the amount of work done plus any payments in kind. However, the weekly remuneration for the purposes of calculating a statutory redundancy payment is capped at €600 per week.
An ex gratia payment is a non-statutory redundancy payment, it is an amount paid by an employer which is over and above the statutory redundancy payment.
Reckonable service/ non-reckonable service
Even though a person may have the requisite continuous service it does not necessarily mean that all service will be reckonable service for redundancy calculation purposes. Therefore, employers must be able to distinguish reckonable service from non-reckonable service.
Reckonable service is when an employee is at work or is absent due to sickness, annual leave entitlements, on maternity leave etc. Non-reckonable service is when an employee is absent in excess of 52 consecutive weeks by reason of an occupational accident or disease, absent by way of lay-off and strike, carers leave in excess of 65 days or absence in excess of 26 consecutive weeks by reason of illness. During the three-year period ending with the date of termination of employment non-reckonable service is not included in the purpose of calculating redundancy payments.
The redundancy process is complicated at the best of times. To ensure adherence to the law, employers should always seek legal assistance when looking at possible redundancies.
Further Information
For more information on employee and employer issues around redundancy or any other employment queries, please contact Marc Fitzgibbon, Partner and Head of Employment.