Common Redundancy Risks in Business Reorganisations

Recent headlines predict that the tech sector will cut more jobs than it hires this year for the first time since 2020. One of Ireland’s largest hospitality groups also made a round of redundancies at its head office late last year and a recent report into voluntary exit packages at the beleaguered state broadcaster has found that RTÉ may not have complied with redundancy legislation in managing a number of Employee departures.

Although the Irish economy appears to be fundamentally in good health, it seems likely that redundancy and downsizing may be unavoidable in certain industries this year. If your Organisation needs to reduce labour costs in response to difficult trading conditions, it is vital to consider the following common redundancy risks that can make this cost-cutting exercise much more expensive
than necessary.

Is there a genuine redundancy situation?

Employers are legally entitled to make an Employee redundant if the role and work they perform is no longer needed. The Workplace Relations Commission is particularly vigilant in identifying
redundancy situations that appear to be ‘sham’ redundancies that have been arranged to remove a difficult Employee.

A genuine redundancy situation arises when the Employee’s dismissal is attributable wholly or mainly to—

  • the fact that the Employer has ceased, or intends to cease, to carry on the business for the purposes of which the Employee was employed, or has ceased or intends to cease, to carry
    on that business in the place where the Employee was so employed, or
  • the fact that the requirement for Employees to carry out work of a particular kind has ceased or diminished or is expected to cease or diminish, or
  • the fact that the Employer has decided to carry on the business with fewer or no Employees or to be done by other Employees, or
  • the fact that the Employer has decided that the work for which the Employee had been employed should be done in a different manner for which the Employee is not sufficiently qualified or trained, or
  • the fact that the Employer has decided that the work for which the Employee had been employed should be done by a person who is also capable of doing other work for which the Employee is not sufficiently qualified or trained.

Real world examples of these situations would include business restructures, business closures, the deployment of a new technology to do the work, a relocation of premises or some other change in the way work is done.

Remember the role is made redundant and not the Employee.

Fair procedures

Once the reason for redundancy is identified, Organisations must then consider the requirement to carry out a fair redundancy process before confirming an Employee’s dismissal. This will involve a step-by-step consultation process during which alternatives to redundancy should be discussed. No redundancies should be confirmed until the consultation process has fully concluded.

Objective selection process

In some cases, two or more Employees might work in the same or similar roles. In these circumstances, the Employer must carry out a fair selection process based on objective criteria to
determine which Employee will stay.

Statutory redundancy payments

Employees with over two years’ service also have an entitlement to a statutory redundancy payment.
A statutory redundancy payment is calculated by paying the Employee two weeks’ remuneration for each year of service plus one additional bonus weeks’ remuneration. A week’s remuneration is
defined as the Employee’s gross weekly wage plus average regular bonus, overtime or other nonvariable allowances.

The weekly remuneration for the purposes of statutory redundancy payment is capped at €600 per week.

Collective redundancies

If a substantial number of Employees are at risk of redundancy, it would be necessary to consider if the restructure involves a “collective” redundancy. Collective redundancy procedures involve a more heavily prescribed information and consultation process as well as an obligation to notify the Minister for Enterprise, Trade and Employment at least 30 days before the first redundancy takes effect.

Legislative developments
The Employment (Collective Redundancies and Miscellaneous Provisions) and Companies (Amendment) Bill 2023 is currently at the third stage of the legislative process before the Dáil.
The core aim of the Bill is to bolster the protection of Employees in collective redundancy situations. The enhancement of protection includes amendments to the Companies Act 2014 that will improve the quality and circulation of information to Employees as creditors in corporate insolvency situations. This draft law is a priority for the Government and the proposed amendments will help to clarify the redundancy obligations of Organisations that are insolvent or seeking insolvency protection advice.

Avoid making a difficult situation worse

A restructure or reorganisation is a difficult situation for both Employers and Employees. For Employees, redundancy can come as a surprise and hit them hard personally. For Employers, the
technical nature of redundancy law means a range of legal risks have to be considered alongside the human side of managing Employees who may be experiencing a wide range of emotions.
To ensure you don’t make a difficult situation worse, Organisations should always seek expert advice before restructuring, downsizing or making redundancies.

Implementing Redundancies can be a very difficult challenge for an Employer to navigate. If your
Organisation needs support to follow the correct process and procedures, please contact Adare
Human Resource Management by calling (01) 561 3594 or emailing info@adarehrm.ie to learn
what services are available to support your business.

 

Adare Human Resource Management is a team of expert-led Employment Law, Industrial Relations
and best practice Human Resource Management consultants. If your Organisation needs advice,
support, or guidance about compliance requirements or any HR issues. For more information, please
visit our website www.adarehrm.ie.