Managing redundancies fairly and mitigating the employment risks

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The ongoing health crisis continues to disrupt businesses in a way that is forcing employers to review their cost base which inevitably requires a review of staffing / headcount costs. Government supports have protected employees somewhat but as these supports begin to ease off, employers will have to make some difficult decisions around staff costs and potential redundancies. For this week’s article Derek McKay, Managing Director of Adare Human Resource Management provides advice and guidance on the redundancy process and outlines some of the risks associated with redundancies.

In its most recent Annual Report, the Workplace Relations Commission states that cases involving Unfair Dismissals made up one in ten of all complaints received, accounting for 1,300 cases in total.[1] One would expect that given the impact of Covid-19 on the business sector, there may well be an increase in the number of cases in front of the WRC next year. It is important that employers follow the legislation around managing redundancies to ensure they protect themselves from potential dismissal claims.

For a genuine redundancy to take place, organisations need to understand the definitions of redundancy –

  • The organisation ceases to operate the business for which the employee was employed to do,
  • The work the employee was contracted to do has ceased or the requirement for that work has reduced,
  • The organisation has decided to carry on the business with fewer, or no, employees,
  • The work the employee was contracted to do is to be performed in a different way and/ or the employee is no longer qualified to carry out that work,
  • The employee’s work is to be done by a different employee who is sufficiently qualified and capable.

Navigating a redundancy process is complex and requires a lot of preparatory work. There are some careful considerations that an employer must take into account before selecting a position for redundancy. The employer must demonstrate that a redundancy situation existed. Having demonstrated that a genuine redundancy situation exists, it is essential to use fair selection criteria in selecting an employee for redundancy.

Selecting roles for redundancy

To fairly select an employee’s role for redundancy, an employer should first establish which positions are to potentially become redundant. Having established that certain positions are at risk and potentially no longer required, employees in that position must be considered against the criteria for selection.

When setting out the criteria for selection, employers should consider precedence – has the business made redundancies in past and, if so, what selection methods were used. The two main methods of selection used are ‘last in first out’ or ‘matrix selection criteria’ that can be based on qualifications, skills, experience or a combination of all three. If a redundancy process has been previously used by the Organisation and it wants to use a different procedure, then it must have a specific reason for doing so.

Employers need to be careful and transparent when dealing with redundancies. While a redundancy situation may exist, an employee can have grounds for complaint if the manner of the selection for redundancy was unfair.

In selecting a particular employee for redundancy, an employer must apply selection criteria that are reasonable and are applied in a fair manner. An employee is entitled to bring a claim for unfair dismissal if they consider that they were unfairly selected for redundancy or consider that a genuine redundancy situation did not exist.

Under the Unfair Dismissals legislation, selection for redundancy based on certain specific grounds is considered unfair. These include redundancy as the result of an employee’s trade union activity, pregnancy or religious or political opinions. The Employment Equality legislation also prohibits selection for redundancy that is based on any of the following nine grounds: gender, civil status, family status, age, disability, religious belief, race, sexual orientation or membership of the Traveller community.

It is important to point out that the burden of proof in a claim for unfair dismissal is on the employer. While an organisation may believe they are justified in making an employee redundant, they risk leaving themselves open to claims if they don’t follow the correct process.

Key legislation that needs to be considered when dealing with redundancies and dismissals includes the Unfair Dismissals Acts 1977 – 2015, Minimum Notice and Terms of Employment Acts 1973 – 2005 and the Employment Equality Acts 1998 – 2015.

Redundancy arising from lay off

People often use the term ‘lay off’ to refer to redundancies. However, lay off in this context is not the same as a redundancy. Lay off and short time are temporary situations where an employer is no longer able to retain the employee in their normal capacity. This option has been used extensively in businesses that have been badly impacted by the current crisis.

Pre-Covid, an employee could request to be made redundant after a period of four consecutive weeks (or a broken period of six weeks) on lay off or short time under the Redundancy Payments Act 1967. If the employer cannot guarantee that within four weeks of the employee’s notice that they can provide 13 weeks unbroken employment, the employer must pay redundancy to the employee provided they qualify for a statutory redundancy payment.

However, this right to invoke redundancy has been suspended until 30th November as part of emergency legislation introduced in March. This was to help prevent vast numbers of employees on lay offs to seek redundancy, which would inevitably put a huge financial burden on employers.

Risks associated with redundancy

Our experience representing organisations in the WRC has shown time and again that it will find in favour of the complainant due to poor, or an absence of, process being followed by the organisation.

Critical to any planned redundancy is the fact that fair procedures must apply and an employer must be able to demonstrate all considerations. Implicit in any potential redundancy are the justifications a genuine redundancy situation exists, fair selection procedures are employed and legislative requirements are met in terms of procedures and compliance. Failing to engage in a meaningful manner whilst the employee who is ‘at risk’ of redundancy, is another key shortcoming commonly highlighted by the WRC and Labour Court.

If any of the above is not in line with fair procedures or natural justice then an employee can seek redress under the Unfair Dismissals Acts or the Employment Equality Acts if the dismissal was on any of the nine grounds previously mentioned, which may result in financial liability or other redress on the employer.

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[1] Workplace Relations Commission Annual Report 2019.