Redundancy process and procedure

For businesses of any size, redundancy is often daunting. You may not want to lose talented staff. And you also may have concerns about how to remain compliant with Irish employment laws.

But if you have to reorganise, or you lose a major source of income, then it may be inevitable.

The redundancy process is complex—you need to approach it carefully. And you should be as thorough and fair as possible.

In this guide, we provide an analysis of what you should do. But, remember, you can contact us on 0818 923 923 for immediate support.

This is particularly important if you need coronavirus business advice. We’re here to help. For quick answers to your questions, get in touch. 

The redundancy process—a quick summary

Although it may appear an overwhelmingly complex way to end a contract of employment (and one fraught with ways to make errors), if you break it down into manageable stages it simplifies matters.

So, here are the most notable stages to the process of making someone redundant in Ireland. You can consider this a redundancy process step-by-step:

1. Establish a strong business case: This is a legal requirement—hold a meeting to confirm the cost savings you need to make to remain a going concern.
2. Consider every alternative first: Take into consideration lay offs, reduced hours, and reduced pay. If there’s a way around dismissing staff, you should choose that.
3. Individual or collective redundancy: You’ll need to understand whether you’re following the former or latter, as these require a slightly different approach. For example, collective redundancies will require a notification to a minister of state.
4. Make your selection: You need to develop criteria to make a selection. And then decide who’ll face redundancy from your workforce.
5. Hold consultations: Before, and after, you make your decision, you should be open with employees. In the second consultations, you’ll need to tell the staff you’re making redundant.
6. Make the redundancies: The final stage, you go ahead with your plans. You can offer supportive measures to your employees after this—such as offering them time off during work to attend interviews or CV coaching or other recruitment advice.

But throughout every stage, one of the most important things to remember is to approach everything fairly.

How to use a fair redundancy process

This is very important—you must respect your employees’ rights.

In Ireland, as an employer you have to remain compliant with the employment law redundancy procedure set out in the Redundancy Payments Act 1967-2014.

Before beginning a process, you must first ensure that you have a legitimate reason for making redundancies under the legislation.

A legitimate redundancy can arise due to the, ‘fact that the requirement of that business for employees to carry out work of a particular kind in the place where he was so employed have ceased or diminished or are expected to cease or diminish.'

In the present circumstances, this is likely to be the most common reason for a business needing to make redundancies.

It then explains how to go about managing a redundancy process fairly. Other legitimate reasons include:

• If a business is shutting down.
• There’s no longer work for certain employees.
• The business plans to carry on, but with fewer employees.
• The nature of an employee’s job changes (such as new technology replaces them).
• A business decides to replace an individual with a more qualified employee.

So, in summary, to make it fair you should be looking at the job role and not to remove an individual employee.

And that change must be due to a change in the working environment. For example, if the business is closing down. Or if employees need dismissing to save money.

Your employees must have been with your business for at least 104 weeks of continuous employment to qualify for a statutory redundancy payment.

In addition, you must provide qualifying staff with:

• Two weeks of notice.
• A statutory redundancy payment.
• A fair process.

For clarity, an unfair redundancy process might involve one of the following reasons. If you:

• Discriminate against a member of staff.
• Indirectly discriminate against a member of staff.
• Fail to follow your process correctly.
• Don’t offer a consultation period.
• Dismissing an employee after ignoring your process.
• Fail to consider alternative roles for your employee.
• Don’t have a process at all.

So, with the above in mind, you must then go about choosing which members of staff to consider for dismissal.

The role of HR in the redundancy process

Your human resource department plays an important role here.

Your business should communicate as soon as possible with an HR department about the redundancies. This can help to:

• Establish plans.
• Update all stakeholders.
• Gain input from the HR team.
• Provide a thorough plan to limit the impact of your dismissals.

Ultimately, an HR team provides an essential role in the communication of information to employees—and keeps your business up to date with their correspondence.

This is particularly important, as you don’t want to confuse members of staff.

Or fail to convey essential information over to them. If they don’t understand where your business is up to with proceedings, it may come across as an unfair process.

So, to ensure you can streamline the stages throughout, human resources can make a significant improvement in your organisation.

Essentially, HR has a vital role to play in ensuring that your redundancy programme follows the legislation.

That's by complying with the relevant consultation obligations and selection criteria.  

The redundancy process for employers

You should begin by establishing whether you have a strong business case, based off the considerations we highlight above.

For example, if there’s a drop in revenue and, financially, you have no option but to end a role.

So, the start for you is to consider your business case. And then, if you believe you have a strong reason to go ahead, you should look into alternatives. Your options include:

• Lay offs.
• Reducing hours.
• Offering temporary leave.
• Offering unpaid leave.
• Reducing pay.
• Transferring staff to a new role in your business.

You must consider every option and, if one is available, then choose that. However, if you must go ahead with redundancies despite your best efforts otherwise, then you can move to the next stage.

If you believe you have no alternatives, you’ll need to begin the process of choosing a criteria system.

Redundancy selection process

The selection process should be the most appropriate one based on the circumstances. The three most common selection processes is use are:

1. Last in first out (LIFO).
2. An interview process.
3. A skills matrix.

Many businesses decide on a points-based system. This will consider the specific qualities of every employee.

As a system, it can also limit discrimination. You can score staff members on:

• Contributions to the business.
• Importance within the business.
• Relationships with key clients.

At the end of the process, you should add together your scores. Those with the lowest you can consider for dismissal.

The redundancy consultation process in Ireland

To successfully manage this situation, clear communication is vital.

Unfair dismissal claims, due to unlawful redundancy processes, are often based on the employer’s failure to consult with the employees.

You should hold effective and meaningful consultations with employees through a series of meetings.

To approach consultations fairly, it’s good business practice to ensure you begin proceedings as soon as possible.

And to have a two-way dialogue—allow staff to respond with concerns. And take these seriously.

You should also put into writing your reasoning. And send these letters to employees facing selection.

The collective redundancy process

This is where a large number of employees will potentially lose their roles within your business.

A collective redundancy exists where the following number of employees are facing dismissal:

• Five employees where 21-49 are in your business.
• 10 employees where there are 50-99.
• 10% of employees where 100-299 are employed.
• 30 employees where there are 300 or more.

The Protection of Employment Acts, 1977-2014 makes it essential (if you require a collective redundancy) for you to:

• Engage in an information and consultation process with the employee representative.
• Inform the Minister for Employment Affairs and Social Protection of your proceedings at least 30 days before the first redundancy takes effect.

You have a statutory duty to provide important information in writing to representatives. So, in your letter you should include these details:

• Your reasons for this outcome. 
• The number of employees affected.
• The number of employees employed with you.
• Your system for redundancy selection.
• How you’ll carry out dismissals.
• How you’ll calculate payments.

Below we offer a look at the collective redundancy procedure. You should:

• Develop your case.
• Inform the relevant legal authorities of this development.
• Consult with trade union representative.
• Respond to their questions or requests for information.
• Upon agreeing on redundancies, provide the affected employees with a dismissal notice. This should include a leaving date you’ll need to agree with them.
• Issue your redundancy notice, which will include details on their statutory redundancy pay and other benefits.

Be aware that employees have the right to appeal your decisions. Or make a grievance claim. You must take these seriously and react accordingly.

Even if it slows down the overall process, it’s your legal duty to respect employee rights.

The individual redundancy process

If you’re not making collective redundancies, this does simplify your legal requirements. The more members of staff facing dismissal, the longer it'll invariably take.

However, regardless of that, you must still follow the process set out in Irish legislation.

And you must remain fair throughout. This will be a difficult time for the affected employee and the process must be handled sensitively and respectfully.  

Voluntary redundancy procedure

After you decide there's a business case to go ahead, you can offer your employees more control over the process by seeking voluntary redundancies.

If you announce to your workforce the plans ahead (and you offer some sort of incentive), staff may put themselves forward.

This can be effective if you have employees nearing retirement age in your workforce, as they may choose this option as a form of early retirement.  

However, you should still follow the same process stages outlined above.

Once an employee volunteers, you’ll need to consider their offer.

If it transpires they’re an important member of your business, you may wish to reject their offer. As an employer, this is your legal right to do so.

How long does the redundancy process take?

It depends on the number of employees facing redundancy. And how long each one has been with your business, as this changes the length of notice period they receive.

We can break this down as follows—period of service first between:

• Two to five years: Two weeks of notice.
• Five to 10 years: Four weeks of notice.
• 10-15 years: Six weeks of notice.
• Over 15 years: Eight weeks of notice.

So, if you’re making a number of employees redundant with over 15 years’ service, the completion will take longer.

Collective redundancies also need to take account of notification to the relevant minister.

Redundancies during coronavirus

With the unprecedented outbreak of the coronavirus pandemic, many businesses are now facing the unwanted possibilities of mass redundancies.

However, before you make a snap decision and decide it’s your only choice, do keep in mind the options you have available to you.

In Ireland, the government has introduced the Temporary COVID-19 Wage Subsidy Scheme. This provides your business (and employees) with a financial lifeline during the crisis.

The scheme is operated by the Revenue Commissioners and allows businesses affected by the pandemic to keep staff on payroll by paying up to 70% of salaries subject to certain limits.  

The Irish government also expects your business to try and meet 100% of employees’ normal income.

This removes significant pressure from your business, providing alternatives to laying staff off, reducing hours, or making redundancies.

However, if you still genuinely need to go ahead then you should follow the procedures outlined above. Or seek professional assistance for support.

Need our help?

If you’re considering making redundancies and need to know if you have a strong business case, contact us for quick answers to your questions: 0818 923 923.