Managing the redundancy process

The loss of jobs across all sections of Irish society has become an all too familiar reality following the collapse of the banking and housing sectors in late 2008.

Employers have been forced to make extremely tough decisions in the last couple of years in relation to staffing in order to keep businesses afloat.

An organisation faced with the prospect of having to make redundancies should follow a formal procedure, preferably agreed and negotiated between management and employee representatives.

Selecting for redundancy

Redundancies generally occur when a company is no longer able to maintain its business and goes into receivership or liquidation; or when an employee’s job no longer exists or when an employer reduces the number of staff.

When making redundancies an employer needs to apply selection criteria that is reasonable and that is applied in a fair and open manner.

Employees who feel they have been made redundant in an unfair manner are entitled to bring a claim for unfair dismissal against the employer.

Forms and required notice

Employers are obliged to issue a written notice of redundancy to an employee through form RP50. A duplicate of this form should also be sent to the Department of Enterprise, Trade and Innovation.

Employees are also entitled to a minimum period of notice which is generally dependant on their length of service or contract agreement with the employer.

It is considered good employment practice to provide advance notice to all workers of a redundancy situation regardless of their length of service.

The following table lists the minimum period of notice a person is entitled to receive:

• Under 13 weeks – No notice required

• 13 weeks - two years – One week required

• Two - five years – Two weeks required

• Five - 10 years – Four weeks required

• 10 - 15 years – Six weeks required

• More than 15 years – Eight weeks required

• An employee is also entitled to reasonable time-off to look for alternative work during the period of notice

Collective redundancies

Under Irish law employers who need to make collective redundancies of up to 10% of staff must provide 30-days notice prior to the first redundancy being made. Collective redundancies can be made in the following numbers:

• Five employees where 21-49 people are employed

• Ten employees where 50-99 people are employed

• 10% of employees where 100-299 people are employed

• 30 employees where 300 or more people are employed

Redundancy payments

Employers are obliged to make statutory redundancy payments, in the form of a lump-sum payment based on the pay of the employee and their time with the company. All eligible employees are entitled to:

• Two weeks' pay for every year of service over the age of 16 and one further week's pay

The amount of statutory redundancy is subject to a maximum earnings limit of €600 per week (€31,200 per year).

In the event an employer cannot afford to pay their employee(s) the full statutory redundancy lump-sum, the Department of Trade, Enterprise and Innovation will make payment out of the Social Insurance Fund. The employer will then become a preferential creditor of the department and will owe 40% of the lump-sum to the Social Insurance Fund.

Preventative measures

Ultimately, an organisation should avoid making redundancies. Steps can be taken prior to making staff redundant, including:

• Pay freezes

• Reduced overtime

• Recruitment freezes

• Negotiated pay cuts

• Offers of early retirement

For more employer advice, check out our Management Advice blog.