Following the recent High Court Case new proposals in relation to JLC/REA's have been made by the government:
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Following today's decision to reduce the Minimum Wage rate to €7.65. The Government has signalled that the ERO and REA rates should be reviewed. In particular the Catering,...

Redundancy and Lay Off's

Redundancy and Lay offs are terms that disappeared during the Celtic Tiger years. However as a result of the economic down turn these terms are now back on the agendas of a lot of management meetings around the country and Employers are now faced with making some very difficult staffing decisions. However it is crucial that when making these decisions Employers ensure that they comply with the  Redundancy Payments Acts 1967-2007 or they could leave themselves exposed to claims taken under the Unfair Dismissals Acts 1977 to 2001. This section will provide a basic guide to Redundancies and Layoffs and also outline some key pitfalls for Employers and the services we provide. 

 

What are Redundancies and Lay Offs?

A Redundancy situation generally arises where an employee's job/position no longer exists and they are not replaced. The reason could be the financial position of the firm, lack of work, reorganisation within the firm or it may be closing down completely. It is the Job/Position not the Person which is made redundant!. A Collective Redundancy situation arises when a number of employees are being made redundant within a 30-day period:  

  • 5 employees where 21-49 are employed
  • 10 employees where 50-99 are employed
  • 10% of the employees where 100-299 are employed
  • 30 employees where 300 or more are employed

Under the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007 (pdf) employers are required to comply with specific guidelines when attempting to affect Collective Redundancies.

 

A Lay Off situation arises when an employer is temporarily unable to provide work for an employee, whereas a Short Time situation occurs where an employer is temporarily forced to reduce an employees working hours so that the employees pay or working hours are half the normal weekly amount. In both these situations the employer must give the employee notice before implementing any changes. Voluntary Redundancy situations arise when an employer requires fewer workers and asks for employees to volunteer for redundancy.

 

What Notice do you have to give of Redundancies?

When making staff redundant an employer is obliged to issue a written notice of redundancy to the employee (Form RP50) . The period of notice will depend on a person's length of service or the period of notice in the person's contract of employment. The following table lists the minimum period of notice, which a person is entitled to receive:

Length of Employment                                         Minimum Period of Notice
Less than 13 weeks                                                  Nil
13 weeks - 2 years                                                   1 Week
2 years - 5 years                                                       2 Weeks
5 years - 10 years                                                     4 Weeks
10 years - 15 years                                                   6 Weeks
More than 15 years                                                   8 Weeks

 

Who qualifies for Statutory Redundancy Payments?

To be eligible for a statutory redundancy payment, an employee must:

  • Be aged 16 years or over
  • Be in employment and paying PRSI contributions, usually Class A contributions
  • Have worked continuously for the employer for at least 2 years (104 weeks)
  • Have worked continuously for the employer for more than 2 years if working part-time.

 

How do you calculate Redundancy Payments?

The Redundancy payment is determined by the employee's length of continuous service and weekly earnings. Weekly earnings include gross weekly wage, average regular overtime and benefits-in-kind. If an employee is eligible for a Redundancy payment, they are entitled to Two weeks pay (to a maximum of €600 per week) for each year they have been employed plus a bonus week's pay. The statutory redundancy payment, or the statutory redundancy part of an enhanced redundancy payment, is tax-free. Any enhanced element of a redundancy payment may be liable for tax although exemptions exist for Termination Payments. A very handy Redundancy Calculator is provided by the Department of Enterprise, Trade and Employment, this is particularly useful when calculating the proportion of a year made up by "excess days" i.e. where an employee has been working for 5 and one half years.

 

What is an Employer's Rebate?

Employers can claim a rebate of 60% of the Statutory Redundancy payment through the Department of Enterprise, Trade and Employment from the Social Insurance Fund. This is obtained by completing and returning the RP50 Form, including the employee's signature within 6 months of the employee receiving their lump sum.

 

Issues for Employers 

Where an employee believes she/he has been made Redundant unfairly andlodges a claim with a third party, the onus is on the employer to prove the following:

 

  1. The existence of a genuine Redundancy situation.
  2. That the employee was consulted and alternative options were examined i.e. Short Time, Alternative Positions.
  3. That they used proper criteria in selecting employees for redundancy and that these criteria were used in a fair manner e.g. Matrix selection process.

 

See our News Section for a summary of a recent Employment Appeals Tribunal case, which highlights what can happen when Redundancy situations are not handled correctly and are subsequently contested in the EAT.

 

Resolve HR has recently provided advice and hands on support at every stage of the Redundancy/Lay Off process to a variety of businesses. For further information and advice on Redundancies and Lay Off's or if you wish to avail of our services please Contact Us