Redundancy Guidelines for Irish Employers [Published 2024]

Layoffs and redundancies are not a new phenomenon for employers in Ireland. However, in recent years, Ireland has witnessed a surge in redundancies across various sectors driven by a mixture of economic, regulatory, technological, and industry-specific factors. 

High-profile cases over the past few months, such as those at TikTok (250 lay-offs from their Dublin office in April), PayPal (announced a further 85 layoffs recently on top of 205 redundancies in February) and Indeed (announced 60-70 anticipated layoffs in May of this year) have kept the topic of redundancy at the forefront of business discussions here in Ireland.

According to Gov.ie, there have already been 1,315 applications received under the Redundancy Payments Scheme in the first half of 2024. That’s the highest H1 figure since 2017 and a 30% increase on the first 6 months of last year.

Redundancy Defined

Before getting into our guidelines, let’s quickly clarify exactly what we are talking about when we use the term “redundancy”.

Redundancy, as defined under the Redundancy Payments Acts of 1967-2007: “occurs when an employee’s job ceases to exist and they are not replaced.”

Redundancy vs Dismissal

While both redundancy and dismissal result in the termination of employment, they are distinct concepts:

• Redundancy: The role itself is no longer needed, often due to business restructuring or economic factors.
• Dismissal: The termination is related to the individual employee, potentially due to performance issues or misconduct.

Impersonality

A key aspect of redundancy is its impersonal nature. The decision to make a role redundant should be based on objective criteria related to the business’s needs, not on personal factors related to the employee. This distinction is crucial in avoiding potential claims of unfair dismissal.

Irish Redundancy Law

Irish redundancy law is governed by several key pieces of legislation:

• Redundancy Payments Acts 1967-2014
  • sets out the obligations and rights of employers and employees in situations where an employee is made redundant.
• Protection of Employment Act 1977-2007:
  • safeguard employees’ rights in cases of significant changes to their employment status
  • primarily focused on providing protections in the context of collective redundancies and business transfers.
• Unfair Dismissals Acts 1977-2015
  • establish the conditions under which a dismissal is considered unfair and provide a legal framework for addressing disputes regarding dismissals
  • an employee who takes a case under the Unfair Dismissals legislation may be awarded up to two years of salary.
• Minimum Notice and Terms of Employment Acts 1973-2005
  • provide employees with minimum notice periods before termination of employment and ensure that employees receive written statements of their terms of employment

Additionally, employers must consider relevant EU directives, such as the Collective Redundancies Directive (98/59/EC).

In accordance with this legislation, common legitimate reasons for redundancy include:

• Business closure or relocation
• Decrease in demand for products or services
• Technological changes rendering certain roles obsolete
• Reorganisation to improve efficiency
• Economic downturns necessitating cost-cutting measures

Even if you are confident in one of these legitimate reasons, employees may have grounds for complaint if the manner of the selection for redundancy was deemed unfair or if they believe that a genuine redundancy situation does not exist.

Types of Redundancies

Compulsory vs Voluntary Redundancy

Before an employer formally goes through the redundancy procedure required by legislation, they may decide to offer a package to encourage employees to volunteer to leave their roles.

This is known as “voluntary redundancy” – essentially an employer may ask employees to volunteer for redundancy. The employer may offer an “ex-gratia” pay incentive as encouragement and employees who agree to volunteer may also claim a statutory redundancy payment

This approach can be useful to avoid the compulsory redundancy process altogether or to reduce the numbers of employees who will ultimately have to be made compulsorily redundant.

Collective Redundancy

Collective redundancies occur when, within a 30-day period, the number of redundancies is:

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

In cases of collective redundancies, employers have additional obligations, including:

1. Notifying the Minister for Enterprise, Trade and Employment at least 30 days before the first dismissal
2. Consulting with employee representatives
3. Providing specific information about the proposed redundancies to employees and their representatives

Legal Requirements for Employers

Irish employers have a range of specific legal obligations when it comes to implementing redundancies. The primary obligations include:

• Notification
• Consultation
• Fair Selection
• Consideration of Alternatives

Notification

Employees must be given proper notice of redundancy by their employers. The minimum notice periods are set out in the Minimum Notice and Terms of Employment Acts 1973-2005:

• 1 week for employees with 13 weeks to 2 years of service
• 2 weeks for 2-5 years of service
• 4 weeks for 5-10 years of service
• 6 weeks for 10-15 years of service
• 8 weeks for over 15 years of service

As we’ve mentioned earlier, in cases of collective redundancies, employers must also notify the Minister for Enterprise, Trade and Employment in writing at least 30 days before the first dismissal takes effect.

According to the Workplace Relations Commission, the notification to employees should be in writing and include the reason for redundancy, the number of employees affected, and the proposed method of selecting employees for redundancy.

Consultation

One of the fundamental pillars anchoring the redundancy process is the consultation phase, which serves as a vital bridge between employers and affected employees. This phase, enshrined in Irish employment law, imposes a legal obligation on employers to proactively engage in robust and meaningful consultations with those whose roles are at risk of redundancy. 

It is during this critical juncture that employers must create an environment for open dialogue, providing ample opportunity for employees to voice their concerns, seek clarification, and explore potential alternatives to redundancy.

Transparency and Inclusivity

By fostering a culture of transparency and inclusivity, the consultation phase not only empowers employees but also demonstrates a commitment to fairness and respect for their contributions. Moreover, this collaborative approach serves to mitigate risks for both employees and the business, fostering trust and goodwill even amidst challenging circumstances. When embarking on the challenging task of selecting employees for redundancy, companies are often bound to adhere to a rigorous framework of selection criteria and due diligence. This commitment to fairness and transparency not only upholds the principles of natural justice but also serves to safeguard against potential disputes.

Fair Selection

The criteria for selecting employees for redundancy must be objective and non-discriminatory. 

In selecting employees for redundancy, the Company must apply selection criteria that are reasonable and are applied in a fair manner. Common selection methods include:

1. Last in first out or

2. A selection matrix which will have to be tailored specifically for a role

The Employment Equality Acts 1998-2015 prohibit discrimination based on nine grounds: gender, civil status, family status, sexual orientation, religion, age, disability, race, and membership of the Traveller community.

Consideration of Alternatives

The employer should consider all options including possible alternatives. This might include:

• Redeployment within the organisation
• Reduction in hours
• Job sharing
• Voluntary redundancy or early retirement schemes

If there is an alternative position available it must be put to the employees. If an employee refuses a reasonable offer, they may lose their entitlement to a redundancy payment. An employee may take up an alternative on trial for up to four weeks.

Redundancy Entitlements / Payments

Eligibility for Redundancy Payments

Employees seeking redundancy payments must meet specific eligibility criteria, including:

1. Have at least two years of continuous service with the employer
2. Be aged between 16 and the normal retiring age
3. Have their employment terminated due to redundancy

Types of Redundancy Payments

1. Statutory redundancy: The redundancy legislation states that each employee with two years continuous service is entitled to two weeks’ salary for every year of service plus one bonus week. The payments will depend on their length of service, hours of work and gross salary.
2. Ex-gratia payments: Additional payments above the statutory minimum, often offered to incentivise voluntary redundancy or as part of a negotiated package. If the Company is in a position to make an ex-gratia payment please be aware that this may be subject to income tax depending on the amount given to the employee and it is essential they sign a waiver to confirm their agreement to the same.

Calculation of Redundancy Payments

Statutory redundancy is calculated as follows:

• Two weeks’ pay for every year of service over the age of 16
• One additional week’s pay

The maximum weekly pay for calculation purposes is €600, and there is no cap on years of service.

For example, an employee aged 45 with 10 years of service earning €800 per week would receive:

(10 years x 2 weeks) + 1 week = 21 weeks 21 x €600 = €12,600 statutory redundancy payment

Redundancy Process Guidelines for Employers

It’s crucial, as an employer, to approach redundancies with care, ensuring compliance with legal requirements while maintaining fairness and transparency. Prior to commencing a redundancy process, regardless of whether it is an individual or collective redundancy, you should follow these guidelines:

1. Assessment of Alternatives: Consider if there are any viable alternatives to redundancy and assess whether the organisation can implement any alternatives as an interim measure.
2. Explore Voluntary Redundancy Feasibility: Determine if voluntary redundancy is an option.
3. Determine the Business Case: Ensure there are clear business reasons for the redundancy and identify the number of roles at risk of redundancy.
4. Establish an Appropriate Selection Criteria: Establish a fair and transparent selection criteria, focusing on the role, not the person.
5. Review Collective Redundancy Criteria: Confirm if the redundancy process meets the criteria for collective redundancy:
   • 5 employees where 21-49 are employed.
   • 10 employees where 50-99 are employed.
   • 10% of employees where 100-299 are employed.
   • 30 employees where 300 or more are employed.
6. Plan the Timelines: Confirm and document the timeline for the redundancy process:
   • 30-day consultation period for collective redundancies.
   • Create a timeline if the redundancy is individual.
7. Calculate Payments: Calculate employees’ length of service and payment entitlement, including statutory and any ex-gratia payments.
8. Plan Meetings: Identify who will conduct the consultation meetings.
9. Consider Third Party Involvement: Ensure compliance with GDPR if involving third parties in consultation meetings.

If your organisation is undertaking either an individual or collective redundancy process, the HR Suite team is available for expert guidance and support throughout the process to ensure legal compliance, minimise risk, and uphold fair and compassionate treatment of employees. 

Redundancy Risks

Legal Redundancy risks

Employers must be aware of both the legal and employee relations challenges that redundancies can present. Mishandling these processes can lead to legal disputes, damage to company reputation, and negative impacts on workforce morale. 

Legal Redundancy Risks

Improper handling of redundancies can lead to several legal risks:

1. Unfair dismissal claims: If the redundancy process is not followed correctly, employees may claim unfair dismissal. Under the Unfair Dismissals legislation, am employee may be awarded up to two years of salary. This amount does not include preparation of the submissions for the day and legal costs for representation i.e. a HR Consultant / Solicitors etc.
2. Discrimination claims: Selection criteria must not directly or indirectly discriminate against protected groups. The employment equality legislation 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.
3. Failure to inform and consult: In collective redundancies, failure to properly inform and consult can result in protective awards.

Employee Relations Redundancy Risks

Entirely aside from the legal risks, redundancies can significantly impact employee morale and company reputation. To mitigate these risks:

1. Communicate clearly and transparently throughout the process
2. Treat affected employees with dignity and respect
3. Provide support for both departing and remaining employees
4. Manage the redundancy process professionally to maintain trust and reputation

In Summary

Navigating redundancy requires a delicate balance of legal compliance, empathy, and strategic decision-making. By adhering to best practices and prioritising transparency and fairness, businesses can navigate this challenging terrain with integrity, safeguarding the interests of all stakeholders involved. 

Ultimately, by understanding legal obligations, engaging in transparent consultations, and offering support to affected employees, organisations can navigate redundancy with integrity and compassion, emerging stronger and more resilient in the face of change.For personalised guidance on handling redundancies or other HR challenges, don’t hesitate to reach out to The HR Suite. Our expertise in change management projects and comprehensive HR solutions can help you navigate these difficult situations with confidence and care.