Managing redundancy – knowing your legal obligations
It is vital to plan carefully if your company needs to reduce hours or staff numbers. Caroline McEnery of HR & Business Solutions explains how to go about it legally
19 April 2011
Due to the competitive climate and pressure on business cash flow many businesses have to reconsider their payroll costs and as a result we are getting lots of queries to help guide employers through the process of restructuring their staff and to ensure they are legally compliant in their obligations when doing so.
The first step in the process is to assess each person’s role and responsibilities and their contribution to the organisation. It is important to differentiate between performance issues and the need to improve payroll costs and productivity.
Identify cost savings
It is important to identify the cost savings you need to make at the outset to identify which is the preferred approach to ensure the correct approach is selected and the maximum saving is achieved.
We always recommend employers to explore all avenues prior to opting for short time, layoff or going down the redundancy route but if it’s unavoidable we will guide them through the process. Honest communication throughout the process is essential – people prefer to know where they stand rather than getting part of the story. The announcement of potential difficulties and the potential layoff, short time or redundancies will invariably have an adverse impact on morale, motivation and customer service if not managed correctly.
You can also explore the option of pay reductions or renegotiation of employee terms and conditions. It is important to remember that all changes must be agreed with the employees or else they will be in breach of the payment of wages act. It is also important to remember you cannot pay less than the statutory minimum entitlements for your industry and relevant legislation eg. the governing JLC or ERO for your industry.
The next step should be to explore the potential of employees opting for unpaid leave, term time extended holidays, reduced hours to suit the employee’s personal circumstances in line with business requirements etc and if this is not meeting the companies requirements the next step is to explore voluntary layoff or short time and voluntary redundancy. Short time or layoff are both short term measures and should be viewed as such in line with business requirements. The employee if their working hours or salary has been reduced by more than half can apply for redundancy using an RP9 form and this can be granted or if the employer can be given increased hours again it can be avoided.
Redundancy is another alternative that should be considered. The company should seek advice on their legal requirements under the Redundancy Payment Acts and obligations on employers introduced by the Employment Appeals Tribunal. Redundancy entitlement which applies after two years’ service is two weeks per year of service plus one bonus week for employees and the employer gets 60% of this back via a rebate they apply for. We must also ensure employees get adequate notice of redundancy, which depends on their service. If the business is closing the employee can be paid this notice instead.
Employers must remember that redundancies can prove to be a very expensive option if not handled correctly. We would urge companies to take advice on the matter to ensure that a genuine redundancy situation exists and that the process is implemented correctly. Selection for redundancy is to be done fairly and other avenues explored prior to resorting to redundancy.
The establishment of a formal procedure on redundancy is therefore to be encouraged across all companies. A well designed redundancy programme should enable employees to update their CV and refresh interview skills and provide advice on job hunting. Good handling of the redundancy process is vital not only from a legal point of view but for an employer’s reputation, potential customers, existing workforce and the public at large.
For advice on re-negotiating terms and conditions, short time, reduced hours and redundancy or other HR related issues for employers and employees contact Caroline McEnery of HR & Business Solutions on 087-9694837 to discuss your requirements.