Fundamentals of Redundancy [Video]

Posted in : Back to Basics on 13 May 2016
Shirley Blair
A&L Goodbody
Issues covered:

Redundancies have become an unfortunate but very commonplace reality for many employers across Northern Ireland. Dealing with redundancies can be a very daunting thing, and employers can be faced with claims of unfair dismissal if they get it wrong. It is also extremely important to good employee relations that employees that are not being made redundant see that their former colleagues have been treated fairly.

Under the Employment Rights Order 1996, employees with more than 12 months service have the right not to be unfairly dismissed. Redundancy is one of the five potentially fair reasons for dismissing an employee, but even then employers need to be able to show that a genuine redundancy situation exists and that a fair procedure has been followed.

So, is there a genuine redundancy situation? Redundancies are often challenged by employees saying that their job still exist in the organization and that no true redundancy situation has arisen. There is a statutory definition of redundancy, and it encompasses the following three situations.

The first is where there is a business closure. The employer is stopping doing the business that the employee had been doing.

The second is workplace closures, where the employer is stopping doing the business where the employee was employed.

And the third is reductions of workforce where the employer is reducing the need to do the sort of work that the employee had been doing.

If one of more of these scenarios exists, it is likely that there is a genuine redundancy situation. If none of these situations applies, it is likely that it is not a genuine redundancy situation.

So looking at fair procedures, even if a dismissal is genuinely on the grounds of redundancy, whether it is fair or not to dismiss the employee for that reason will depend on whether a fair procedure has been followed. At the outset and throughout the consultation period, the employer should explore ways in which the redundancies could be avoided. This may include things like putting a freeze on recruitment, reducing overtime if you can, and reducing the use of agency workers.

Following a fair procedure will usually entail identifying the appropriate pool of employees at risk of redundancy, consulting with the employees in the pool. This should be a meaningful process in which the employer and employee look at any ways in which the redundancies could be avoided. It's an important point that no decision should have been taken about whether any employee is to be made redundant until the consultation process has been completed.

You should also apply objective selection criteria to those in the pool, and it's sensible to try to get the affected employees' agreement to the selection criteria before it is used. Employers should consider whether there is suitable alternative employment for the employees. And importantly, they also should adhere to the three-step statutory dismissal regulations, including giving the employee the right of appeal.

Turning now to redundancy payments. Employees who are dismissed by reason of redundancy and who have more than two years service are entitled to a statutory redundancy payment.

Statutory redundancy pay is calculated according to a formula set out in the Employment Rights Order 1996, which is based on the employee's age at the day of termination, length of service subject to a 20-year cap, and pay, which is subject to a maximum weekly amount.

In addition to statutory redundancy, an employee may be entitled to an enhanced contractual redundancy payment. This could either an expressed or implied entitlement. If there is an expressed entitlement, this is usually found on the employee's contract of employment or in a redundancy policy. The most common way for an implied entitlement to arise is where the employer has a custom and practice of making enhanced redundancy payments.

Employers need to make sure that any enhanced redundancy payments are not discriminatory. For example, if they're based on length of service, there is a risk that they could discriminate against employees on the grounds of age or against women who may have taken time out of work to care for children.

This article is correct at 13/05/2016

The information in this article is provided as part of Legal-Island's Employment Law Hub. We regret we are not able to respond to requests for specific legal or HR queries and recommend that professional advice is obtained before relying on information supplied anywhere within this article.

Shirley Blair
A&L Goodbody

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