redundancy management (ca)

Chartered AccountantsTralee – 10 November 2009

Gene Boyd

Boyd Associates Limited 2009

Management Consultant/Chartered Accountant Based in Tralee Previously General Manager of Fujisawa Ireland

Ltd. (Astellas) in Killorglin Pharmaceutical assignments Focus on local Small & Medium Enterprises and

Expanding Indigenous Businesses Helping to Grow your Business and Support your

People Seminars


Increasing in current economic environment To be carried out successfully certain

procedures to be followed Main issues around:

◦ Reasons/Grounds for Redundancy◦ Alternatives◦ Selection◦ Regulations (Notice, Forms)◦ Payment (Statutory, Ex-Gratia)

Best to be prepared rather than approaching it without a clear view on what needs to be done


Dismissal from Employment in particular circumstances Main Legislation is Redundancy Payments Acts, 1967 –

2003◦ Definitions◦ Minimum Statutory Payments◦ Payment and Procedural Obligations on Employers

Also need to be aware of other legislation (Unfair Dismissals & Equality Acts) as well as Custom & Practice


Dismissal from Employment in particular circumstances

Dismissal is wholly or mainly because◦ Ceasing to carry out the business (complete or

partial cessation or in a particular location)◦ Reduced business (overall or specific)◦ Reorganisation (outsourcing/increased use of

technology)◦ Work done in a different manner (lack of

employee skills)◦ Combination of work (lack of employee skills)◦ Combination of more than one of the above


Two important characteristics are present in all of the above Reasons/Grounds

◦ Impartiality (dismissal relates to the job not the person)

◦ Change (business level, different way of doing things, new technology etc.)


If the redundancy is for one of the reasons set out in the Unfair Dismissals Acts 1977-2001 then, by definition, the redundancy is not legitimate◦ Trade Union membership◦ Religious or political opinions◦ Involvement of an employee in civil proceedings

against his/her employer◦ Matters relating to pregnancy◦ Exercise of statutory leave rights◦ Etc.


Applies to Employees with more than one year’s continuous service

Dismissal of Employee deemed to be unfair unless Employer can prove otherwise

‘Fair Dismissals’ Capability, Competence or Qualifications Conduct Redundancy Employee unable to work in the position

Procedures vital Constructive Dismissal


Selection process must be fair and non-discriminatory

Where redundancy is not voluntary it is expected that it will be on last in, first out basis unless business cannot select on this basis ◦ because those employees remaining would not have

the necessary abilities to do the remaining work to an acceptable level of performance and where training the remaining employees would not be a viable solution for reasons of cost or other valid reasons

Onus on employer to justify approach


Prohibits Discrimination by Employers on the following nine grounds:

◦ Gender◦ Age ◦ Marital status◦ Family status◦ Sexual orientation◦ Religion◦ Race◦ Disability◦ Membership of the Travelling Community


All companies now required to consider the Alternatives to redundancy

Need to document that Alternatives were considered otherwise risk of Unfair Dismissal

Common Alternatives include the following but beware of getting Employee’s Consent:◦ Reorganisation◦ Pay Cuts◦ Career Breaks◦ Extended Holidays◦ Timebanking◦ Lay-off & Short-time


Discrimination can be ◦ Direct◦ Indirect

Need to be very careful!

Need for reliable and accurate records to be available for the selection process

If selection is not on ‘last in, first out’ basis then there must be adequate records and evidence to support the chosen basis


If employee unhappy with selection process then he/she has the option of making a claim to the Employment Appeals Tribunal or Rights Commissioner depending on claim

Main focus of EAT will be on whether objective criteria were used in deciding who would be made redundant

Employer needs to be clear that the procedures chosen will stand up as being fair, equitable and objective


Definition comes from Protection of Employment Act 1977

Occurs when a certain number of employees are made redundant within a 30 day period

Only applies to businesses employing more than 20 employees

Certain procedures need to be followed around notifying the Department of Enterprise, Trade & Employment


Employee who has been laid-off or is on short-time working may be entitled to claim redundancy

Lay-off or short-time for longer than four consecutive weeks or at least six weeks over a period of thirteen consecutive weeks

Employee must serve notice Employer can serve counter notice (13

week’s work within a period of four weeks) otherwise employee entitled to redundancy payment subject to normal conditions


Employer required to issue notice in accordance with the minimum notice periods set out in the Minimum Notice & Terms of Employment Acts◦ 13 weeks to 2 years – 1 week◦ 2 years to 5 years – 2 weeks◦ 5 years to 10 years – 4 weeks◦ 10 years to 15 years – 6 weeks◦ More than 15 years – 8 weeks

Must be written notice either directly to the employee or posted to his/her home address


Statutory Entitlements Lump sum based on length of reckonable

service and his/her weekly rate of remuneration at the time the employer declares the redundancy

Must be paid on or before date of termination

Only applies if employee has more than 104 weeks of service (two years) and is between 16 and 66 years of age


Statutory Entitlements Weekly rate of remuneration includes all

other benefits such as car allowance, lunch allowance etc. subject to a maximum of €600

Calculation of lump sum based on two weeks’ remuneration per year of service plus one week’s remuneration

Part-years also included in calculation Statutory redundancy payments are tax-free


Reckonable Service Following leave is allowable as reckonable

service◦ Adoptive leave◦ Maternity-related leave◦ Parental leave◦ Force majeure leave◦ Carer’s leave◦ Other absence allowed by the employer◦ General leave (sickness, holidays, lay-off)


Non-reckonable service Only applicable in the three years

immediately prior to the redundancy◦ Absences in excess of 52 weeks for occupational

accident or disease◦ Absences in excess of 26 weeks other than for

occupational accident or disease◦ Absence by reason of lay-off by the employer◦ Absence due to a strike


Employer’s Rebate Employer is entitled to 60% rebate of the

Statutory Redundancy payment from the Social Insurance Fund

Only applies to the statutory redundancy payment

Form RP50 must be completed by the employer and employee and submitted to the Department of Enterprise, Trade & Employment within six months of the redundancy


Ex-Gratia Payments These are payments made in addition to the

statutory redundancy payment These are determined by what is typical in

the particular business sector, precedent, strength of negotiation of employee and employer discretion

Usually calculated on a similar basis as the statutory redundancy payment i.e. No. of weeks per year of service


Ex-Gratia Payments These payments are subject to tax but reliefs

available Basic Exemption

◦ €10,160 plus €765 for each complete year of service

Increased Exemption◦ €10,000 extra, subject to Revenue approval, if no

claim for relief has been made in the past ten years◦ Reduced by any tax-free lump-sum paid or payable

under an approved pension scheme


Ex-Gratia Payments (cont’d) Standard Capital Superannuation Benefit

(SCSB)◦ Calculated (A x B/15) – C where◦ A = average annual remuneration over the last

three years’ service◦ B = number of complete years of service◦ C = value of any tax-free lump-sum

received/receivable under an approved pension scheme

Get tax advice to apply this relief!


Ex-Gratia Payments (cont’d) Top-Slicing Relief

◦ Tax payable on an ex-gratia payment is limited to the employee’s average tax rate for the previous three years

◦ Any refund to be claimed in the year following the redundancy

Issue for employee to follow-up


In the two weeks prior to the redundancy the employee is entitled to reasonable time-off to look for new employment

Paid time-off Applies also to making arrangements for

training Employer entitled to ask the employee for

evidence of such arrangements


Considered best practice to support employees who are being made redundant

Non-financial supports include◦ Time-off to seek training/work◦ Assistance with preparation of CV◦ Assistance with interview skills◦ Counselling◦ Advice on management of redundancy lump sum◦ Leaving drinks party

Support for redundant employees but also a positive message for remaining employees


Set out clearly Reasons/Grounds for Redundancy Must be legitimate (Impartial and involving Change) Determine Selection Procedure based on the

Reasons/Grounds Must be fair and non-discriminatory Voluntary versus Compulsory Be clear why ‘last in first out’ selection procedure

does not apply Review Employees to see how they fit into selection

procedure Be aware of potential claims by employees and how

you can defend against these (importance of records)


Confirm Notice Period for selected employees Determine Redundancy Payment (statutory &

ex-gratia) Be aware of any custom & practice issues Determine what non-financial supports will be

provided to employees Inform Employees giving background and

rationale Pay Redundancy Payment prior to or on date of

redundancy Complete Form RP50 (with employee)prior to or

on date of redundancy


redundancy management (ca)

Documents

redundancy lay

consecutive weeks employee

employee unhappy

redundancy payments

notice employer

remaining employees

redundancy payment subject

employees certain procedures