A Rise in Redundancies - The Redundancy Process: Helpful FAQ's

by Jamie Doddy February-15-2023 in Employment Law

In recent months, particularly in the tech sector, we are seeing a sharp increase in redundancies. The majority of affected employees will not have previously faced the burden of their role being placed at risk of redundancy and will not be familiar with the process. The following is a brief guide to the redundancy process, in a Q&A form, containing the most common questions we receive from employees facing redundancy.

1. When can I be dismissed by reason of redundancy?

A genuine redundancy arises as a result of any one of the following scenarios:

1. Where the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed, or in the place where the employee was employed.
2. Where the business requirements for employees to carry out the work have ceased or diminished or are expected to cease or diminish.
3. Where the employer has decided to carry on the business with fewer or no employees.
4. Where the employer has decided that the work carried out by the employee should be done in a different manner for which the employee is not sufficiently qualified or trained.
5. Where the employer has decided that the work carried out by the employee should be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained.

2. How are employees selected for redundancy?

Employers must establish fair and objective selection criteria. This might include selection on a “Last In, First Out” basis. An alternative approach is to put a ranking system in place, based on objective criteria such as skills, qualifications, standard of work and attendance records. Employers need to ensure that selection criteria does not amount to discrimination against a certain category of employees.

An employee with any length of service can be dismissed by reason of redundancy.

3. What does at risk of redundancy mean?

Being placed at risk of redundancy means that the employer has proposed a reduction of roles because of one of the reasons set out in Q1 above. It does not mean that a redundancy of an individual role is inevitable.

4. What is a redundancy consultation process?

A redundancy consultation process is an opportunity to explore how potential redundancies might be avoided. All employees whose role has been placed at risk of redundancy should be invited to take place in a consultation process. Generally, this will involve at least two meetings between the employer and the employee. The employer should explain the reason for the potential redundancies and should invite the employee to make proposals as to how a redundancy of their role might be avoided. The employee should be allowed to bring a colleague or trade union representative to consultation meetings.

5. What is voluntary redundancy? Am I entitled to take voluntary redundancy?

Before engaging in a selection process as described at Q2, employers may choose to offer employees the opportunity to volunteer to take redundancy. This is known as voluntary redundancy. This is at the sole discretion of the employer and employees do not have the right to be made redundant voluntarily.

6. If it is decided that my role is redundant, am I entitled to appeal this decision?

Yes. If an employee is not afforded an opportunity to appeal the decision to terminate their employment, they could seek recourse by bringing a claim for unfair dismissal due to a lack of fair procedures.

7. I have been informed that my employment is being terminated by reason of redundancy. What redundancy payment am I entitled to?

Where an employee has worked continuously for their employer for at least two years, they are entitled to receive a statutory redundancy payment.

The statutory redundancy payment is calculated based on an employee’s length of service. An employee is entitled to two weeks’ pay per year of service plus one extra week. For the purposes of the statutory redundancy payment, a week’s pay is capped at €600.

Employees with less than two years’ continuous service are not entitled to a statutory redundancy payment.

8. Am I entitled to an enhanced redundancy payment, above the statutory amount?

There is no outright legal obligation on employers to pay employees an enhanced redundancy payment, above the statutory redundancy payment amount. However, if the employer has an established custom and practice of paying an enhanced payment, also known as an ex-gratia termination payment, they are obliged to continue to offer such a payment in respect of future redundancies. Please click here for more information on when custom and practice creates a legal entitlement to enhanced redundancy payments.

9. I have been asked to sign a Termination Agreement in order to receive an enhanced redundancy payment. What does this mean?

In certain scenarios, regardless of whether there is any obligation to do so, employers often offer an enhanced redundancy payment in exchange for the employee signing a Termination Agreement. These Agreements are also known as Redundancy Agreements, Severance Agreements or Compromise Agreements.

A Termination Agreement is an agreement between the employer and the employee in which all terms and conditions relevant to the employee’s termination are agreed. It sets out the various payments to be paid to the employee as a result of the termination, and terms which the employee must comply with to receive the payment – for example, confidentiality provisions.

Most importantly, a Termination Agreement will include a waiver of claims. This means that by signing the Agreement, and in exchange for the enhanced redundancy payment, the employee will be waiving their right to bring any claims against the employer, in relation to their employment or its termination. In that scenario, the enhanced payment is made in full and final settlement of any claims or potential claims.

10. Do I need to obtain legal advice?

In most cases, employers will require the employee to take independent legal advice prior to signing the Termination Agreement. Without such advice being taken, there is risk of the Termination Agreement and wavier of claims being unenforceable.

Independent legal advice should always be taken before an employee signs a Termination Agreement. Where an employee feels that the redundancy of their role is not genuine, or they feel that the termination of their role is unfair, they should not hesitate to take legal advice at an early stage in the process.

11. Am I required to work through my notice period?

This is a matter for the employer to decide. If the employer requires the employee to work through their notice period, the employee is contractually obliged to do so. If an employee refuses to work during the notice period, this may affect the employee’s entitlement to a redundancy payment.

During the last two weeks of their notice period, where an employee is being made redundant, they are entitled to a reasonable amount of paid time off to attend interviews for a new job.

As an alternative to requiring an employee to work through their notice period, an employer may decide to either pay an employee in lieu of notice or place the employee on a period of garden leave, meaning the employee will not be required to work up to the termination date. If the contract of employment does not include a provision for these two options, the employer must obtain the consent of the employee.

12. What period of notice am I entitled to?

Employees are entitled to be given the greater of:

• the notice period set out in their contract of employment; or
• the minimum notice period set out in legislation, which depends on the length of an employee’s service. The relevant notice period required by statute is as follows:

13. What happens to my unused Annual Leave days when my employment is terminated?

Employees are entitled to be paid in lieu of any earned but unused annual leave as of the date of termination of employment. This is the only scenario which allows employees to receive a payment in lieu of annual leave. The payment should equal the amount an employee would have been paid if they had taken the annual leave.

It is possible that an employer can require an employee to take their annual leave at specific times, including during a period of notice. However, this is subject to the employer:

• taking into account the employee’s family responsibilities and opportunities for rest and recreation during the annual leave period; and
• discussing the proposed annual leave arrangement with the employee, at least one month prior to the date on which the employee commences annual leave.

14. Given that my employer is terminating my employment by reason of redundancy, am I still bound by the post-termination restrictions contained in my contract?

Contracts may sometimes include clauses which restrict an employee from:

• working for a competitor;
• soliciting the employer’s employees; or
• dealing with clients of the employer

for a limited period of time following the termination of employment. These are known as post-termination restrictions or restrictive covenants. Unless the employer is agreeable to waiving its rights under any of the above clauses, the employee will remain bound by the terms of their contract and must not breach the relevant clauses.

The requirement to maintain confidentiality is another term and condition of employment which survives the termination of employment and must be honoured by the employee after termination.

15. Am I entitled to my outstanding bonus payment?

This will depend on the terms of the contract of employment and/or any bonus schemes in place. It is often the case that bonus payments are at the discretion of the employer. Contracts and bonus schemes often contain a provision which states that if an employee is given notice of termination of employment, prior to the date on which a bonus payment becomes payable, the employee is not entitled to receive the payment. It is advisable that employees review their contracts and the bonus schemes with regard to bonus payment entitlements in the event of termination of employment.

If you require any advice in relation to redundancy or the termination of your role, please do not hesitate to contact our Employment Law team here. 

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About the Author

Jamie Doddy

Jamie is an associate solicitor in the Employment Law team at Hayes solicitors. Jamie advises both employers and employees, in relation to contentious and non-contentious employment matters, including contracts of employment, workplace policies, workplace investigations, statutory compliance, redundancies and dismissals.