What is a redundancy under Irish law?

A redundancy occurs where an employee’s role ceases to exist. Examples of this include:

• The employer ceases or intends to cease the business (or at the place of work)
• The requirement for employees to carry out work of a particular kind has ceased or diminished
• The employer decides to carry on the business with fewer or no employees
• The work is to be done in a different manner for which the employee is not sufficiently qualified or trained
• The work is to be done by a person who is also capable of doing other work for which the employee is not sufficiently qualified or trained
   

It is important to bear in mind that redundancy relates to an employee’s role ceasing to exist; it does not relate to the employee’s performance or conduct.

What is a collective redundancy under Irish law?

Under the Protection of Employment Acts 1977 – 2014, a collective redundancy arises where, over a 30-day period, an employer proposes to dismiss by reason of redundancy:

• 5 or more employees in an establishment (where 21 – 49 normally employed)
• 10 or more employees in an establishment (where 50 – 99 normally employed)
• 10% or more of employees in an establishment (where 100 – 299 normally employed)
• 30 or more employees in an establishment (where 300+ normally employed)
   

The number of employees “normally employed” is calculated as the average number employed in each of the 12 months preceding the date on which the first dismissal takes effect.

What are the key differences between individual and collective redundancies?

While many of the principles are consistent across both, there are some important differences between individual and collective redundancies. Collective redundancies impose additional statutory obligations on employers, including:

• Notification to the Minister: Employers must notify the Minister for Enterprise, Tourism and Employment of the proposed redundancies at least 30 days before the first notice of dismissal issues. A consultation process then takes place during this 30-day period.
   
• Consultation process: Employers are required to facilitate the election of employee representatives to act on behalf of employees, provide specific information to these representatives and engage in a consultation process with these representatives.
   
• Timeframe: No dismissal (including notice to dismiss) can be made until 30 days have elapsed from the date of the commencement of the consultation process.
   

What are the employer’s consultation obligations?

It is important that employers engage in a fair and meaningful consultation with the employee representatives, and this process should commence very quickly after a decision has been made that may result in collective redundancies. A number of issues should be covered during the consultation process, including the business rationale for the proposed redundancies and the methods by which employees were selected for redundancy. The employee representatives should also be given sufficient opportunity to suggest alternatives to the proposed redundancies (e.g. redeployment of employees elsewhere within the business), and it is important that the employer considers any such alternatives in full.

Notwithstanding the role of the employee representatives, best practice is that employers should also meet affected employees individually and give them the opportunity to provide their thoughts on the proposed redundancy of their role.

How should selection be handled in a collective redundancy? 

To be able to stand behind the genuineness of a collective redundancy process, and to mitigate against any allegations of discrimination, there are a number of points employers must bear in mind. Where there is more than one employee in the same role, it is important that employers:

• Define appropriate selection pools
• Apply objective and transparent criteria
• Use a scoring matrix or similar method of comparing employees
• Retain records of the above
   

What redundancy payments are employees entitled to?

Provided they have a minimum of two years’ service with their employer, employees who are dismissed by reason of redundancy are entitled to a tax-free statutory redundancy payment of two weeks’ pay for every year of service in addition to one bonus week’s pay. A week’s pay is capped at €600 per week and earnings in excess of this figure are disregarded for the purposes of calculating the redundancy payment.

While not mandatory, many employers offer employees whose roles are made redundant an enhanced redundancy package over and above statutory entitlements. Typically, the enhanced element of a redundancy package (i.e. an ex gratia payment) is conditional on employees signing a compromise waiver agreement, which generally prevents the employees from taking any legal claims arising from their employment and/or its termination. Ex gratia payments vary greatly from employer to employer, as do the methods of calculating such payments; for example, certain employers offer a flat payment, while others prefer to base the payment on years of service to reward longer-serving employees.