How to manage: Redundancy process can be hard but must be fair

As published in the Business Post, February 7 2021.

Many businesses hit by Covid-19 restrictions will have little choice but to reduce their workforce this year – but it’s important to do so in a legally compliant way.

Employers continue to live with the Covid-19 restrictions, as do their staff. While this year will hopefully bring more positive news, particularly with the emergence of viable vaccines, the impact on businesses and workplaces nationwide will still be appreciable.

Many will have been closed for months by the time the restrictions are eased. Some will not have opened for almost a year. This means there could be tough choices when it comes to the costs of continuing to employ staff.

There are a number of avenues available to employers that fall short of dismissal. In certain cases, unfortunately, trimming the size of the workforce or reducing it entirely are the only options.

For the first time since the financial crash, a significant number of employers are in the invidious position of having to make roles redundant. For these employers, it is essential that they implement redundancies in a legally compliant manner.

This is important as the consequences can be severe if an employer gets it wrong, especially where multiple roles are involved.

The most fundamental principle of Irish employment law is that once an employee has more than 52 weeks of continuous service, unfair dismissal legislation automatically deems their dismissal unfair.

In practical terms, this means that the employer has to demonstrate that the dismissal is fair if an employee brings an unfair dismissal claim. Applicable legislation sets out the circumstances in which an employer can do this and one of them is redundancy.

There are two fundamental boxes that must be ticked if an employer wants to run a safe redundancy process.

First of all, there has to be a genuine redundancy situation. This means that there has to be some form of objective change necessitating the redundancy of one or more roles.

It’s particularly important to note here that people are not made redundant, roles are. The decision to make a role redundant cannot be related to the characteristics of the person occupying that role.

Secondly, a fair process must be followed, including consulting with the employee, or employees, and considering any representations they make about the proposed redundancies.

If one of these two elements is missing, there is a significant chance that an employee will be able to demonstrate to the Workplace Relations Commission (WRC) that the dismissal was unfair and thereby open the door to an award of up to two years’ remuneration.

Looking at this in more detail, an employer will be expected to demonstrate that something fundamental has changed which requires the redundancy of a role or roles.

In the Covid era, the most likely change that an employer will point to is a downturn, most likely a significant one, in business. If an employer, to take the most extreme example, can no longer run the business because they cannot trade and meet payroll as a consequence, that is likely to pass muster.

If, on the other hand, an employer attempts to make roles redundant using the pandemic as a cover, a challenge is more likely to be successful.

The WRC will always be alert to any attempt to reduce the size of the workforce “by stealth” under the guise of redundancy.

The process of how redundancies are brought about is also very important. While there are no fixed timelines laid down in law, best practice would be for an employer to begin by educating the affected individuals on what is proposed and to give the employees enough information to allow them to make meaningful representations.

This allows for an opportunity to try to avoid redundancies. It is possible, for example, that employees could make proposals to their employer – reductions in salary across the board, for example – that might obviate the need for redundancies.

One particularly important point to note is that an employer is not obliged to accept the employees‘ proposals. But a prudent employer will at least consider them and document this. They will also allow the affected employees sufficient time to make representations and likewise will spend sufficient time considering them if they are submitted.

An employer who adheres to these basic principles should not go far wrong when engaging in a redundancy process.

It’s also important to note that additional obligations are imposed by law where multiple employees are let go in workplaces above a certain size. In those circumstances, collective redundancy legislation can apply.

This imposes additional obligations on an employer. Among other things, there is a mandatory 30-day consultation period and the minister for enterprise must be notified. Employers should always check if they come within the thresholds.


For further information in relation to the above article, please contact Patrick Walshe.

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