After a very difficult year for the business sector, many employers are likely to face tough decisions around staff numbers this year. With lots of businesses suffering steep drops in revenue during the crisis, many are likely to be facing genuine redundancy situations.
What are the key factors in a redundancy?
A genuine redundancy situation must be established as part of a redundancy process. Also, the importance of following fair procedures before confirming the redundancy cannot be overstated.
If you need to restructure your business this year, it does not automatically follow that any redundancies you make will be legal. A genuine redundancy situation must exist.
If you dismiss an employee on redundancy grounds, you need to ensure that:
- There was a genuine redundancy situation.
- The employee had the benefit of fair procedures prior to the dismissal.
- The selection process was fair.
If an employee has any doubts about any of these issues, they may seek to make an unfair dismissal claim. We look at a recent example below which demonstrates the huge financial risks involved in getting a redundancy wrong.
What are the consequences of a poorly run redundancy process?
The employee in question worked as an accounts administrator in a hotel. She was the victim of harassment and alleged that the general manager sent inappropriate texts. When she raised this issue, there were subsequent payroll errors/omissions affecting her salary. Shortly after these incidents, the general manager made the employee’s position redundant and she received all payments that were owed to her.
The employee produced evidence showing that her role was advertised soon after her redundancy. Her claim queried whether her redundancy was genuine, why she was the only staff member made redundant, and the objective basis for her selection.
After examining both sides’ submissions, the Adjudication Officer found no evidence that the employer had:
- Engaged in a consultation process with the employee.
- Discussed suitable, alternative employment within the company.
- Provided the employee with a right to appeal her redundancy.
There was a clear absence of evidence of any objective standards that were applied to select the employee for redundancy. The Adjudication Officer in turn ruled that the employee was unfairly selected.
As the employee worked in the hotel sector, she failed to find alternative employment during the pandemic and was unable to mitigate her loss.
The Adjudication Officer awarded compensation of €60,000, almost two years’ salary to take account of both the loss suffered and future loss.
The importance of a genuine redundancy situation
Redundancies may come about following a restructure of a business. Employers must not, however, use a restructure as a way to engineer a redundancy situation. There must be a genuine redundancy situation followed by a thorough redundancy process based on fair procedures. As the above case shows, the costs of failing to get redundancy right could cripple your business.
We recommend that employers have a documented redundancy procedure in place. This policy should include the notification and consultation process and the selection process that any final decisions in relation to redundancy are based on.
Need our help handling redundancies?
If you need help handling redundancies, you can call our 24/7 helpline for instant, unlimited advice. To speak to a HR expert now, call 0818 923 923.
