redundancy management (ca)
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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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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.)
Boyd Associates Limited 2009
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.
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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)
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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!
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009
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)
Boyd Associates Limited 2009
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
Boyd Associates Limited 2009