Employees are at risk of being made redundant as private and public sector employers “tighten the belt” to cope with economic uncertainty and the recent change in government. Employers are allowed to cut their costs by eliminating roles, provided they follow a fair process. Employees should know their rights to ensure they are treated fairly.
What is redundancy?
Redundancy is when an employer eliminates a role in their organisation (for instance to reduce the cost of labour, or to move the organisation in a different direction). Often redundancies will come about when an organisation reviews it current strategy and structure, and makes changes to it. This is known as a “restructure”.
Redundancies may result from a restructure (but not always). Redundancy means a role is not longer required (or is surplus to the needs of the employer). Redundancy is about the role, rather than the personal characteristics of the employee that fills that role.
What does the law require when an employer want to make employees redundant?
1. Genuine Redundancy.
An employer must have a genuine business reason for eliminating a role. An example of a genuine business reason for making someone redundant is, when an organisation does not require the same amount of sales staff because their sales have decreased or have been automated.
Terminating an employee’s employment on the basis of redundancy, when in fact they are being dismissed for another reason, will be an unjustified dismissal. The employee will have grounds to raise a personal grievance.
Employers who are considering making an employee redundant should ensure they have a clear business case for their proposal. If there is another reason for wanting to dismiss the employee, the correct process should be followed (for instance a performance management process if the employee is not meeting performance expectations, or a disciplinary process if the employee has misconducted themself).
2. Fair process:
An employer must also follow a fair process when they make an employee redundant. This means providing potentially affected employees with sufficient information about a proposal, and an opportunity to comment before any decision is made (often referred to as “consultation”).
An employer should explain the business rationale for the proposed restructure and how that rationale will be served by the proposed redundancies. Often employer will provide a current organisational chart, and a proposed new organisational chart.
The employer should invite affected staff to give feedback on the proposal, and must take that feedback into account with an open mind. An employer must be open to changing their proposal, on the basis of the feedback they receive. Otherwise their decision would be the result of an unfair process and an affected employee could raise a personal grievance.
Other than being legally compliant, adequate consultation has other benefits too. It will ensure an employer gets feedback on a proposal before implementing it. Employees may provide helpful information about where the proposal is falling short or has failed to consider something. Employees may also offer suggestions which may help to improve the proposal (and avoid redundancies).
After receiving feedback, the employer may change their proposal and seek further feedback before making a final decision. New information should be consulted on before any decision is finalised, or the process may be deemed unfair.
Adequate consultation will also ensure employees feel they have been treated with respect and courtesy. This may help them to accept an outcome, whatever it may be.
Affected employees should be advised they can rely on a support person (like a trusted friend or family member) and/or a representative (like an advocate, union representative or lawyer) during the consultation process. This is a good idea, especially if the employee is feeling overwhelmed, upset or unsure of their rights. Having support or representation will also help level out the playing field between an employer and employees.
If the employer’s decision is to proceed with redundancy, the employer must follow their own policies and the terms of any applicable employment agreements (for instance there may be a requirement to inform the union, or to meet in a particular way).
An employer who is proposing to reduce the number of staff in a similar role, should ensure they follow a fair process in selecting who remains employed and who is made redundant. Employers must explain how they will make the selection (“selection criteria”), and they must follow a fair process in coming to their decision.
An employer should also consider redeployment options (for instance to another available role), where staff are being made redundant.
What entitlements do employees have if they are made redundant?
Usually an employee will get notice that their employment will end. The duration of notice will be set out in their employment agreement. An employee is usually allowed to work out their notice period, but sometimes an employer may have the right to alter duties, location of work, or even require an employee not to work at all (and instead be paid out in lieu of working). The applicable employment agreement should be consulted.
An employer may offer to pay out the notice period in lieu of working, even if that is not in the employment agreement. The employee does not have to agree, but may prefer it so they can use that time to focus on finding new employment. Similarly, and employee can ask their employer to waive to notice period, if they do not want to work it out.
An employer may also be obliged to pay redundancy compensation in some cases. Again, this depends on what is set out in the applicable employment agreement. Occasionally, an employer may agree to pay compensation (or additional compensation), even though they are not contractually required to do so.
An employee may be in a position to negotiate better terms than they are otherwise entitled to, depending on their circumstances. An example may include pay time off during the notice period to attend interviews for an new role.
When an employee is made redundant, an employer should also consider whether redeployment options available. Termination of someone’s employment should be a last resort.
What can I do if the redundancy is not genuine or the process unfair?
If an employee believes their redundancy is not genuine or a fair process was not followed, they may have grounds to raise a personal grievance. An employee must do this within ninety days of the grievance arising (or being made aware of it).
An employment law expert can help assess an employee’s case and advise on the strength of their legal position and their options. A lawyer may also help an employee obtain information from their employer to work out what has happened and whether it makes sense to raise a personal grievance.
A resolution can be achieved through direct negotiations between parties, by attending mediation, or by seeking a decision in the Employment Relations Authority. A lawyer will be able to explain the options, risks and associated costs.
Remedies may include reinstatement to a job; or compensation for the loss of employment and for hurt and humiliation suffered.
Tips:
Check deadlines: During the consultation period, comply with deadlines to provide feedback or ask for more information. If more time is required, ask for it in advance.
Ask for more information: If you are unsure about anything in the proposal, do not hesitate to seek more information. The better you understand the reason for the proposal the better position you will be in to provide meaningful feedback which may result in a different outcome.
Get advice: Do not hesitate to get legal advice if you feel unsure, or if you are being treated unfairly.
Negotiate: Engage in constructive negotiations with your employer to see what options, other than redundancy they may be open to. Consider options such as voluntary redundancy, redeployment to another position, or taking a part-time role.
Protect Your Well-being: Facing redundancy is stressful. Seek support from friends, family, or a counsellor if needed. Many employers will offer free counselling, but if your employer does not, do not hesitate to ask regardless.
Empower Law have experts who can advise on redundancy law, and help guide you through the process. Contact us for a non-obligation discussion to see how we can assist.
