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Introduction
Redundancy is a common yet challenging situation that many employers face.
Whether a business is undergoing restructuring, downsizing or adjusting its workforce, the potential need to make certain roles redundant often arises. Redundancies affect not only those losing their jobs, but also the morale and trust of the remaining workforce.
Implementing redundancies can be a challenging process for an employer to navigate, and failure to comply with the Redundancy Payments Acts 1967-2014 and the legal principles established by the Workplace Relations Commission (“WRC”) can result in significant legal, financial and reputational consequences. Employees can challenge both the decision to make their role redundant and the process followed and many of those challenges find their way to the WRC.
Redundancy should always be a last resort, but when it is unavoidable, employers have a duty to handle them with fairness, legality and empathy. Done well, the process can preserve dignity for all involved, reduce legal risk and help the business move forward with integrity.
This article outlines the key steps that employers should consider when implementing redundancies and common pitfalls to avoid.
Redundancy Must Be Genuine
A Redundancy arises when a role is no longer required often due to:
Financial Difficulties: Where an employer needs to cut costs and this means employee numbers must be reduced.
Reduction in Work: If an employer no longer needs or has a diminished need for employees with a particular skillset or new technology has made a job(s) unnecessary. We have seen a marked increase in redundancies, particularly in the technology sector, with the introduction of Artificial Intelligence (“AI”).
Fewer Employees: Where an employer has decided that the work for which the employee had been employed can be divided up and undertaken by other employees.
Reorganisation / Restructure: Many redundancies arise where an employer has decided to carry on its business with fewer or no staff.
Business Closure: A business closing down or moving to a new location can give rise to redundancy.
It’s crucial to ensure that the role, not the person, is no longer required. Redundancies should not be used to address performance issues or interpersonal conflicts. Misusing redundancy can expose employers to claims of unfair dismissal.
Follow a Fair Process
The most significant risk that employers face is failing to follow a fair and transparent redundancy process. In terminating an employee’s employment on the grounds of redundancy, it is important that employers must:
Consult: Engage in meaningful consultation with affected employees. Consultation is a process whereby the employer engages in genuine dialogue with affected employees before any final decision is made in relation to the termination of their employment. Its purpose is to inform the employee that their role is at risk of redundancy, provide clear reasoning and explain the rationale for the proposed redundancy. It is also an opportunity for the employee to ask any questions regarding the redundancy.
Transparent Selection: If two or more employees occupy the same or similar roles, and if not all employees in a group are being made redundant, an employer is required to go through a fair and transparent selection exercise to determine the individuals that are to be made redundant. The selection criteria and weighting should be discussed with the employee and should be applied consistently and objectively.
Explore Alternatives: When an employee’s role is identified as potentially redundant, the employer must explore alternatives to redundancy or any mitigating measures. What is suitable for one employee may be completely different for another employee. When considering suitable alternative roles, employers should not make any assumptions about what an employee is prepared or qualified to do. It is important that employers allow employees to provide feedback and make representations and / or propose alternatives to redundancy which the employer must genuinely consider.
Determine a “Selection Pool”
The “selection pool” refers to the group of employees from which it will fairly determine those who are to be made redundant. This must be established logically and fairly and may include:
Employees doing the same or similar roles
Those in interchangeable roles
Teams affected by departmental restructuring
In cases where only one individual performs a distinct role that is being eliminated, a selection pool may not be required. However, where duties overlap or roles are similar, the employer must carefully assess who is in scope.
If multiple employees perform similar roles or can perform each other’s duties with minimal training, they should typically be included in the same pool. It’s important to assess what employees actually do, not just what their job title or description says as the WRC generally examines the reality of the work being done.
Objective Selection Criteria
The selection criteria must be objective, transparent and capable of independent verification. Common criteria include:
Skills and qualifications
Experience
Cost
Performance (based on documented appraisals)
Attendance (excluding disability-related or pregnancy-related absences)
Disciplinary record
Scoring should be independently carried out by at least two managers to avoid bias.
Redundancy decisions must be free from discrimination based on age, gender, race, religion, disability, sexual orientation, family status or membership of the Traveller community. Any breaches in this regard can lead to claims under the Employment Equality Acts 1998–2015.
Employers should keep detailed records of the selection process and ensure that all criteria are objective, relevant and consistently applied. This information should be shared with employees during the redundancy consultation process.
Do Not Ignore Collective Redundancy Obligations
A Collective Redundancy arises where a certain number of employees are made redundant during any period of 30 consecutive days:
5 employees made redundant out of a workforce of 21 to 49 employees
10 employees made redundant out of a workforce of 50 to 99 employees
10% of employees made redundant out of a workforce of 100 to 299 employees
30 employees made redundant out of a workforce of 300 employees
Where the collective redundancy thresholds are triggered, the employer organisation must initiate consultation with employee representatives at least 30 days before the first notice of dismissal is given. Prescribed information, as set out in the Protection of Employment must be provided to the employee representatives and notification must also be sent to the Minister for Enterprise, Trade and Employment of both the impending redundancies and certain prescribed information at least 30 days before the first dismissal takes effect.
No Decision Should Be Made Until the End of the Consultation Process
It is essential that no decision to make a role redundant is made or documented until the conclusion of the "at risk" consultation process. A formal decision to proceed with redundancy should only be made and recorded after the consultation process has been completed.
Once a final decision has been made at the appropriate stage, the employee should be issued with a detailed letter. This letter should clearly outline the reason for the redundancy, the steps taken during the process and the financial package being offered to the employee. The employee should also be given an opportunity to appeal the decision to terminate their employment by way of redundancy.
Employers should be mindful that employees affected by redundancy are likely to submit a Data Subject Access Request (“DSAR”), particularly if they are considering challenging the outcome. Any documentation suggesting that a redundancy decision was made before the consultation concluded could significantly undermine the employer’s ability to defend against such a challenge.
Advise Employees to Obtain Legal Advice Prior to Signing a Compromise Agreement
Employees with over two years’ service are entitled to a statutory redundancy payment, which can be paid tax free. Many employers also offer an ex-gratia payment strictly subject to the employee entering into a Compromise Agreement (otherwise known as Severance Agreement, Waiver Agreement, Termination Agreement or Settlement Agreement) which is a waiver and release of legal claims against the employer.
As the ex-gratia is not a statutory or contractual payment, there is no fixed or standard amount for such payment. Often ex-gratia payments are measured in weeks’ pay per year of service, therefore someone who has been with their employer longer typically receives a larger ex- gratia payment than more recent hires.
To ensure the enforceability of a waiver and release of claims, employers should encourage (some employers insist) employees to seek independent legal advice prior to signing the Compromise Agreement. To ensure the agreement is enforceable, it has become standard practice for employers to make a contribution to the employee’s legal costs in obtaining independent legal advice in relation to the legal effect and implications of the Compromise Agreement.
Beware of Backfilling Roles
Employers should be cautious when backfilling redundant roles shortly after the redundancy process has completed. The risks that can arise include a complaint of Unfair Dismissal on the basis that it was not a genuine redundancy situation (albeit this risk is mitigated if the employees sign a Compromise Agreement). Additionally, if a statutory redundancy payment has been made, there may be a risk that the Irish Revenue Commissioners could take issue with the tax-free treatment of the payment especially if there is a brief pause between the redundancy and the backfill of the position.
The redundancy selection process in Ireland demands more than just sound business reasoning, it requires careful adherence to legal obligations, a fair and transparent process and a commitment to treating employees with respect. Employers who approach the process methodically and empathetically can minimise legal risk while preserving morale and trust within the organisation.
Document the Redundancy Process
It is crucial that employers record and document the redundancy process in writing, as it provides legal protection, demonstrates transparency, compliance and consistency. Being able to demonstrate a structured and fair process is how an employer can defend against an Unfair Dismissal complaint.
Throughout the redundancy process employers should maintain:
Records / reports evidencing the business rationale for redundancy
Records of how any “selection pool” was formed
The selection criteria and scoring
Notes from consultation meetings
Details of alternative employment considerations
Communications sent to affected employees
Redundancy payments to include calculations, payslips and tax confirmation letter regarding the taxation of any ex-gratia payment
Redundancy Case Study: David Henderson v Bohemian Football Club
Case Overview: In David Henderson v The Bohemian Football Club CLG (ADJ-00056820) (the "Club"), Mr. Henderson, a former employee of the Club claimed he was unfairly dismissed in a sham redundancy process, in the absence of any fair procedures.
Case Summary: On 30 November 2024, he received a phone call from the Club’s Director of Football informing him that his employment was being terminated. The first reason given was “budgeting issues,” but when Mr. Henderson challenged it, the club also referred to “anonymous verbal complaints” and a “historic letter of complaint”. Mr. Henderson requested evidence of the alleged complaints, but later the Club confirmed no such letter ever existed.
The Adjudicator, Christina Ryan, found the Complainant was unfairly dismissed from his employment. Ms. Ryan found the Club failed to present any documentary evidence to support that the Club was in financial distress, or that the role was legitimately redundant, what was presented as redundancy was in fact a sham redundancy done in a “ruthless and dishonest manner”. The Club’s board meeting at which the redundancy was allegedly discussed did not have any recorded minutes. Nor could the Club substantiate the misconduct or complaint allegations. Mr. Henderson was not given notice that redundancies were being considered, he was not consulted, no alternative to redundancy was considered, and he had no opportunity to respond to the allegations. Ms. Ryan criticized the Club’s handling as showing a “cavalier disregard for due process and an unmitigated disregard for the law.”
Case Outcome: The tribunal concluded that the dismissal was unfair and that what was presented as redundancy was in fact a sham redundancy done in a “ruthless and dishonest manner.”
Under the Unfair Dismissals Acts, the WRC can award compensation up to 104 weeks’ pay. Mr Henerson was awarded €26,000, which was effectively the maximum she was permitted to award and that it was “just and equitable having regard to all the circumstances”. The Club later issued an apology, accepting the WRC’s decision and acknowledging procedural failings in how Henderson was dismissed.
Key Takeaways for Employers
This case is a stark reminder to employers of their legal obligations in Ireland. An employer cannot escape their obligations under the Unfair Dismissal Acts by simply calling what is otherwise an unfair dismissal “a redundancy”.
There is an onus of proof on employers to show a genuine redundancy situation existed and that their conduct was reasonable by engaging in a fair consultation process with the employee.
Employers cannot treat redundancy as a loophole to dismiss someone unfairly. Redundancies must be genuine, supported by evidence and handled with procedural fairness.
The WRC examines whether the employer has produced credible documentation (financials, board minutes, consultation records) when relying on redundancy as a defence.
Further Information
For expert legal advice on Redundancies, covering both employer and employee obligations, or any Employment law matter, please contact Marc Fitzgibbon, Partner or Nikita Kelly, Solicitor in our Employment Team.
For additional information, see our previous article: The Redundancy Process and the Steps an Employer Must Follow
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