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Budget 2012 provided that the employer rebate on statutory redundancy payments was reduced from a rate of 60% to 15% with effect from 1 January 2012. This has made redundancies a much more costly exercise for employers from the start of 2012. This will put added pressure on many community and voluntary sector organisations who may not have sufficient reserves to cover the increased payment.

Employers implementing redundancies need to ensure that they comply with the Redundancy Payment Acts 1967-2007 and that the redundancy process which is carried out is fair in order to minimise the risk of, and to defend, claims. This normally involves engaging in consultation with employees, carrying out a fair selection process and considering alternatives to redundancy.

There are additional requirements for collective redundancies (i.e. where a certain minimum number of employees are made redundant within a 30 day period with the numbers depending on the size of the workforce). These requirements include issuing a notification to the Minister for Jobs, Enterprise and Innovation and carrying out a 30 day consultation period with employee representatives.

Social Welfare Bill 2011

Section 15 of the Bill 2011 provides for amendments to the Redundancy Payment Acts 1967 to 2007 by way of a reduction from 60% to 15% in the rebates paid to employers from the Social Insurance Fund. This reduction will apply in the case of rebates paid to employers on or after 1 January 2012, in respect of statutory redundancy payments made to employees whose date of dismissal by reason of redundancy occurs on or after 1 January 2012. Rebates paid to employers on or after 1 January 2012 in respect of payments made to employees whose date of dismissal is before 1 January 2012 will continue to be paid at 60%.
What is the date of dismissal?
Under the Redundancy Payments Acts 1967 to 2007, “date of dismissal” is defined as:
• where notice is given, the date on which that notice expires, or
• where the contract is terminated without notice (by the employer or employee) the date the termination takes effect, or
• in the case of the expiration of fixed term contracts without renewal of those contracts, the date of expiration of the contract.
The Minimum Notice and Terms of Employment Acts 1973 to 2001 sets out the statutory minimum notice periods which an employer must provide on termination of employment, depending on the length of service of the employee. Employers should also be mindful of the notice requirements in the Redundancy Payments Acts, but are advised the two notice periods may run concurrently.
There is a variety of ways in which dismissals by reason of redundancy may be effected, which can have implications for the date on which the employee will be deemed to have been dismissed.

Effect on ex gratis terms

The Social Welfare Act 2011 will have an impact on the level of ex gratia payments which individual employers may have been willing to pay when they could avail of the higher rebate. In instances where organisations have in the past have paid an ex-gratia payment or where organisations are in the process of agreeing such a package, they need to be aware of the cost implications of the reduction of the rebate from 60% to 15%.

Where there are no changes to these packages there will be a cost increase to the employer. Due to the increased cost to employers, it is likely to affect the feasibility and level of ex-gratia payments which employers may be able to pay. The cost of redundancy payments to Irish employers is now approximately 2.5 times the net cost of effecting redundancy in the UK.

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