Redundancy – Covid-19
Employees with the qualifying criteria can serve a notice on their employer claiming redundancy if their “Lay-off”/“Short time” continues for four consecutive weeks or more (or for an aggregate duration of six weeks in a 13 week period). However, an employer can serve a counter-notice against the redundancy if it can give the employee 13 weeks work without “Lay-off”/“Short time” within four weeks of the employee’s notice. Given the unprecedented nature of the COVID-19 virus and the risk as expressed in some scientific circles that it may hit in further waves, it may be difficult for employers to give this assurance to employees. This may lead to employers facing redundancy claims from employees, the cost of which could cause their businesses to close.
What is Redundancy?
Redundancy is broadly defined in the Redundancy Payments Acts 1967 – 2014. It can occur in situations where the employer ceases to carry on its business in part or entirely and where work requirements have diminished, causing employees to lose their jobs. Complete and partial closure of businesses has become widespread in light of the Covid-19 pandemic.
Qualifying for Redundancy
For employees to qualify for the redundancy payment, they must fulfil the following criteria: –
- The employee must have two years of continuous employment with the same employer;
- The employment must be fully insurable under the Social Welfare legislation;
- The employee must be over 16 years of age;
- The employee’s role must no longer exist.
Employees fulfilling the criteria set out above are entitled to a statutory redundancy payment from their employer. The minimum statutory lump-sum payment is tax-free and is capped at €600 per week and is calculated as:-
- two normal weeks’ pay for each year of continuous and reckonable employment over the age of 16 years; plus
- one additional week’s pay.
If employers were to be faced with a significant number of redundancy claims in the coming weeks, they may not be able to discharge the redundancy payments due to cash flow issues arising from the effect of the Covid-19 pandemic. This financial pressure could ultimately force employers to close their businesses.
In an instance where the employer is unable to pay or refuses or fails to pay statutory redundancy, employees would only be able to recover statutory redundancy from State, thus putting additional pressure on state funds.
Employer representative groups are currently lobbying the Government for a state-funded wage subsidy scheme specifically providing financial supports to employers directly affected by Covid-19 to fund employee income during the current crisis. The rationale is that keeping employees on the payroll would avoid employers having to pay potentially large lump sums at such a difficult time. Both the British and Danish Governments have undertaken to pay certain percentages of employee’s wages up to certain stipulated maximums with the employers funding the remainder. Additionally, Danish employees have agreed to take five days of holidays during the crisis period. It would appear that the introduction of a state-funded wage subsidy scheme would be widely welcomed by employers and employees alike.
If you have any specific queries or require advice/further information in relation to the above and/or employment law queries, please contact Dervla Beirne, Solicitor, Keating Connolly Sellors, Solicitors;- [email protected]Our previous article discussed “Lay off” and “Short time” of employees given that thousands of employers have been forced to take immediate action to close or scale back their businesses due to the effect of the Covid-19 pandemic on the Irish economy in Ireland.