You’ve trimmed all of your costs (printing, advertising, entertaining etc.) and yet your bank overdraft is ever increasing. With no imminent prospect of an increase in trade levels, you are forced into reducing your payroll costs.
Rather than starting with lay-offs of valued staff, there are a number of less drastic alternatives that should be considered:
- Request staff to take their annual leave early
- Reduced hours
- Reduce full-time employees to part-time
- Salary adjustments
It is important to remember that all of the above options probably require the approval of the employee prior to their implementation. This is especially important if a formal written contract is in place.
The next step would be to offer temporary lay-offs, where you expect to be able to re-employ the staff within the foreseeable future. While on lay-off or short-hours, employees usually can supplement their income from social welfare for the days off which they usually work. As employer, you will be asked to sign off on the employee’s card for these days.
If you feel that you have no other option than to offer redundancy then the procedures are governed by legislation. Even with part-time work hours or temporary lay-offs redundancy may be applied for by the employee if the situation continues for at least four weeks, or six out of the last thirteen weeks. Redundancy must be paid to such employees unless you can within the next four weeks, offer thirteen full weeks of employment.
You must be able to demonstrate your reasoning for your selection of employees for redundancy. While it is reasonable to want to keep your best employees, best practice would suggest a proper rating system of all employees be used as part of the selection process.
Redundancy is payable to all employees with a least two years service. While not payable to employees with less service, it is important to remember that the minimum notice due to any employee is one week. The notice period increases with the level of service as follows:
- 2 -5 years – 2 weeks notice
- 5 – 10 years – four weeks notice
- 10 – 15 years – six weeks notice
- 15 years + – eight weeks notice
Remember the maximum of that outlined above and the notice per employee contract must be adhered to in each case.
An employer of a continuing trade is entitled to a rebate of 15% from 2012 (previously 60% to 2011) of statutory redundancy payments. You must apply to Department of Enterprise, Trade and Employment after 100% of the payment has been made to the employee.
Statutory redundancy payments are specifically exempt from income tax and therefore do not go through the payroll system. You may decide to pay in excess of the statutory minimum – not only is this portion non-rebateable from the government, the employee is fully liable to income tax on this amount*.
* However a portion of this may be liable to exemption depending on the length of service of the employee.
Further information can be got on the National Employment Rights Authority website.