So far this year nearly 50,000 people have been made redundant so the trend in settlements and redundancy compensation is of widespread interest, writes employment specialist, Gerald Flynn.

In recent months there has been a growing confusion between union militancy and redundancy stances. Staff occupying the Thomas Cook offices in Dublin; ballots for industrial action at Element Six in Shannon; retail employees taking over Dairygold outlets in Fermoy and Mitchelstown; and pickets on Carroll’s Joinery in Kilkenny and Dublin – are all related to redundancy offers or settlements.

It is a long way from seeking pay rises, disruption money, promotions, improved annual leave or enhanced pensions which may have occupied unionised employees during the boom and bubble.  Now it is a case of salvaging whatever they can as staff numbers are cut  and securing a premium on the legal minimum of two weeks’ pay for each year  worked or ‘served’ with the employer.

Redundancy payment is essentially a  form of social insurance but during the tight labour market is was seen by many as a financial bonus which came with change and those willing to voluntarily ‘move on’ collected a tidy sum which would  reduce their mortgage or fund a second property while they moved to another job.  Now it is a lifeline to cushion the prospect of getting by on €204 job-seekers allowance.

Some Key Redundancy Deals in recent months

Source: Industrial Relations News      SE = statutory entitlement   pys = per year of service

For many managers on the fringes of employment relations there is a view that the statutory entitlement of two weeks’ per year of service (pys), capped at a ceiling of €600 earnings a week, is the standard exit package. On that basis a person with ten years’ service would get at least €12,000 plus any payments in lieu of notice.

The reality is that redundancy settlements usually include an ex gratia payment in addition to the legal minimum ranging from an additional week’s pay for each year worked to an extra five or six weeks in some sectors, usually with larger numbers of employees.

Factors which will influence a redundancy package will be whether it is on a voluntary or compulsory basis; is the business closing or just slimming down and does it affect all or just a minority of employees; what is the norm in comparable firms or within a sector such as retail, manufacturing or construction; and the age profile of the workforce.

For many years selection for redundancy was often on the basis of ‘last-in-first out’ (lifo) but that is often not appropriate where  there are skill mixes and in voluntary redundancy situations staff who have their applications refused often become disengaged and even resentful of their ineligibility “to collect the package”.

Recent Labour Court recommendations noted that “the norm in industrial relation in this country is to pay  an ex-gratia amount  in addition to statutory redundancy compensation. This is n especially true in cases of compulsory redundancy”.

Another recent innovation has seen the Labour Court recommend that the 60% rebate which an employer is entitled to claim back from the Social Insurance Fund, paid for from PRSI deductions, should also be passed on to those losing their jobs if they are only offered the legal minimum. This effective boosts the redundancy by 1.2 weeks to 3.2 weeks for each year worked with the company.

That is all very well if the business is continuing and has reserves but in a receivership, liquidation or wind-up situation employees may be left with the minimum and then find that their anticipated pension is seriously devalued as happened many former employees at Waterford Crystal.

An analysis of redundancy settlements over the first six months of this year by Industrial Relations News (IRN) found that the average package was set at between 5.5 to 7 weeks’ pay which incorporated the statutory two weeks’ entitlement.  The lower rate was paid in the electronics and engineering sector while the food and drink sector averaged just over six weeks and job cuts in the healthcare and pharmaceutical sector attracted deals of just over seven weeks’ pay on average.

Some of the better payments were in non-unionised firms which provision was made for rationalisation costs and human resource directors were anxious to protect the morale of remaining staff or to limit any potential reputational damage.

In Limerick Dell offered its 1,900 non-union staff a six weeks’ deal but capped at one-year’s pay which reduced potential payouts to those with over nine years’ service. This cap was doubled and some additional options introduced following employee protests though the staff are seeking a seven weeks’ deal with a “wind-down” lump sum payment of around €6,500.

Accountants KPMG offered 200 employees – about one-third were managers – a payment of six weeks’ including statutory entitlements capped at two years’ salary. Intel has offered six weeks’ plus the statutory bringing it close to eight weeks’ with no cap or ceiling.

It is usually the lower skilled workers in smaller, more vulnerable firms who get the worst deals and their annoyance can be compounded by poor management communications and little, if any, consultation despite the requirements of the employment protection legislation. In such a situation an occupation is not too surprising as they have few other options.

The five week’s offered by Thomas Cook to its 45 staff was broadly within the norm for the retail sector and so it was not surprising after their occupation of the offices, High Court appearances and mediation at the Labour Relations Commission that the eventual deal was practically the same as what had been originally offered by the company.

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