Things are looking “brown”, as they say, and usually the first cost-cutting measure is a retrenchment exercise to lower the wage bill. The Employment Rights Act (ERA) outlines the manner in which and the grounds on which an employer can terminate a contract of employment, including the right to dismiss on grounds of redundancy pursuant to section 29.
Redundancy has been defined in section 31 of the ERA as being where:“(a) the employer has ceased, or intends to cease, to carry on the business for the purposes of which the employee was employed by him, or has ceased, or intends to cease, to carry on that business in the place where the employee was so employed; or (b) requirements of that business for employees to carry out work of a particular kind, or for employees to carry out work of that particular kind in the place where the employee was so employed, have ceased or diminished or are expected to cease or diminish.”
Where terminations are being made as a result of redundancy, then the threshold for consultations is 10 per cent of the workforce.
This includes: 1. A written statement to any trade union and the Chief Labour Officer (CLO) outlining the reasons for and other particulars of the dismissal; and 2. Consultations with any trade union or in the absence of a union, with the individual employees. Consultations should take place not later than six weeks before the first employee is dismissed. There must be good and substantial reasons for any failure to consult or an unfair dismissal finding will be the result.
Cutie Lynch et al v National Conservation Commission, ERT/2014/064 has provided guidance in the conduct of a redundancy exercise. While indicating that the same did not have the“rule of law”, the Tribunal endorsed the following guidelines:
1. The employer should give early warning of redundancy to allow employees time to seek alternate employment;
2. Consultation should be undertaken with the union with a view to minimizing hardship;
3. Establishment of an objective criteria for selection of the employees to be retrenched;
4. Consideration of any representations made during consultation;
5. Instead of dismissing, the employer should seek to offer alternative employment.
The Severance Payments Act, Cap. 355A (SPA) has not been repealed by the ERA and its provisions in relation to redundancy therefore still apply. Section 3 of the SPA provides that where an employer dismisses because of redundancy, the employee is entitled to a severance payment calculated in accordance with the First Schedule as follows: 2.5 weeks’ basic pay for each year up to 10 years; 3 weeks’ basic pay for each year over 10 years but under 20 years; 3.5 weeks’ basic pay for each year over 20 years but under 33 years.
Basic pay is defined as“the insurable earnings of an employee calculated in accordance with regulation 17 of, and the Schedule to, the National insurance and Social Security (Collection of Contributions) Regulations, 1967.” The current NIS insurable earnings limit is $4,650.00 for monthly paid workers or $1073.00 for weekly paid workers. In other words, an employee is not entitled to severance calculated at a rate in excess of the NIS limit. Any additional payments are in the sole discretion of the employer.
Section 29 of the SPA provides for the recovery by the employer of a rebate on the payment of severance where the employer “is liable to pay under Part II [section 3] and has paid a severance payment to an employee.” No rebate is payable in respect of any payment made to an employee employed for less than the requisite 104 weeks. The amount of the rebate is“such percentage…as the Minister prescribes” in accordance with the Third Schedule to the Act. Best of luck with that.
In terminating the contract of employment even in a case of redundancy, the employer is required to give adequate notice to the employee. The minimum periods of notice which an employer is required to give to an employee in relation to the termination of the contract of that employee is set out in section 22 of the ERA.
Upon termination of the contract of employment,the employer is required to issue the employee with the following:
1. A certificate of employment record;
2. Written reasons for the dismissal where the employee so requests;
3. Final pay slip;
4. National Insurance Termination/Lay Off Certificate; and
5. Pension options (if applicable).
Here’s to hoping that there is no sharp increase in the unemployment rate or, for that matter, any additions to the public sector wage bill in anticipation of elections.