Redundancy

What it means

Redundancy is a ground for dismissal under the Labour Code where an employee is no longer needed by the employer because of an organisational change. Typically the role is abolished, headcount is cut, technology changes or work moves elsewhere.

The key point is that the employer or the competent body must decide on the organisational change before notice is served, and in writing. Notice given for redundancy without a prior decision on the change is almost always found invalid in a dispute.

Before giving notice, the employer has a duty to offer alternative work: if a suitable vacancy exists that the employee could fill, it must be offered. On termination for redundancy the employee is entitled to severance pay according to length of service.

How it works in practice

When preparing the process, we help with the timeline: the decision on the organisational change, the offer of another role, the notice, the notice period, severance pay and the final payslip including pay in lieu of untaken leave. Every step should be documented in writing.

It must be checked whether the employee is in a protected period, such as sick leave or parental leave, and whether they enjoy enhanced protection, for example as an employee representative. Where many people are dismissed within a short time, it is collective redundancy with further obligations.

Severance pay is deductible for the employer and taxable for the employee, with contributions due under special rules. When planning a reorganisation, we recommend budgeting for severance and notice periods in advance.

What to watch out for

The most common mistake is filling the “abolished” role with a new hire shortly after the dismissal. In a dispute that proves the organisational change was a pretext, and the dismissal is declared invalid with a claim to back pay.

The second risk is using redundancy to deal with other problems, such as poor performance. The law provides other grounds with other procedures for that. The wrong ground leaves the dismissal vulnerable in court.