Managing Employee Costs (NI): HR Guideline
Managing Employee Costs: Guideline
Northern Ireland
ILCU HR Department: Autumn 2009
Disclaimer
This document does not represent legal advice or purport to be a legal interpretation of legislation or
standard rules. Whilst every effort is made to ensure the information is accurate, responsibility cannot be
accepted for any liability incurred or loss suffered as a consequence of relying on any material published
herein. Appropriate professional advice should be taken before acting or refraining to act on the basis of this
document.
© Irish League of Credit Unions. No part of this document may be copied without written permission from
the Irish League of Credit Unions.
ILCU 2009
1
Table of Contents
INTRODUCTION ............................................................................................................................................................... 3
SECTION 1: A STEP-BY-STEP APPROACH ............................................................................................................. 4
STEP 1: Gather Information ..................................................................................................................................... 4
STEP 2: Analysis ...................................................................................................................................................... 4
STEP 3: Decide on Options ...................................................................................................................................... 5
STEP 4: Consultation and Negotiation ..................................................................................................................... 5
STEP 5: Implement Changes .................................................................................................................................... 6
STEP 6: Follow-up ................................................................................................................................................... 6
SECTION 2: COST-CUTTING OPTIONS AND STAFFING .................................................................................... 7
2.1: "SOFT" OPTIONS ...................................................................................................................................................... 8
a.
Recruitment freeze ........................................................................................................................................... 8
b.
Review and Amend Policies (including unpaid leave and untaken leave)....................................................... 8
c.
Re-evaluate benefits ........................................................................................................................................ 9
2.2: RESTRUCTURING OF THE WORKPLACE ................................................................................................................... 12
d.
Flexible Working Arrangements ................................................................................................................... 12
e.
Reduce Hours of Work .................................................................................................................................. 13
f.
Career Breaks ............................................................................................................................................... 13
g.
Retraining ...................................................................................................................................................... 13
h.
Short-time working or lay-offs ...................................................................................................................... 14
i.
Non-renewal of Temporary Contracts........................................................................................................... 16
2.3: RETIREMENT AND REDUNDANCY ........................................................................................................................... 17
j.
Voluntary Departure: Early Retirement ........................................................................................................ 17
k.
Voluntary Departure: Voluntary Redundancy .............................................................................................. 17
l.
Compulsory Redundancy............................................................................................................................... 18
In Summary ............................................................................................................................................................. 19
SECTION 3: CONSULTATION AND NEGOTIATION ........................................................................................... 20
3.1: PURPOSE OF CONSULTATION AND NEGOTIATION .................................................................................................. 20
Consultation Process: A Suggested Approach ........................................................................................................ 21
3.2: CONSEQUENCES OF POOR COMMUNICATION ......................................................................................................... 22
Therefore, consider all the options… ...................................................................................................................... 22
SECTION 4: FOLLOW-UP .......................................................................................................................................... 23
Impact on Employees Following Change ............................................................................................................... 23
APPENDIX 1: SAMPLE REDUNDANCY POLICY ................................................................................................. 25
APPENDIX 2: REDUNDANCY KEY POINTS .......................................................................................................... 28
Redundancy Policy and Procedures ....................................................................................................................... 33
Potential legal Claims against the credit union ...................................................................................................... 33
APPENDIX 3: GENERAL DISMISSAL PROCEDURE ........................................................................................... 35
Analyse Results ....................................................................................................................................................... 38
SOURCES OF INFORMATION .................................................................................................................................. 39
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HR Guideline: Managing Employee Costs
INTRODUCTION
The current economic climate is one of declining national output, deflation for the first time in 40 years
and rising unemployment1. For credit unions, the poor economic environment, declining demand for
lending and an ever-increasing threat of rising bad debt levels, mean that many are now in a race to reduce
their overheads.
On the face of it, reducing the credit union’s head-count may appear to be the most obvious route to
cutting costs. However, it is vital to understand the full implications of taking such a drastic measure, as
“…redundancies are expensive, disruptive and time-consuming. In addition to this short term damage, the
loss of experience, key skills, and corporate knowledge, may prove hugely detrimental to a company’s
ability to regain its momentum and remain competitive in the long term.”2
In other words, job cuts should not be seen as inevitable.
The governance role of the board of directors is to develop a strategy to contain costs, while also ensuring
optimum service delivery to members in the most efficient way. In the current climate credit unions need
to work smarter in order to achieve this goal. It is important to consider all options, and to approach any
change in a planned and organised manner.
Employees are not just a cost to the credit union; they are one of the credit union’s strongest assets. The
credit union needs a strong, committed workforce to effectively guide the business through this difficult
time and this is a key point to remember throughout any decision-making process.
This document aims to provide information and guidance for those credit unions that need to reduce
overall costs, which includes a range of options, up to and including termination of employment by reason
of redundancy. However, it is hoped that alternatives to redundancy will avoid as much as possible losing
valuable employees.
Note: many of the options mentioned in this document cannot be implemented without obtaining the
express agreement of employees, since any change to pay or other benefits is a change to an employee’s
terms and conditions of employment. Neither employer nor employee can unilaterally change the terms
and conditions of employment. Consultation and negotiation must take place before any decisions are
implemented and changes to an employee’s terms and conditions of employment must be achieved
through getting agreement with employees.
“…the seasonally adjusted unemployment rate in Northern Ireland now stands at 6.2 per cent, up from 5.7 per cent in
the previous quarter and from 4 per cent for the same period a year earlier”, According to Charlie Taylor in the Irish
Times, 17th June 2009
2
According to Fiona Conway, “Redeployment and other alternatives to redundancy “, IBEC HR Database, February
2009
1
3
Please note that this is not a guide on redundancy legislation and in all situations involving a decision that
will significantly affect employees’ terms and conditions of employment, professional assistance should be
sought.
Section 1: A Step-by-Step Approach
A suggested step-by-step approach is provided below to assist the decision-making process where the
credit union needs to balance its staffing requirements with the need to make cost-cutting measures
within the credit union. Each step in the process is discussed in more detail in the subsequent Appendices:
Step 6:
Step 5:
Step 4:
Step 3:
Step 2:
Step 1:
FOLLOW-UP
IMPLEMENT CHANGES
CONSULTATION & NEGOTIATION
DECIDE ON OPTIONS
ANALYSIS
GATHER INFORMATION
STEP 1: Gather Information

How much do we need to save? The accounts will provide the figures, also consult with the auditor,
PEARLS ratios3 or any other expert opinion available

Review work practices and processes: Can the credit union be run more efficiently? Should some
products, services, internal reporting structures or work practices be revised or discontinued?

Review staffing levels: How do staffing levels compare with other credit unions in the area/nationally?
(On average the member-to-staff ratio in Northern Ireland is 875 members per employee4 ).
STEP 2: Analysis

What is the cause of the financial problem? Is it temporary or longer-term in nature?

What cost-savings can be made? Review all areas of expenditure with a view to making changes, e.g.
renegotiation of external contracts, equipment, premises costs, waste management, outsourcing,
3
For example, Ratios R4, R5 and R6
Source: ILCU, March 2009: Figure represents initial analysis of staffing levels comparing credit union returns in
December 2008 with those 50 Northern Ireland credit unions that completed the ILCU Manpower Survey, July 2007.
Note that this figure is an indicator only of current levels: it is not a guide or a recommendation.
4
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HR Guideline: Managing Employee Costs
utility bills etc. Also consider what income generation may be possible, e.g. through renting out part of
the premises

What is the amount required to be saved in relation to staffing? Having identified cost savings across
all other areas of the business, the target for cost saving in the area of staffing can be gauged.
STEP 3: Decide on Options
Consider all options before selecting most appropriate to address the credit union’s needs. The following
are a range of suggested options5, you may come up with others:
a. “Soft” Options: require little organisational upheaval, e.g.
1. Recruitment freeze
2. Amend policies and procedures
3. Re-evaluate benefits
b. Office Restructuring: require some organisational change, e.g.
4. Flexible Working Arrangements
5. Reduce Hours of Work
6. Career Breaks / extended unpaid leave
7. Retraining
8. Short time working/layoffs
9. Non-renewal of temporary contracts
c. Retirement and Redundancy: require termination of the employment contract, e.g.
10. Voluntary Departure: Early Retirement
11. Voluntary Departure: Voluntary Redundancy
12. Compulsory Redundancy
STEP 4: Consultation and Negotiation
Neither employer nor employee can unilaterally change terms and conditions of employment. Therefore a
consultation process MUST take place with employees, which should involve the following:
1. Meet with employees:

present the current situation;

highlight the credit union’s proposals to address the problem;

Ask employees for feedback/suggestions;
5
Source: Adapted from World Bank Labor Toolkit:
http://rru.worldbank.org/Documents/Toolkits/Labor/Toolkit/index.html
5

If redundancy is an option, ensure employees are provided with opportunity to present
alternatives;

After meeting: Provide employees with summary in writing.
2. Provide employees with a contact person with whom they can discuss concerns, ask for
clarification etc.
3. Give time to employees (e.g. 2-3 working weeks) to come back with alternative suggestions
4. Collate employee feedback/suggestions
5. Reconvene meeting with employees:

Provide update and action required;

Explain why staff suggestions were/were not utilised;

Communicate plan for implementation of changes including time frame/dates;

Advise employees that some changes will require specific individual approval from each
employee affected by the change;

After meeting: provide employees with summary in writing.
6. Keep records of entire process: from initial decision to make workplace changes through to final
implementation of change.
STEP 5: Implement Changes
1. Design memo/letter for employee to sign: Any change to terms and conditions of employment
requires employee consent to effect the change;
2. Provide two copies of the document to each employee affected by the change;
3. Give time frame for return of signed document;
4. Keep signed copies on file: the signed document represents a change to the employees’ terms and
conditions of employment;
5. Refer individual employees to the grievance procedure in the event of an issue arising.
STEP 6: Follow-up
Ongoing monitoring of the situation is required in order that the following is addressed:

Have the cost-cutting measures sufficiently addressed the credit union’s financial concerns?

Employee morale, performance and productivity following the implementation of change: re-training
and ongoing communication is essential to maintain positive workplace relations and to avoid conflict
as much as possible.
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HR Guideline: Managing Employee Costs
Section 2: Cost-Cutting Options and Staffing
The credit union should make every effort to avoid job losses; redundancies should only ever be
considered as a last resort. This Section looks at various alternatives that should be given real
consideration before resorting to redundancy. These options are not mutually exclusive; in practice they
can be used in sequence or combined with one another. As mentioned earlier, this is not a complete list of
available options: the credit union may come up with others.
Note: Remember that no changes to terms and conditions of employment can be made without securing
specific employee consent to the change.
The options suggested are divided into three categories and range from ‘soft’ options, i.e. options that
require little organisational upheaval, to office restructuring, to termination of employment.
a) "Soft" options: involve the application and enforcement of existing workplace systems, regulations
and policies. These measures include:

Recruitment freeze

Review and amend policies (including unpaid leave and untaken leave)

Re-evaluate benefits
b) Restructuring of the workplace: includes measures such as unpaid leave, job-sharing, parttime work, and, in some cases, the shedding of non-essential activities or services.

Flexible working arrangements

Reduce hours of work

Career breaks

Outsourcing

Retraining

Short-time working or lay-offs

Non-renewal of fixed term contracts (in line with Statutory Procedures – see page 16)
c) Retirement and redundancy:

Voluntary departure: options that provide incentives for employees to leave voluntarily, either
through early retirement or the provision of generous severance packages.

Compulsory redundancy, where employees are required to leave employment without their
consent.
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2.1: "SOFT" OPTIONS
a. Recruitment freeze
This occurs where an employee leaves and is not replaced. Effective in cutting staff numbers in larger
organisations or where there is a high staff turnover, for many credit unions with smaller staff and low
turnover, this option may not yield many results.
Recruitment and promotion freezes are always temporary in nature. Even if the freeze lasts a number
of years, at some stage new staff must be hired and promotion reinstated. The credit union can at least
stop increases in staff numbers through:

Freezes on the hiring of permanent or contract employees

Elimination of certain vacant posts

Suspension of the automatic replacement of staff who retire normally
This option is only relevant if, following analysis and possible work reorganisation, it is found that the
credit union is over-staffed.
Redeployment
Redeployment or reassignment can be an effective means of avoiding redundancies, for example by
filling internal vacancies with existing employees who have experience of the credit union’s ethos,
culture and working practices6. This not only allows the credit union to retain valuable employees and
existing knowledge, it also provides employees with the opportunity to point their careers in a
different direction and to tackle new challenges. Remember, however, that effective redeployment
involves planning and co-ordination and is also likely to require retraining.
b. Review and Amend Policies (including unpaid leave and untaken leave)
The credit union should review all policies with a view to achieving a reduction in expenditure.
However, be pragmatic! Select only those changes that will achieve real savings for the credit union
rather than making a range of smaller changes that will only cause staff conflict without yielding any
real cost saving benefit to the credit union. Some examples of areas to consider include:
Statutory Leave entitlements
How is annual leave, parental leave and other statutory entitlements currently managed within the
credit union? Tighter policies may result in the better management and control of overall leave while
potentially reducing the need for additional staffing.
6
Always remember the importance of following proper Recruitment and Selection procedures by ensuring that there is
a pool of candidates for every vacancy that arises. Internal recruitment practices should still comply with
recommended best practice in order to avoid potential liability under anti-discrimination legislation.
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HR Guideline: Managing Employee Costs
As a short-term measure, actively encourage all employees to use up any untaken leave entitlements,
such as annual leave. Leave should be managed and scheduled in such away that it does not result in
any additional costs, and therefore should be staggered. Remember, under the law, the employer has
the right to determine the manner in which annual leave is taken.
The credit union could consider implementing a period of unpaid leave for all staff, to be taken at a
time of the credit union’s choosing, e.g. during quieter business periods during the year (postChristmas and post-AGM for example). The deduction of the unpaid leave from salaries could also be
taken on a phased basis to avoid a substantial decrease in pay in any one pay period.
c. Re-evaluate benefits
A re-evaluation of current employee benefits may result in significant cost-savings. In particular,
tightening up on such items as expense allowances, car and mileage allowance, and sick pay (where
sick pay is paid in excess of the Statutory Sick Pay scheme) can all contribute to savings. However, the
credit union must be careful if reducing benefits to ensure that it is not targeting a particularly
vulnerable group of employees. For example, adjusting benefits such as maternity benefit and
certified sick pay should be an absolute last resort, as these measures may incur claims of
discrimination if they are targeted carelessly. Examples of employee benefits include:

Overtime

Expenses and allowances (e.g. mileage rates, mobile phone allowance etc.)

Pay

Pension/life assurance

Additional holidays (in excess of the statutory entitlement of 28 days including public holidays)

Social events, e.g. Christmas party, annual summer outing etc.

Health insurance

Health initiatives, e.g. subsidising the costs of a stop-smoking training course

Maternity and/or paternity benefits

Sick pay and absenteeism
Overtime
What is the credit union’s policy regarding overtime? How much is spent on overtime within the credit
union? Who authorises overtime? Is compulsory overtime (e.g. Friday night/Saturday work) a current
part of working hours? The credit union could consider reducing or removing the need for overtime,
9
changing the rate that overtime is paid to employees or requiring employees to take time off in lieu of
hours worked (TOIL) instead of payment for additional hours worked.
Sick leave and Absenteeism
What is the pattern and incidence of absenteeism? Review current work practices and the current
policy with a view to tightening control of sick leave within the credit union7.
Expenses and Allowances (e.g. mileage rates, mobile phone allowances etc.)
Review mileage and subsistence rates paid to volunteers and employees; tighten control over mobile
phone bills/allowances, particularly if a significant cost is incurred in such areas of the business.
Pay Freeze
Pay freezes are a way of trying to maintain the status quo over a longer period of time than perhaps
was the case before where annual increments or wage agreements provided a regular increase in
salary.
Be Careful: employees could claim that they were entitled to certain increments at specific regular
periods of time (e.g. annually), especially if such clauses are specifically contained in the contract of
employment, or even if they exist as ‘custom and practice’8.
Regarding bonuses, if contracts of employment contain clauses in relation to bonus payments, this
could result in a credible employee claim that they were entitled to this payment.
Pay Cut
No pay cut can be imposed on an employee without their specific written consent. Any change in a
contractual term may be challenged as discriminatory or unreasonable and must be objectively
justified. In the absence of consent, if the credit union attempts to push a pay reduction through
without consultation or any form of negotiation with employees, an employee could:

Resign and claim constructive dismissal;

Claim breach of contract in the civil courts; or
7
Please contact the ILCU HR Department for more detailed information on effective absence management
According to the Labour Relations Agency, ‘Custom and Practice’ is defined as follows: In the absence of any
express or written terms of employment, ‘custom and practice’ is often the only way that an employee can establish
their entitlement to important contractual rights. For a term to be implied by custom and practice it must be:
 reasonable – it is the norm within the industry in which the employee works;
 certain – clear to all and not capable of being interpreted in different ways by different people; and
 notorious – well known to all to whom it relates and should have been in existence for a considerably
lengthy period of time.
Terms which could be viewed as implied by custom and practice could include the provision of transport to work, rest
breaks, finishing times, commissions, entitlements to overtime payments, etc, where these terms are not clearly
expressed elsewhere.
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HR Guideline: Managing Employee Costs

Bring a claim to an Industrial Tribunal under the Employment Rights (Northern Ireland) Order,
1996, asserting that the reduction in salary constituted an unlawful deduction from his/her wages.
Even where some contracts of employment contain clauses to reserve the right to vary terms and
conditions of employment, this would not give the credit union a unilateral right to implement a
reduction in pay, and any discretion to vary the terms and conditions of employment cannot be carried
out in a manner that is oppressive on employees.
Any scenario that affects an employee’s pay is bound to cause conflict and will be met with resistance.
Given the current economic situation, these options are being considered more and more by
employers as an alternative to redundancy. Therefore, employees may be willing to accept a reduction
in wages where it would prevent such redundancies. However, specific legal advice should be taken in
these situations.
Effective management of such situations is crucial: the credit union needs to honestly and openly
communicate the reality of redundancy versus pay cut/freeze to employees during the consultation
and negotiation stage of the process and hope that the ‘moral obligation’ on employees to cooperate
may come through.
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2.2: RESTRUCTURING OF THE WORKPLACE

Flexible Working Arrangements

Reduce Hours of Work

Career Breaks

Retraining

Short-time working or lay-offs

Non-renewal of temporary contracts
d. Flexible Working Arrangements
A key change in human resources management over the last two decades has been the shift from
asking "how many people do we need to do the job?" to asking "what is the best way to get the work
done?" In practice, this can involve:

Replacement of the traditional full time permanent employee with a mixture of full time
employees and part-time or fixed-term workers

Reduction of formal job demarcations, retraining within the credit union, and greater multi-skilling
of the employees

More innovation in the types of employment contract (e.g. job sharing)

Greater use of technology to facilitate changed work practices
Work-life balance arrangements may help cut costs, benefit employees and increase the overall
flexibility of the workforce. The credit union should consider introducing flexible working arrangements
in order to retain employees. This option might be a particularly attractive option to employees in
credit unions with more traditional working structures, i.e. where most or all employees are fulltime
workers.
Job-sharing, part-time working, and term-time working are all flexible working arrangements that
allow the credit union to retain employees while reducing costs9. Reductions in costs will result from
full-time employees moving to part-time hours.
Note: Employees who are requested to work fewer hours by their employers may be eligible for some
sort of government benefit or assistance (e.g. Working Tax Credit or Income Support) subject to
satisfying certain criteria10.
9
In the ILCU Salary Survey NI (November 2007), 11% of credit unions indicated they had such arrangements in place.
See http://www.adviceguide.org.uk/nireland or http://www.direct.gov.uk for further information
10
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HR Guideline: Managing Employee Costs
e. Reduce Hours of Work
It may be possible to reduce working hours for some or all employees (e.g. if all employees worked for
an hour less each day, how much would that save the credit union?).
The credit union might not need a full staff complement during certain periods, which may present the
opportunity of reducing working hours for some or even all, employees. Transaction levels and footfall
within the office will provide useful information in the decision making process.
The credit union could consider closing early or opening late on those mornings/afternoons where the
transaction levels are lowest during the week; this option requires some analysis of transaction levels
and other work requirements of the credit union.
If reducing working hours is an option, focus on the tasks and jobs to be done rather than selecting a
particular category of employees for reduced hours, e.g. part time workers, in order to avoid potential
claims of discrimination under equality or part time work legislation.
f. Career Breaks
Career breaks can be another means of avoiding redundancies while retaining experienced and valued
staff. For employees, career breaks provide an opportunity to pursue career development or further
education, to engage in charitable work, to improve work-life balance.
With a career break, the contract of employment is temporarily suspended for a period of time to
allow an employee to take time off work with a view to returning to the workplace at some future
agreed date, e.g. 6 months, a year or longer. In facilitating career breaks, the credit union retains an
employee for future requirements, thereby avoiding recruitment and selection costs, while easing the
cost of the payroll at the current time11. When implementing a career break scheme, the credit union
must define factors such as eligibility and the process of returning to work.
g. Retraining
Organisations that don’t train their employees are two-and-a-half times more likely to fail than those
that do12. In previous downturns those businesses that did invest in their employees saw the most
dynamic recovery. According to a report issued by the Cranfield School of Management in the UK,
organisations that invest in their employees are best placed to save money, improve motivation and
increase employee retention, all of which helps businesses stay competitive in a downturn. So, be
aware of the dangers of cutting the training budget as in the long term it may prove to be a costly
business decision!
11
A sample career break policy and other supporting materials are available from the ILCU HR Department or by
visiting www.ilcu.ie
12
Source: IBEC, based on research conducted in 2007
13
h. Short-time working or lay-offs
Note: In the cases of short-time working or lay-offs, the important thing to note is that they are
TEMPORARY in nature and that because of this fact, the legislation allows the employee to trigger the
redundancy after quite a short period of time (see below).
Short-time
This exists where there is a reduction in the amount of work available, leading to a reduction in weekly
earnings to less than half the normal weekly earnings; or a reduction in the hours worked to less than
half the normal weekly working hours. The credit union must give notice that the short-time is of a
temporary nature; failure to do so may leave an employee open to claim for redundancy payment.
Lay-off
This occurs where the services of an employee are not required because of lack of work carried out by
that employee, provided that the credit union gives notice to the employee beforehand that the break
in employment is of a temporary nature. Where a credit union fails to give notice of lay-off, it is left
open to claims for statutory redundancy payments.
An employer cannot invoke either short-time or lay-off unless the contract of employment
specifically contains a clause allowing for such action to be taken. If it is not in the contract, an
employer must get the employees’ agreement before taking such action, which can be difficult.
If an employer imposes short-time or lay-off on employees where no contractual clause exists and
where employees have refused to agree to it, the employer runs the risk of employee claims for
payment of outstanding wages or for constructive dismissal.
Therefore, where there is no contractual clause and the employee refuses to accept lay-off or shorttime working, an employer may have no other option but to make the employee’s position
redundant13 or to consider other alternatives.
Employee’s Right to a Redundancy Lump-Sum Payment by reason of Lay-off or
Short-time
Where an employee has been laid off or kept on short-time or a mixture of both either:

for four consecutive weeks or

for a broken series of six weeks where all six weeks occur within a 13 week period,
the employee is entitled to claim redundancy payment (statutory only).
13
An employee can claim redundancy where they have been laid-off or put on short-time or a combination of both, for
at least four consecutive weeks, or for a broken series of six weeks within a period of 13 consecutive weeks .
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HR Guideline: Managing Employee Costs
The procedure for claiming redundancy is very technical and must be followed strictly. It can be
summarised as follows:
Step 1 – Notice of Intention to Claim (NIC)

An employee must give their employer written notice stating that he/she intends to claim a
redundancy payment because of lay-off or short-time. This is referred to as a notice of intention to
claim (NIC) and must be sent to the employer no later than 4 weeks following a qualifying period or
lay-off.

A notice of intention to claim a redundancy payment is separate from an employee’s notice to
leave employment. The employee can give in his/her notice to leave before the notice of intention
to claim, or at the same time, or later. If he/she has been laid off or on short-time for 4
consecutive weeks (or 6 weeks in 13), he/she does not prejudice the claim for a redundancy
payment if he/she then leaves the employment, provided notice to leave is given as detailed in
Step 3 – Resignation.
Step 2 – Counter Notice by Employer

Upon receipt of an NIC an employer may opt to serve a counter-notice to an employee. This must
be in writing and must clearly state that liability for a redundancy payment will be contested. This
must be done within 7 days of service of the NIC.

If the employer has served a counter-notice within the period specified above, the employees will
have no right to a redundancy payment unless they apply to an Industrial Tribunal. The employer’s
only defence to a claim (provided that the employees have complied with the requirements of the
procedure) is that, at the date of service of the NIC, there was a reasonable prospect that the
employees would, not later than four weeks after that date, resume normal working for a period of
not less than 13 weeks during which the employees would not be laid off or put on short-time. The
employer can only use this defence if he or she has served a valid counter-notice. Therefore it is
suggested that counter-notice includes a statement to this effect.
Step 3 - Resignation

In order to be entitled to a redundancy payment under this scheme an employee must give notice
to terminate their contract of employment. The period of notice that the employee must give is
that which is required by their contract of employment, or, in the absence of any clear, agreed
notice period, a minimum of one week. The employee must clearly state the period they are
giving, e.g. one week (or longer contractual notice) as failure to do so can render their claim for a
redundancy payment invalid. While an employee is not required to put this notice in writing, it
may avoid any doubt around the legitimacy of their claim for a redundancy payment if they do and
clearly state the notice period they are giving.

This notice must be given:
15
 If the employer has not served a counter-notice, within four weeks of service of the NIC; or
 If the employer has served a counter-notice and then withdrawn it, within three weeks of
the withdrawal; or
 If the employee has been awarded a redundancy payment by a tribunal, within three
weeks from the date of receipt of decision.
Step 4 – Industrial Tribunal Action for Non-Payment of Redundancy Pay

If the employer fails to pay the redundancy pay following the termination of employment by the
employee, the employee may then pursue a claim for redundancy pay to the Industrial Tribunal.
The normal time limit for making such an application is 6 months from the effective date of
termination. However, in line with statutory dispute resolution procedures an employee must first
send a written statement claiming the redundancy payment to their employer and wait at least 28
days, before pursuing a claim to the Industrial Tribunal. The time limit for pursuing a claim to the
Industrial Tribunal under these circumstances may be extended to allow the grievance procedure
to be followed.14
i. Non-renewal of Temporary Contracts
A fixed term employee is someone who is employed under a contract which contains a specific start
and end date, or who is employed to carry out a specific task or project or the continuity of whose
contract is contingent on a particular event such as the return of an employee from sick leave.
For those credit unions with employees on fixed term contracts, non-renewal of those contracts may
be regarded as an easy method of reducing staff. However, please note: If an employee is employed
for a fixed term or for a specified purpose and that term expires or that purpose ceases without the
contract being renewed, then the employee may be entitled to redundancy, depending on their
length of service with the credit union.
Where a fixed term contract is coming to an end and is not being renewed, the credit union must
follow the 3-step dismissal procedure15 (in accordance with required statutory procedures). Failure to
follow the statutory procedure can make a dismissal automatically unfair and can also lead to
increased compensation for the former employee.
14
The above statutory procedure is very complex. You can refer to the information note contained on the Labour
Relations Agency website http://www.lra.org.uk ,Information Note 5: Temporary Lay-Off and Short-Time Working
15
See Appendix 3 for a General Dismissal Procedure, compliant with the Statutory Dismissal Procedure
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HR Guideline: Managing Employee Costs
2.3: RETIREMENT AND REDUNDANCY
The credit union may, having considered the above options, decide that a reduction in current staffing
levels is required. The credit union should consider voluntary departure, through early retirement or
voluntary redundancy before considering compulsory redundancies.

Voluntary departure: early retirement or voluntary redundancy.

Compulsory redundancy, where employees are required to leave employment without their
consent.
j. Voluntary Departure: Early Retirement
Early retirement can be an attractive choice for more senior employees and can reduce employee
numbers without the need for redundancies. This option, however, depends on the strength of the
pension scheme in place and whether the funds can sustain early retirement. The credit union must
also ensure that the business is not left vulnerable through the loss of too many key experienced staff.
No action should be taken until the credit union has contacted its pension provider and can make an
informed decision.
Phased Retirement
An alternative may be phased retirement. This offers employees an opportunity to reduce their fulltime commitment to the credit union over the period leading up to, or past, normal retirement age.
For example, a phased retirement scheme could allow full-time employees to continue working,
usually with a reduced workload or reduced responsibility, for a period of years prior to retirement. By
phasing retirement, the credit union could reduce pension costs while retaining an experienced worker
past the normal retirement date. However, each pension scheme is different and the credit union
should discuss the benefits of implementing an early or phased retirement scheme with their pension
providers.
k. Voluntary Departure: Voluntary Redundancy
Voluntary redundancy occurs when the credit union, faced with a situation where a smaller workforce
is required, asks for volunteers for redundancy. The people who then volunteer for redundancy are, if
they fulfil the normal conditions, eligible for statutory redundancy. There must be a genuine
redundancy situation in the first place.
Voluntary redundancy will normally have a less demoralising and disruptive effect on the workforce.
There are some compelling reasons for voluntary rather than compulsory redundancy.
17

Fairness: A voluntary departure package is an indicator that the credit union is treating workers
fairly, which will in turn help smooth subsequent workplace adjustments.

Speed: Voluntary packages usually provide a better severance package than the minimum
statutory benefit. Where compulsory redundancy is politically difficult, the enhanced benefit is an
incentive for workers to leave relatively quickly and in larger numbers.

Getting around restrictive legislation: Compulsory redundancy procedures are determined by
legislation and sometimes within collective bargaining agreements. The credit union may want to
use voluntary redundancy to avoid a compulsory redundancy situation and in particular, having to
decide criteria for selection for redundancy.
In short, voluntary redundancies can ensure a smoother, faster process of cutting the workforce with
less risk of confrontation with trade unions or employees. On the other hand, 'Voluntary redundancy'
is generally more expensive as longer serving employees are more likely to volunteer and so will need
higher redundancy payments. Also, it is not uncommon to offer better redundancy payments to
encourage people to leave. In situations where more people volunteer to leave than necessary, the
credit union should consider how some employees will react if they are not chosen and think about the
best way to deal with this.
Another important issue is the gap in skills and experience which may be created by accepting those
employees who volunteer for redundancy and which might affect the future success of the credit
union. They may include some people who might be expected to contribute most to the credit union’s
future achievement (e.g. key senior employees). One way of overcoming these difficulties would be to
gain agreement from either the trade union representatives (if applicable) or the employees
themselves to limit applications for redundancy to certain categories of worker (e.g. teller). In practice,
many redundancy agreements confirm the employer’s right to decide whether a particular employee
should be allowed to leave.
Voluntary redundancy programmes often include an early retirement component. In such situations,
employees cease work before the normal retirement age and receive a partial or full pension. The
credit union’s pension provider must be consulted in such situations before any decisions are made to
offer an early retirement option to employees.
l. Compulsory Redundancy
What is Redundancy?
Redundancy arises where a person’s job no longer exists for any one of a number of reasons: a closure,
a transfer of a business, restructuring, for example. Other examples include a partial closing down of a
business, a decrease in requirements for workers of a particular kind or an employer’s requirements
for fewer employees due to an economic recession.
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HR Guideline: Managing Employee Costs
Redundancy is given a broad definition under the law16 and occurs where:

The employer has ceased to carry on the business for the purpose or in the place where the
employee was employed

Work has diminished or is expected to diminish

The manner in which work is done is to change

The work for which the employee was employed will be done by another person who is also
capable of doing other work for which the employee being mad redundant is not trained

An employee gives written notice by reason of being placed on short time or lay-off

A voluntary redundancy scheme is put in place and an employee volunteers

The employer intends to carry on the business with fewer or no employees
Compulsory redundancy is best achieved through clear objectives, open communication, and
transparent and fair processes.
Please see Appendix 2 for more detailed information on Redundancy.
In Summary
Redundancy is a disruptive and often costly measure. It is crucial, therefore, to realise the necessity of
looking at alternatives. While many of the measures mentioned may incur some cost, this would be
minimal compared to a wide-scale redundancy initiative, particularly in the case of employees with long
service.
Moreover, there can be hidden costs associated with redundancy: the loss of key employees with a wealth
of credit union-specific knowledge may prove far more detrimental to the revival of the business in the
long term. Remember, the credit union has probably invested significant time and resources to bring the
employees up to their current level of skills and experience. When the economic situation changes in time
again, the credit union must be prepared with the right employees – not scrambling to find resources to
recruit and train new talent.
16
Employment Rights (Northern Ireland) Order 1996
19
Section 3: Consultation and Negotiation
Conflict is inevitable where tough decisions need to be made. Managing change effectively involves
honest communication with employees before any decisions are made. It is essential to meet with
employees to discuss the credit union’s problems, to provide necessary background information, to
acknowledge the insecurities employees will be experiencing and to invite responses and suggestions from
the staff. Be honest about what tough decisions may need to be taken. In order to minimise employee
stress, insecurity and mistrust, honesty and fairness throughout the change process is essential, even when
it means relaying unpleasant decisions that you know will cause dissent.
3.1: PURPOSE OF CONSULTATION AND NEGOTIATION
The purpose of consultation is to give everyone involved an early opportunity to share the problem and
discuss the options. It can encourage better cooperation between the credit union and employees, reduce
uncertainty, and lead to better decision making.
In particular, when faced with a redundancy situation, the individual employees (or their trade union or
employee representatives) may be able to suggest acceptable alternative ways of tackling the problem or,
if redundancies are inevitable, ways of reducing hardship.
The credit union will then be in a better position to decide whether the needs of the business can be met in
some way other than by making people redundant.
Consultation should include ways of:

avoiding the redundancies;

reducing the number of employees to be made redundant; and

reducing the effects of the redundancies.
Consultation should begin in good time and be completed before any changes are implemented.
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HR Guideline: Managing Employee Costs
Consultation Process: A Suggested Approach
Essentially any change management process involves 3 key elements:

Communicate with employees (and their trade union if applicable) on the current situation and the
need for the particular changes being sought.

Consult with employees (and their trade union if applicable) on the various options applicable,
including redundancy packages and procedures.

Negotiate on issues such as changes to contracts, pensions, and working practices.
Step-by-Step:
1. Meet with employees (and their trade union if applicable):

Communicate the current situation

Highlight the credit union’s proposals to address the problem

Ask employees for feedback/suggestions

If redundancy is an option, ensure employees are provided with opportunity to present
alternatives

After meeting: Provide employees with summary in writing
2. Provide employees with a contact person with whom they can discuss concerns, ask for
clarification etc.
3. Give time to employees (e.g. 2-3 working weeks) to come back with alternative suggestions
4. Collate employee feedback/suggestions
5. Reconvene meeting with employees:

Provide update and action required

Explain why staff suggestions were/were not utilised

Communicate plan for implementation of changes including time frame/dates

Advise employees that some changes will require specific individual approval from each
employee affected by the change

After meeting: provide employees with summary in writing
6. Keep records of entire process: from initial decision to make workplace changes through to
final implementation of change
21
3.2: CONSEQUENCES OF POOR COMMUNICATION
If a situation involving significant change to employees’ working conditions, staffing levels or to pay is
handled badly, the credit union can expect:

Productivity to drop significantly;

The credit union’s image and reputation to be significantly damaged, making it more difficult to retain
key employees or to recruit quality employees in the future and

Members to become nervous about the stability of the credit union, particularly in the current financial
services environment.

In the case of redundancies the credit union can expect:
o
Departing employees to express anger towards the credit union and to feel extremely
anxious about their future career prospects;
o
Morale of those employees left behind to drop, with people feeling disillusioned, paranoid
about being ‘next to go’, feeling guilty and demoralised and just waiting to be told their
jobs are also gone
Therefore, consider all the options…

Plan and implement carefully

From the very outset, make sure you are fully aware of your legal obligations. Once this is done, set
about giving careful thought to exactly what you hope to achieve by implementing your proposed
changes.

Maintain a sense of trust

Communication is central. By being open and honest and truly trying to make the very best of a bad
situation, organisations demonstrate that they are trustworthy, that they value their employees and
other stakeholders.
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HR Guideline: Managing Employee Costs
Section 4: Follow-Up
Monitor Impact of Cost-Cutting Measures:
Have the cost-cutting measures sufficiently addressed the credit union’s financial concerns? Ongoing
monitoring of the financial performance of the business will provide such answers and may result in further
cost-cutting measures. Ongoing performance should be communicated to employees regularly.
Impact on Employees Following Change
How is employee morale, performance and productivity following the implementation of change? Retraining and ongoing communication is essential to maintain positive workplace relations and to avoid
conflict as much as possible.
Remember, people’s feeling of ‘security’, that they have a ‘job for life’ has almost disappeared in today’s
current climate.
Survivor Syndrome
The assumption that those who survive redundancy are the ‘lucky ones’ who will be motivated simply
because they survived the process, is dangerous. In fact, according to ongoing research, studies have
shown that survivors experience significant emotional strain.
Employees that have been through the process say they feel guilt because they kept their job, increased
distrust, anxiety, stress, absenteeism, combined with reduced self-esteem.
According to John Philpott, chief economist of the CIPD17: “…redundancies risk either a decline in morale or
a loss of trust on the part of remaining employees, with adverse potential effects on staff turnover and
productivity.”
Honest and Open Communication
Therefore, it is essential that the credit union can:

Explain the entire decision-making process that led to the particular changes in detail, with the aim of
illustrating to employees that the credit union acted fairly throughout the process.

Illustrate that there was genuine involvement of employees in the decision-making process that led to
the particular changes. People feel more in control when they are allowed take part in the change
process.
17
Source: ‘Happy New Year Anyone?’, People Management Magazine, Vol 15, No., 1, January 2009
23

Show that all employees are bearing the share of the burden equitably. One group of employees
should not feel hard-done-by compared to another group, e.g. ALL staff should take a pay cut if one is
proposed – senior management should not be excluded

Show that everyone was treated with dignity and respect throughout the entire process.
If the credit union can show that work colleagues were treated with respect throughout, and employees
can understand the rationale behind the decisions taken, the longer term damage to the employment
relationship is minimised.
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HR Guideline: Managing Employee Costs
Appendix 1: Sample Redundancy Policy
It is the policy of _______________________________ Credit Union Limited (the credit union) to make
sure, as far as possible, that all employees have security of employment.
However, from time to time there may be changes in market conditions, changes affecting the needs of the
business or technological developments that may affect staffing needs. In the event of such change
occurring, the credit union, in consultation with the employees [and their trade union representative –
insert if applicable], will strive to reduce the effect of redundancies by giving employees enough time and
help to find alternative employment. If compulsory redundancies cannot be avoided, these will be handled
in a fair, consistent and sympathetic manner in order to reduce as much as possible any hardship that the
employee(s) concerned may suffer.
Consultation
The credit union is committed to keeping employees/employee representatives informed as much as
possible about staffing needs and any need for redundancies that might arise. The credit union will consult
with employees/employee representatives should this situation arise with a view to avoiding redundancies
if possible, minimising the numbers of employees that might be made redundant, and in an effort to
reduce the effect of redundancies on the credit union’s employees.
Where a redundancy situation does arise, the credit union will inform employees of:

The reasons for the redundancies;

The number and/or category of employees to be made redundant;

The way in which employees will be selected for redundancy;

How the redundancies will be carried out, including the period of time during which people will be
made redundant; and

How redundancy payments will be calculated.
In a redundancy situation, the credit union is committed to providing suitable arrangements for reasonable
time off with pay for those employees who are to be made redundant to find alternative employment or to
make arrangements for training.
25
Alternatives to Redundancy
The credit union is committed to reducing any possible redundancies by examining any other viable
options available. Such options might include:

Review working hours

Reducing overtime

Training or Retraining of employees

Review and Amend Policies

Career Breaks

Early Retirement

Natural Wastage or Recruitment freeze

Pay pause/pay freeze/pay cut

Short-time working or lay-offs [can only be included where a specific clause exists in contracts of
employment]
This list is not exhaustive.
Selection Criteria
If, having taken all viable measures to reduce staffing levels, there are still more employees than is
necessary, the credit union may have no alternative but to make some positions redundant. The selection
criteria used will be fair, consistent, unbiased and non-discriminatory. Employees will be selected for
redundancy by ___________________________________ [insert those that will have responsibility, e.g.
Staff Liaison Committee/Cost-cutting committee etc.] based on the following selection criteria [note: this is
an example only – the credit union can produce its own selection criteria]:

The skills, experience and ability of the employee;

The standard of work performance;

The attendance or disciplinary record of the employee; and

Voluntary redundancy.
Dismissal Procedures
The three step general dismissal procedure will be followed when contemplating dismissing an employee
by reason of redundancy.
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HR Guideline: Managing Employee Costs
Step 1 – Statement of Grounds for Action and Invitation to Meeting
(Insert name) will inform the employee in writing of the alleged characteristics or other circumstances
which have led to the contemplation of the dismissal of the employee (or action short of dismissal) and
invite the employee to a hearing to discuss this.
Step 2 – Meeting
Prior to the hearing the employee will be provided with particulars on the basis for the grounds given in
the statement in step 1. The employee will be given reasonable opportunity to consider his/her response
to that information before any hearing takes place. The hearing will be conducted by (Insert name). No
action (other than suspension on full pay) will be taken before the hearing takes place.
After the hearing the employee will be informed in writing of the decision and of his/her right of appeal
against this if he/she is not satisfied with it.
Step 3 – Appeal
If an employee wishes to appeal he/she must inform the credit union within 5 working days. Where an
appeal is requested, the employee will be invited to an appeal hearing. The Appeal hearing will be
conducted by (Insert name) and shall be held within 5 working days of the request for an appeal. The credit
union may implement any decision taken at the first hearing before the appeal hearing is held. After the
appeal hearing the employee will be informed in writing of the credit union’s final decision within 5
working days.
Looking for another Job
All employees who have been provided with notice of redundancy have the legal right to seek alternative
employment or to arrange training in order to find employment.
Severance Pay
An employee’s severance pay will be calculated as follows:

Redundancy payment

Overtime pay

Holiday pay

Time off owed
27
Appendix 2: Redundancy Key Points
Redundancy occurs where an employer reduces the workforce because either the amount of work
available has ceased or diminished, or the method of work has changed or there is a requirement for the
work to be done by fewer employees. An employer must be able to prove that a redundancy was
legitimate (valid) and that the selection procedure used to make certain positions redundant was fair. If
redundancies are being considered all procedural aspects must be conducted in accordance with the law
and the credit union should obtain professional HR advice in advance.
Requirement to keep it Impersonal
It is essential to remember that it is the role, not the person that is redundant.
In the event that an employee challenges a redundancy (usually in the form of a claim of unfair dismissal),
the credit union must be able to show:
a) that the redundancy was genuine, and
b) that the selection criteria used was fair, unbiased and consistently applied.
The 3-step general dismissal procedure needs to be followed when contemplating dismissing and
employee by reason of redundancy as discussed earlier (see Appendix 3 also). The employer, in addition to
these steps should act fairly and reasonably in arriving at any decision to dismiss an employee. This will
include for example, consultation with the employee and offering suitable alternative work, where
appropriate.
Selection for Redundancy
Where a redundancy situation occurs, those employees to be made redundant are those whose functions
are redundant.
Where the credit union’s need for a number of employees to perform a similar role or function diminishes,
one or more employees must be selected from the group of employees affected to be made redundant
and the others retained. It is essential that employees are selected fairly for redundancy in this situation.
Fair selection involves applying selection criteria which may, as far as possible, be objectively justified
and applied in affair manner, which will require some level of discussion or consultation with the
employee to be affected by the application of such criteria.
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HR Guideline: Managing Employee Costs
Where the credit union is faced with the possibility of redundancies, the trade union or the employees
should be approached directly and invited to put forward alternative proposals which should carefully be
considered by the credit union.
If the proposals are not a viable option the trade union and/or employees should be told, and only after
this should notice of redundancy be served on employees.
Selection Criteria
There is nothing in the law specifying the criteria to be adopted by an employer when selecting employees
to be made redundant: it is a matter for each employer to choose the criteria to be applied in the
selection process.
If an employee takes a claim of unfair selection for redundancy, those selection criteria will come under
very close scrutiny. The credit union must be able to defend the criteria chosen and the rating/score given
to the employee under each heading.
The onus is on the employer to justify the selection for redundancy of the employee(s) claiming unfair
dismissal. The Tribunal will examine the assessments used for selection to make sure that reasonable
criteria were applied to all the employees concerned and that the selection for redundancy of an individual
employee in the context of such criteria was fairly made. Each individual employee has the right to be
fairly treated.
Employees must be made aware of the selection criteria applied and should be allowed make a
constructive contribution to the selection process.

Objectivity: In theory, employers can use a wide range of selection criteria, such as qualifications,
competence, ability, attendance record, disciplinary record, skill levels etc. An employer can resort to
the ‘last-in-first-out’ principle, but be aware that this could be challenged by younger employees with
less length of service, by claiming age discrimination under equality legislation.

Whatever selection criteria is used, it must be relevant, e.g. you cannot select an employee for
redundancy based on a disciplinary warning that has lapsed (you cannot use misconduct as a reason
for selection for redundancy since the employment continued after the alleged ‘misconduct’)

Relevant legislation: Whatever selection criteria are chosen, employers need to make sure that they
do not directly or indirectly discriminate against anyone because of their gender, marital status, family
status, age, race, religion, disability, sexual orientation or membership of the Traveller community.
Equally employers must be careful not to discriminate against part time or fixed term workers.

Capable of scrutiny: Any selection criteria used must be capable of scrutiny in some future date.
Personnel records are an excellent source of information, but only where they have been continuously
29
updated and adequately maintained. Other examples of useful information that can be used as
selection criteria:
o
Staff / skills audits, which help identify critical skill sets that must be retained or are in short
supply
o
Individual appraisal or assessment records,
o
Education and qualifications records
o
Training records, and evidence of employee response to training
o
Attendance records, which detail unauthorised leave and medical absences (whether
uncertified or certified by a doctor). However, be careful of absences which are related to a
“disability” or to pregnancy as this could lead to a claim of disability/sex discrimination.
o
Special interviews and tests specifically for selection prior to severance can supplement other
information or fill in the gaps where the credit union’s records are poor or missing, only if they
are undertaken in an objective manner and if they probe and test for relevant skills and
competencies.
o
Eligibility is another mechanism for selection and targeting. For example, if there is
overstaffing in particular group of employees, e.g. teller staff, redundancy may be offered only
to that particular group
Using a range of the above tools is wise, and can help assure employees (and their trade union
representatives) that the process is being carried out in a fair and transparent manner. Selection tools will
be most effective where an effective appraisal system is already in place, together with competent and
professional management of the process.
Service Requirement
Employees must be over 16 and must have at least 104 weeks’ continuous service in insurable employment
to be eligible for a redundancy payment under the law.
Notice
Employees are entitled to whichever entitlement provides them with the longer period of notice from the
following two options:
1. Entitlements (based on length of service) under Employment Rights (Northern Ireland) Order 1996, i.e.
the credit union must give an employee:
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HR Guideline: Managing Employee Costs
o
at least one week's notice after one month's employment;
o
at least two weeks after two years;
o
at least three weeks after three years and so on up to 12 weeks after 12 years or more.
or
2. The notice period stated in the contract of employment.
Right to time-off to look for work
An employee is entitled, during the notice period, to reasonable, paid time-off to look for new
employment or to make arrangements for training for future employment.
The credit union can ask the employee to provide evidence of arrangements made for these purposes and
the employee must furnish such evidence provided it is not prejudicial to the employee’s interest.
Redundancy Payment
Employers are obliged by law to pay redundant employees what is known as "statutory redundancy
entitlement".
The amount used for redundancy payment depends on:

How long an employee has been continuously employed by the credit union;

How the employee’s years of continuous service relate to a particular age band (up to a
maximum of 20 years); and

An employee’s weekly pay up to a legal limit (the current weekly limit is £350, but this is
reviewed annually). Overtime earnings are not included unless overtime was part of the normal
working week.
All statutory redundancy payments are tax-free.
31
Calculation of Lump Sum:

0.5 week’s pay for each full year of service where age during the year is less than 22;

week’s pay for each full year of service where age during the year is 22 or above, but less than 41; and

1.5 week’s pay for each full year of service where age during the year is 41+

Reckonable service excludes absence from work because of lay-offs or strikes. However, short-time
work is reckonable.
Payments in excess of the Statutory Entitlements
The ability to make any payment in excess of the statutory entitlement will turn on the financial and
commercial circumstances facing the credit union.
Employer Inability to Pay
If an employer is unable to pay an employee their entitlements, the Department of Employment and
Learning may pay the full statutory amount direct to the employee from the National Insurance Fund.
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HR Guideline: Managing Employee Costs
Collective Redundancies
There are a range of additional obligations involved where ‘collective redundancies’ are carried out by an
employer. A collective redundancy is a term used to describe a situation in which 20 or more employees
are being made redundant at one establishment.
In a collective redundancy situation, 30 days before any notice of dismissal is served on employees, the
employer must provide information to and engage in a detailed consultation process with employee
representatives. The Department of Employment and Learning must also be notified in writing of the
situation.
Given the number of employees in most credit unions, very few will fall into the category of ‘collective
redundancies’. However, if any credit union falls into this category, it is essential that professional HR
advice is sought before starting this process.
Redundancy Policy and Procedures
In order to reduce risk of liability when making redundancies it is essential that comprehensive, well
drafted redundancy procedures and policies are in place to ensure fair procedures are followed. A
cornerstone of this procedure should include a meeting with the employee to discuss any alternatives to
redundancy. As well as meeting with the employee it is essential that details of the meeting are put to the
employee in writing.
The advantages of having clearly established policy and procedures in relation to redundancy are that:

there is a common understanding of the terms, conditions, and definitions applicable to redundancy;

the prospect of redundancy has been raised and discussed; and

there are clear guidelines for conducting redundancy activities (such as calculation of amounts owed to
each employee).
Any redundancy policy and procedure should be set out and agreed by all involved before restructuring
starts.
Please see Appendix 1 for a Sample Redundancy Policy
Employers making redundancies may face successful claims for unfair dismissals even where a genuine
redundancy exists if they do not follow fair procedures and consider alternatives to avoid the redundancy.
Potential legal Claims against the credit union
Where an employee has been dismissed due to redundancy, he/she could claim that:
33

the particular situation was not a genuine redundancy, i.e. that the employer used redundancy as an
excuse to dismiss the employee

they were unfairly selected for redundancy or

they were selected for redundancy for a discriminatory reason under employment equality law, by
reason of their sex, sexual orientation, race, religion, political opinion, disability, or age18.
18
The main legislation currently relevant to discrimination in Northern Ireland includes:
The Sex Discrimination (NI) Order 1976 (as amended);
The Equal Pay (NI) Act 1970 (as amended);
The Disability Discrimination Act 1995 (as amended);
The Race Relations (NI) Order 1997 (as amended);
The Fair Employment and Treatment (NI) Order 1998;
The Employment Equality (Sexual Orientation) Regulations (NI) 2003; and
The Employment Equality (Age) Regulations (NI) 2006
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HR Guideline: Managing Employee Costs
Appendix 3: General Dismissal Procedure
[This is compliant with the Standard Statutory Dismissal Procedure]
This procedure applies where the credit union is contemplating dismissing an employee. It does not apply
in cases of misconduct for which there is a separate procedure. It will apply, for example, in cases of
dismissal related to capability, redundancy and expiry/non renewal of a fixed term contract.
The procedure below only outlines the minimum steps which must be followed to ensure compliance with
the Statutory Procedures. Following this procedure in a dismissal situation does not guarantee that an
Industrial Tribunal will find the dismissal ‘fair’. The credit union, in addition to these steps should act fairly
and reasonably in arriving at any decision to dismiss an employee. This will include for example,
consultation with the employee and offering suitable alternative work, where appropriate.
General Procedures
The credit union will endeavour to ensure that:

Each step and action under the procedure is taken without unreasonable delay

Timing and locations of hearings are reasonable

Hearings are conducted in a manner that enables an employee to explain his/her case.

The employee must take all reasonable steps to attend the hearings.

At hearings and appeal hearings the employee may, where reasonably requested, be accompanied by a
fellow worker from the employer or a trade union official.

Dismissal appeal hearings will be conducted as far as reasonably practicable by a more senior manager
than the manager who took the action being appealed unless the most senior manager attended the
hearing.
Procedure
Step 1 – Statement of Grounds for Action and Invitation to Meeting
[Insert name] will inform the employee in writing of the alleged characteristics or other circumstances
which have led to the contemplation of the dismissal of the employee (or action short of dismissal) and
invite the employee to a hearing to discuss this.
Step 2 – Meeting
Prior to the hearing the employee will be provided with particulars on the basis for the grounds given in
the statement in step 1. The employee will be given reasonable opportunity to consider his/her response
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to that information before any hearing takes place. The hearing will be conducted by [Insert name]. No
action (other than suspension on full pay) will be taken before the hearing takes place.
After the hearing the employee will be informed in writing of the decision and of his/her right of appeal
against this if he/she is not satisfied with it.
Step 3 – Appeal
If an employee wishes to appeal he/she must inform the credit union within 5 working days. Where an
appeal is requested, the employee will be invited to an appeal hearing. The Appeal hearing will be
conducted by [Insert name] and shall be held within 5 working days of the request for an appeal. The credit
union may implement any decision taken at the first hearing before the appeal hearing is held. After the
appeal hearing the employee will be informed in writing of the credit union’s final decision within 5
working days.
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HR Guideline: Managing Employee Costs
Appendix 4: Conducting a Staff Audit: What to Consider?
A staff audit is a fresh review of staffing. It provides up-to-date information on personnel, and will
effectively provide basic information against which proposals for change can be assessed.
Employee Information: By examining the following, the credit union should obtain some valuable
information to assist in subsequent analysis:

Type of workers
How many permanent full-time and part-time employees; how many short-term or temporary
workers; temporary workers engaged for many years (who may have acquired additional rights);
employees on disciplinary suspension; employees on leave

Operational Information
Job titles, function, salary grade, level of education, age, years of service, and other operational
information relevant to employees working in the credit union.
The minimum information that the credit union should obtain for each employee:

o
Age
o
Years of service and service start date
o
Grade and/or category of worker
o
Salary
o
Allowances
Employee Skills
Skills assessments are important in maintaining service levels and quality, and they generally include
assessment of individual employee skills; identification of key people whose knowledge, experience,
and institutional memory are critical to the effective operation of the credit union. Another name for
such an exercise is a Training Needs Analysis19.

Range and Type of Employee Benefits
For each employee, or category of employee, what benefits are provided? Include basic salary,
bonuses or other allowances, benefits-in-kind (for example subsidised medical insurance payments,
company car, company mobile phone), and pension contributions by the credit union.
19
Please contact the ILCU Training Department for advice or assistance on conducting a Training Needs Analysis
37

Employee Records
Records of employee performance are an important source of information. Where appraisal or
disciplinary records are incomplete, it becomes very difficult to use these criteria as a basis for taking
particular action e.g. selecting one individual over another for redundancy.
Analyse Results
Review the overall performance of the credit union by asking some straightforward questions:

What are the credit union’s key business activities currently?

Are the current methods and work processes associated with these key activities sufficient and
appropriate?

Are certain activities needed at all? Have some products, services, reports or work practices reached a
point where they should be discontinued?

If the activity is still needed, is it being carried out in the most efficient way?
Such reviews are critical because they can expose aspects of the business that are redundant thus allowing
the credit union to make changes accordingly.
In relation to staffing: once the above has been completed the information gained will help compare
existing staffing levels and types of employees with what are needed.

How do staffing levels within the credit union compare with other credit unions in the locality or
nationally20? Please contact the ILCU for further information on member: staff ratios

If surplus employees are identified, where are they within the credit union?

Are there any particular skills that are scarce?

Will future market or operational changes place some skills in more demand than others?

Are there particular key individuals or categories that must be retained–perhaps because their
experience is critical to the continued operation of the credit union?
The credit union is now in a better position to consider its options.
20
On average, the member: staff ratio in Northern Ireland is 875 members for every one employee. This
information provides an indication only of staffing levels within credit unions, but nevertheless may assist credit unions
who think they might be over or under-staffed.
38
HR Guideline: Managing Employee Costs
Sources of Information
Career Decisions Limerick, “10 Commandments for Effectively Managing the Downsizing Process”, 2008
Department of Enterprise, Trade and Employment, ‘Guide to the Redundancy Payments Scheme:
Redundancy Payments Acts 1967 to 2007’, 2007
IBEC, “Employer’s Guide to Redundancy”, October 2008
IBEC, “HR Databank”, Volume 2, Issue 14, February 2009
Law Society of Ireland, “Employment Law”, Byrne, G., Kennedy, M., Shannon, G. & Ni Longain, M., Oxford
University Press, 2003
Labour Relations Agency, “Advice on Handling Redundancy”, October 2007
World Bank Labor Toolkit, “Labor Issues in Infrastructure Reform: A Toolkit”
Useful Contact Details:
Labour Relations Agency: Helpline Telephone 028 9032 1442 or visit their website at www.lra.org.uk
Equality Commission for Northern Ireland: Helpline 028 90 890 890 or visit their website at
www.equalityni.org
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