Redundancy & Termination of Employment

 What is Redundancy ?

Redundancy is the process of letting go of personnel for various business-related causes. The majority of the time, there are economic factors at play, such as the job category being superfluous or drastically reduced, a lack of funding or projects, company relocation, or overall business cessation.

Redundancies may occur voluntarily or by force. If volunteer workers accept the offer when it is made to them. When compelled, the organization must decide who will be let go, usually using the Last in, First out method.

 Usually, conversations with employers, workers, and other stakeholders take place prior to layoffs in order to determine how a company might prevent a position from being laid off by reorganizing or creating other possibilities.

Within very tight deadlines, redundant employees may file a claim for compensation for their termination of employment.

 

A few explanations for redundancy

• There is no longer as much of a necessity for that position for economic, political, or cultural reasons.

• The previous position is no longer required due to the introduction of a new vertical.

• Either the work environment is changing, or the company is closing down completely.

• Since taking over, the new management has completely redesigned the organization, making the position more crucial than ever.

What is Termination ?

 When one or both parties adhere to a contract's termination provision, which permits them to cancel the arrangement, it is known as termination. The justifications for the termination will be outlined and defined in that provision. Sometimes, all it takes to terminate a contract is for both parties to agree to do so. Nonetheless, it is frequently employed in situations where one party has breached the contract, failed to live up to expectations, or engaged in dishonest behavior. Furthermore, terminations frequently occur when unanticipated events prevent the contract from being completed.

 

Benefits of terminating a contract

Terminating a contract when it is no longer advantageous to one or both parties would be one of its key advantages. It denotes the ability of an organization or individual to leave circumstances that fall short of the requirements outlined in the agreement.

 It furthermore offers a chance for both parties to clearly define expectations from the start. Both parties are aware from the beginning of what might end a working relationship by specifying what would legally terminate an agreement and what steps are necessary to do so. It also prevents parties from being bound to one another in a scenario when both parties lose out. Alternatively, individuals have the legal right to void the agreement, freeing them to pursue other work opportunities or ventures.

 

Acts of redundancy and termination of employment

 The following acts govern redundancy and terminations of employment in Sri Lanka, according to the law:

•  Employment of Workmen’s Act NO. 20 – 1971
•  Termination of Employment of Workmen Act No. 45 – 1971
•  Industrial Disputes Act No. 43 – 1950
•  Office Employees ( Regulation of Employment and Remuneration ) – Act of 1954 (desaram, 2023).

 The Company must give written notice to the workers and trade union at least one month in advance of any redundancy or termination in accordance with the aforementioned four Acts. In this scenario, the Company's legal cause for the notification is the restructuring and branching of their business chain. (labourdept, 2017).

Employees who are laid off or fired will get severance benefits based on the duration of their employment.

When choosing which employees to lay off, the company must act impartially. Any employee can submit a complaint with the Labor Tribunal, which has the power to impact the company's reputation, if they feel they were fired unfairly. (salary, 2021).

What is the procedure for redundancy?

 In summary, the following requirements must be met: sufficient notice of redundancy must be given to those who have been selected, appropriate alternative employment within the organization must be offered when possible, adequate consultation with those affected and, where appropriate, their appointed representatives must be engaged in the selection process, and relevant redundancy pay entitlement must be made. (davidsonmorris, 2023).

•  Give reasonable justifications for redundancy.

Employees may be let go through the redundancy procedure if an employer wishes to reduce the size of its personnel or if a position becomes outdated.

This implies that when a worker's position is no longer required, they may be made redundant. This can be the result of the company closing locations, modifications to the procedures it uses, or shifts in the industry it works in.

• Think about substitutes for redundancy.

The employer must take into account alternatives to terminating employees through redundancy, even if they have a valid cause for doing so. This implies that the company needs to consider ways to lessen the possibility of having to lay off employees.

In reality, an employee has the right to file a tribunal claim if they feel their redundancy firing was unjust since their employer did not consider other options.

 

• Offering  voluntary redundancy.

Offering voluntary redundancy may be suitable in certain situations or in the organization's best interests.

Offering workers a just financial compensation package, or an incentive to quit the company, is known as voluntary redundancy.

Many things will need to be taken into account. Because the redundancy payment is discussed and agreed upon with the employee, voluntary redundancies are usually more expensive in terms of settlement.

 Employees should be informed that while voluntary redundancy is an option, the employer is not obligated to grant requests for voluntary redundancy from staff members. The package for the resignation and settlement must be approved by the employer.

 If more workers volunteer for redundancy than is necessary, you will have to choose fairly from this "pool" of candidates. Every choice made from the volunteer pool will need to follow a just process in order to prevent legal problems. Applications ought to be judged according to standards including disciplinary history, attendance, and skill level. This should also stop situations when important employees volunteer, which is something the company would like to avoid.

Should a sufficient number of workers decline to participate, you can still be forced to implement the mandatory redundancy plan, which would further delay the entire process. Deciding whether to give voluntary redundancy will depend on how the particular circumstances are evaluated.

 

• Selection of redundancies

Employees must be equitably chosen for individual redundancies using pre-established redundancy criteria.

When several people are impacted, you probably will have to choose which workers will be made redundant by identifying a pool of candidates to evaluate against predetermined standards. Employees performing equivalent or comparable tasks should be included in the pool, including those who offer cover.

Selection will not be applicable if the layoffs are the consequence of an all-staff workplace stoppage.

 

 References

• desaram, 2023. desaram.com. [Online] Available at: https://www.desaram.com/BlogArticles/termination-of-employment-contracts-in-sri-lanka.php [Accessed 08 April 2024]. 

• labourdept, 2017. labourdept.gov.lk. [Online] Available at: https://labourdept.gov.lk/index.php?option=com_content&view=article&id=92&Itemid=80&lang=en [Accessed 08 April 2024]. 

• salary, 2021. salary.lk. [Online] Available at: https://salary.lk/labour-law/employment-security/notice-and-severance [Accessed 08 April 2024]. 

• davidsonmorris, 2023. davidsonmorris.com. [Online] Available at: https://www.davidsonmorris.com/redundancy-process/ [Accessed 09 April 2024].