Organisational changes and redundancies

Costs are rising and the first companies are starting to lay off, downsize or move production to third countries for operational reasons. However, this entails a number of obligations towards employees for whom the employer no longer has a job due to these reasons.

How should an employer behave when making redundancies due to organisational changes?

Three reasons for terminations due to organisational changes

There are three grounds on which an employer can give notice to an employee:

• The employer is abolished, or part of it is abolished
  
  • It must be a cancellation of a part without compensation, for example, closing branches. It is therefore logical that the employer cannot continue to assign work to employees at the branch.
• The employer is relocating (or part of it)
  
  • It may be a matter of relocating production or a branch somewhere else.
• Employee redundancy
  
  • With regard to organizational changes, decisions made by the employer to increase work efficiency, the employer regulates the composition of the workforce.

"The most common case we encounter with clients is employee redundancy."

The employer is being abolished/relocated or part of it is being abolished/relocated

With regard to employees, the employer's decision is sufficient. When the decision is taken, a fact arises which gives rise to the possibility of giving notice to the employees.

If you have a union, you also have a duty of information to the union. However, this does not affect the validity of the notices themselves.

The employer can also offer to change the employment contract, but it is not obliged to do so.

Employee redundancy

The most common reason for termination in the area of organisational changes is redundancy.

There are three basic requirements an employer must meet:

1. They must take a decision on the organisational change and communicate this decision to the employees
   
   • It does not have to be in writing, but a letter is recommended (given that the decision must be communicated to the employee).
2. Must deliver the notice to the employee
3. The organisational change must not be fictitious
   
   • The aim must not be to get rid of an inconvenient employee, but to regulate the professional composition of employees. The selection of an employee must not be guided by criteria based on prohibited discrimination.

What if, as employers, you fictitiously make an organisational change to get rid of an inconvenient employee?

Such notice is invalid. It is assumed that if the employer abolishes a position and then opens a vacancy for a similar position, it is a fictitious change. The employee has the option of going to court on the grounds that the termination is invalid. The court proceedings would then address whether the dismissal was valid or invalid. And perhaps job advertisements for such a position could be used as evidence.

How to correctly give a notice?

The notice must be in writing. It needs to be in paper form (currently) unless the employee has agreed to be served by data mail (even then they would need to confirm this). However, this may change with the forthcoming amendment to the Labour Code. ↗.

The notice content must contain:

• what is the reason for termination (in the case of organisational changes, redundancy of the employee),
• who gives it,
• which employee it applies to, and
• which employment relationship it relates to.

Termination must be timed correctly with the organizational change. It is possible to give notice at the same time as the organisational change decision. However, in this case, the position is abolished and the employer loses the possibility to assign work to the position. And the employee is entitled to full wage compensation for the duration of the termination.

If you want the employee to stay in the position as long as possible, you can set the effective date of the organisational change to the first day following the end of the notice period.

Example: on 21 September, the employer gives notice to the employee. On the last day of November, the employment relationship ends. The effective date of the organisational change can be set to 1 December, i.e. the day after the end of the notice period.

Severance Pay

Remember that in the event of termination due to organisational changes, the employee is entitled to severance pay in the amount of:

• One times the average earnings if the employment relationship with the employer lasted less than one year.
• Double the average earnings if the employment relationship with the employer lasted 1-2 years.
• Triple if the employment relationship lasted at least 2 years.

The entire period, including the notice period, counts towards the duration of the employment relationship. The employee is also entitled to severance pay if the employment relationship was terminated by agreement.

Severance pay is not subject to social security and health insurance contributions.

If you are preparing for organisational changes

If you plan to resign due to organizational changes, please do not hesitate to contact us ↗. We will take care of the whole process for you.