REDUNDANCY
Redundancy is an action taken by an employer to terminate one or more positions on his workforce on account that these particular positions are no longer needed.
What is Redundancy
Redundancy is an action taken by an employer to terminate one or more positions on his workforce on account that these particular positions are no longer needed.
Redundancy benefit falls under the purview of the Protection of Employment Act (Volume 12, Chapter 89:02 of the Revised Laws of Dominica). Although it is currently administered by the Dominica Social Security, it is not a Social Security benefit.
Redundancy Benefit
Redundancy benefit is payable to an employee who suffers loss of employment arising out of the introduction of new methods of work, whether by automation, mechanization, rationalization or reorganization due to shortage of work in accordance with the Protection of Employment Act. In order to qualify for Redundancy benefit, an employee must have been employed for at least 3 years and must be Covered by the Protection of Employment Act.
All employees, except the following categories listed below, are covered by the Protection of Employment Act:
- Government workers
- Managerial staff (who have and actually exercise authority to hire and fire employees)
- Stevedores, and Long-shore men
- Domestic workers
- Any employee who is the father, mother, husband, wife, brother, sister, son or daughter of the employer.
By virtue of being exempt from coverage, no contributions towards Redundancy are payable on their behalf; and they are not eligible for Redundancy Benefit. Such Employers are, therefore, required to contribute 7.50% in respect of those employees in comparison with the 7.75% payable on behalf of employees who are covered by the Protection of Employment Act.
The Protection of Employment Act identifies the following as possible reasons for which an employer may terminate his employee(s)’ employment on account of Redundancy:
- Where the employer has modernized, automated or mechanized all, or part of his business
- Where the employer has discontinued or ceased to carry on all, or part of his business
- Where the employer has sold or otherwise disposed of all or part of his business
- Where the employer has re-organized his business to improve efficiency
- Where the employer’s need for employees in a particular category has diminished or ceased
- Where it has become impossible or impracticable for the employer to carry on his business at its usual rate, or level, or at all, due to:
- A shortage of materials
- A mechanical breakdown
- A force majeur
- An Act of God
- A reduced operation in the employer’s business that has been made necessary by economic conditions – including a lack of, or change in, markets, contraction in the volume of work or sales, reduced demand, or surplus inventory
To qualify for redundancy benefit, an employee must have been continuously employed for a period of not less than three years, and the employment of that employee must have been terminated in accordance with one or more of the Reasons for which an employee may be made Redundant.
The amount that should be payable as Redundancy benefit is determined as follows:
Where the employee has been continuously employed by the employer for a period:
- Not exceeding five years, the Redundancy payable shall be an amount equal to one week’s pay for each year that the employee was so employed, plus two weeks pay for each year in excess of three years.
- Exceeding five years, but not exceeding ten years, the Redundancy payable shall be an amount equal to nine weeks pay, plus two weeks pay for each year in excess of five years that the employee was so employed.
- Exceeding ten years, the Redundancy payable shall be an amount equal to nineteen weeks pay, plus three weeks pay for each year in excess of ten years that the employee was so employed.
It is important to note that Redundancy Benefit payable to an employee shall not exceed an amount that is equal to 52 weeks’ pay for that employee.
A claim for Redundancy benefit must be submitted in writing to the Director, DSS, within 6 weeks of the date that the employee was made Redundant.
A person submitting a claim for Redundancy benefit must submit a written letter containing the following:
- His name and Social Security number
- His date of commencement and termination of employment on account of Redundancy
- Proof or evidence that he has been made redundant
- Proof that he has applied for the benefit from his employer and that his employer has failed to pay.
Where the DSS pays the benefit directly to the Employee(s) the amount so paid remains a statutory debt to be repaid by the Employer.
On the other hand, an Employer who has paid Redundancy Benefits to his former Employees can submit a claim for a Rebate to the Director of the DSS.
The Redundancy Rebate represents an amount refundable to the employer in respect of the amount paid to his employee as Redundancy benefit. The amount currently paid by DSS, as Rebate is 10% of the amount payable as Redundancy benefit, or the amount paid by the employer, whichever is less.
A claim for Rebate must be submitted in writing to the Director of DSS within 6 months of the date that the employee was paid Redundancy benefit.
The claim shall stipulate the following:
- The reason(s) why the employee(s) was made redundant
- The dates of commencement and termination of the employee’s employment
- How the employee’s Redundancy payment was calculated by the employer
- Proof of the amount that has been paid to the employee(s)
- Any other proof that the Director may require for determining the rights of the employee, or the amount of the rebate