“Redundancy” means the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment. (Employment Act, Section 2)
Reasons for redundancy;
Reduction of workforce, close of business, mergers, acquisitions, operational requirements (occasioned by changes in business environment, legal framework, technology etc.)
Process of redundancy;
Notification to employee, labor office and trade union
- Where the employee is a member of a trade union, the employer should notify the union concerned and the labor officer in charge of the area of the reasons for, and the extent of the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy.
- Where an employee is not a member of a trade union, the employer should notify the employee(s) personally in writing and the labor officer. The above communication is done through notice of intention to restructure letter.
Acknowledgement by labor office – The labor office shall acknowledge receipt by stamping a copy of the letter. They retain a copy of the letter while the employer retains another copy.
Termination on account of redundancy
Upon expiry of the 30 days’ notice as explained above, the employer may write to the employee termination letter on account of redundancy. The employer may give 1-month notice or pay 1 months’ salary in lieu of notice.
Payment of terminal dues is as follows;
- Payment of 1 months’ salary. (only in lieu of notice)
- Payment of a minimum of 15 days’ salary for each year worked (severance pay)
- Payment of accrued leave days not taken
- Payment of any other dues applicable to the employee according to company policy.
Note: To identify whether the client has a redundancy policy in place.
Legal Steps to be followed.
2.0 Mandatory Conditions
The Employment Act 2007 (hereinafter “the Act”) sets out the following mandatory conditions to be fulfilled by an employer before effecting a redundancy:
- Where the employees are unionised, the trade union and the local labour officer should be notified of the reasons for, and the extent of, the intended redundancy. This notice should be issued not less than a month prior to the date of the intended date of termination on account of redundancy.
- An employer is also required to notify an employee in writing of the intended redundancy, this should be a mere proposal. This notification should be given to the employee at least one month prior to the effective date of the redundancy and can be given to the employee at the same time that the labour office notification is being sent out.
- The law requires that in selecting the employees to be declared redundant, an employer should have due regard to seniority in time (last in first out principle) and to the skill, ability and reliability of each employee in the category of employees affected.
- Where leave is due to an employee declared redundant, the employer is required to pay off the employee in cash for the leave accrued but not taken.
- An employer is required to pay the employee declared redundant severance pay at a minimum rate of not less than 15 days pay for each completed year of service.
2.1 Where an employee’s contract of employment or the company’s HR Policy/Manual provides for a procedure, benefits and/or payment over and above what is set out in the law as above, the employer has to ensure compliance with the same.
2.2 Applicable Procedure
Our Employment and Labour Relations Courts have held that an employer should consult with an employee and the union before effecting a redundancy. This is intended to prepare the employee for the inevitable loss of employment and to mitigate against the harsh effects of the redundancy. In this regard, consultations with staff members are mandatory before a final decision is made and/or communicated to them.
2.3 In the case of: Kenya Union of Domestic Hotels Educational Institutions and Hospital Workers (KUDHEIHA) v Aga Khan University Hospital Nairobi  eKLR (attached herewith), the court held as follows with regard to consultations:
The employer must invite the Claimant to negotiations and or consultations with an open mind as it were… As rightly noted by the Court of Appeal above cited, consultations should not be a charade. I will add, consultations should not be a means to justify an end or an end in itself. It should entail a process towards achieving a goal. Consultation should be held so as to achieve industrial peace and ensure fair labour relations… As noted above, redundancy is a process – once notice is issued, consultations follow, identification of issues is done, if such require re-organisation of employees such is addressed; where such reorganisation may require certain position be removed, a criteria is set out and where possible terminations are inevitable they are identified, and based on the pre-set criteria, affected employees are served with termination notices and the guidelines for the issuance of such notice is set out in law.” Unfortunately our Courts have not set out the mechanics or modalities for consultations.
2.4 We set out the mandatory steps to be followed in this process as follows:
- We suggest that the initial general notice should be sent to all the employees. To our knowledge the company does not have unionisable employees and therefore no notice is required. This notice should be sent out as a mere proposal (for example using the terminology “proposed redundancy” will make this clear), and not as the notification of the termination of employment. This notice should explain the reasons for and the extent of the proposed
- The County labour officer should also be notified of the reasons for and the extent of the proposed redundancy.
- The notice period should not be less than one month
- Within the one month period as set out in step 1 above, the employees (and the union, where applicable) should be invited to engage in consultations. The Court has indicated that at this stage, the employer should explain to the employees the circumstances in which the proposal has been made. We propose that the first meeting should be held with all the employees, setting out the criteria and extent of the proposed redundancy. As the process narrows down to the affected department and the employees likely to be impacted, we propose that the next consultation should be held with the individual employees. The idea is to assist the employees understand the basis of the proposal and to give them an opportuno9ity to make representations and/or raise concerns. In effect, the company should explain the reason and the extent of the proposed redundancy as well as the criteria that will be applied in selecting the employee(s) to be declared redundant. The law provides that the “last in, first out” principle which takes into account the years of service of an employee should be applied as part of the selection criteria. Other considerations such as the skill, ability and reliability of the employee can also be taken into account. Please bear in mind that the company must be able to prove its selection criteria.
- The company is required to give the employees a reasonable opportunity to constructively engage and the employees should be encouraged to express their views. In addition, it is required to consider any alternative proposals arising in the course of these discussions while bearing in mind that redundancy should be undertaken as a last resort.
- The consultations should also include individual sessions with each employee to give them an opportunity to express any views and/or concerns that they would like addressed at a personal level.
- The discussions should be documented and minutes taken and signed. For group and individual sessions attendance should be recorded.
- In certain instances, employers have gone as far as to arrange for a third party counsellor or adviser to meet with the employees to assist them plan their finances and/or provide psychological counselling and support. The idea is to show that the decision was implemented reasonably and fairly with due concern of the effect of the redundancy upon the employees.
- During the consultation period, the company should consider whether there are any alternative employment positions that can be taken up by the employees likely to be affected. The courts have held that in considering alternative positions, this can be either at the place of employment or where practicable in sister companies, subsidiaries or related organisations.
After the consultation period is at an end, if no viable alternative to the proposed redundancy is found the company can then proceed to announce its intention to declare redundancies. it will then proceed to issue the affected employees with a written notice. This notice will confirm the decision of the company identifying the employee’s position for abolition and indicate the effective date of the redundancy. The effective date should not be less than one month from the date of this notice.
At the same time, a separate notice should be sent to the county labour office. This notice will confirm the company’s intention to declare redundancies and the rationale for this decision. It should state the name and positions of the affected employees. In effect, the reasons, extent and criteria should be reflected.
Note that these notices should be issued not less than one month prior to the effective date of the redundancy.
Finally, an employer is required to issue an employee with a certificate of service upon termination. The certificate should contain the name of the employer and its postal address, the name of the employee, the date when the employment of the employee commenced, the nature and usual place of employment of the employee and the date when the employment of the employee ceased. The employer is however not bound to give the employee a testimonial, reference or certificate relating to the character or performance of that employee.
2.5 Based on the foregoing, the entire redundancy process will take a minimum of two months.
It is important to take minutes at every meeting that is held and record attendance. Where possible, do a mapping for selection of the employees and for any redeployment. This is so that if the objectivity of the process is challenged, you will be in a position to justify the same.
2.6 If an employer does not follow due process as set out above and/or if the grounds giving rise to the redundancy are successfully challenged, the court could make a determination that the redundancy was unlawful.
As a consequence, the employee could be reinstated and/or awarded damages at a maximum equivalent of 12 months’ salary.