12.1

INTRODUCTION

This section summarises, in general terms, the matters which a new employer should be aware of on becoming an employer in Ireland. In this respect, it addresses the following:-

  • Taxation
  • Recruitment and Discrimination
  • Appointment
  • Work Permits
  • Terms of Employment
  • Trade Unions and Industrial Relations
  • Safety
  • Sexual Harassment
  • Discipline/Dismissal
  • Redundancy
  • Transfer of Business to or from another employer.

12.2

TAXATION

An employer engaging employees must register with the Tax Authorities, and follow the procedures for the deduction of Pay As You Earn (PAYE) and Pay-Related Social Insurance (PRSI) from employees at source. At commencement of employment, employees should be in a position to provide the employer with a Certificate of Tax Free Allowances showing, on an annual, monthly and weekly basis the amount that an employee can earn before PAYE Tax is applied. PRSI, at the rate of 4.5% up to the ceiling of IR£24,200 per annum must be deducted from the gross salary and a further 2.25% is payable for which there is no ceiling. In addition to the deduction made from the employee's income, the employer must make a PRSI contribution in respect of each employee of 12.0% on the gross salary up to an annual income ceiling of IR£29,900. The tax year commences on 6th April.

As employers have primary responsibility for tax, an employer must ensure that where any additional taxable benefits are provided to an employee, the appropriate PAYE tax is levied at source.

Special rules apply as regards the provision of a pension, and motor cars.

12.3

RECRUITMENT AND DISCRIMINATION

As the law currently stands, in advertising for employees, and interviewing and then deciding who to employ, employers must not discriminate on grounds of either an individual's sex or marital status.

These grounds are being extended so as to prohibit discrimination on the further grounds of religion, age, race, disability, family status, sexual orientation and membership of the Travelling Community.

In addition to access to employment, employers are prohibited from discriminating with regard to conditions of employment, training or experience for, or in relation to, employment, promotion or classification of posts.

12.4

APPOINTMENT

Care should be taken prior to offering employment to have a candidate medically examined to ascertain fitness to do the work. It is not usual, though it is not prohibited, to carry out drug or alcohol screening. All personal or previous employment references should also be checked prior to offering employment.

Once the decision has been made to offer employment, the candidate should be furnished with a letter or other document (both will constitute the contract of employment) setting out the terms upon which employment is being offered. The document should be signed on behalf of the employer and should also provide for signature by the employee accepting the offer of employment on the particular terms.

Care should be taken that the document is returned and kept safely. An employer if it has not already done so, must, within two months of the commencement of employment, give the employee a written statement of the terms and conditions of employment.

This document may include a provision for an initial probationary period. Legislation allows for a probationary term of no more than twelve months. It would be usual to have a probationary term of six or nine months, and in certain instances after that period the employer may find it necessary to extend, in writing, that period up to the maximum of twelve months. Whatever the length of the period stipulated, subject to that maximum, a record should be kept at the outset of the length of the period being granted so as the employee's suitability can be assessed in sufficient time before the expiry of the probationary period.

12.5

WORK PERMITS

Non-European Union Citizens proposing to take up employment in Ireland must obtain work permits from the Department of Enterprise and Employment before commencing employment.

12.6

TERMS OF EMPLOYMENT

The Contract of Employment referred to above should contain all the essential terms attaching to the employment. It should set out the position in relation to the date of commencement of the employment, to whom the individual will report, the place of employment, salary and all benefits, hours of work and the nature of the position.

It should deal with such issues as holidays, any sickness procedure, and maternity procedures (where applicable). It should then address such issues as discipline and grievances, and the notice required to be given by the employee in the event of leaving employment, and notice to be given by the employer. The following is the legal position in relation to some of these issues:-

(i)Nature of Position/Job Title

It is important that, at the outset, the individual knows the job that he/she will be required to do. In certain cases a detailed job specification may be attached to the contract. In most cases, however, it will be sufficient to refer to the job title, and cross-reference it with the advertisement to which the employee applied, and the discussions at interview.

It should be noted that employees cannot be moved from one job position to another, without their consent. The employment relationship is a contract between the employer and the employee, and as with any other contract, it cannot be changed without the consent of both parties. As jobs evolve and change it is reasonable to require the employee to do different work. Nevertheless care should be taken to avoid any claim by an employee that the change is so fundamental as to undermine the contract, entitling the employee to resign from employment, and to claim that he/she has been constructively dismissed.

(ii)Location of Employment

An employee should be advised of the place of work. It is reasonable for employers to move employees around a particular site or premises.

However, as with changes in job description, care should be taken in relation to any attempts to relocate employees at a distance from the original employment. On occasions, where the move might be regarded as a considerable inconvenience to the employee, employers might be advised to compensate the employee so as to obtain agreement to the relocation. Failure to agree could lead to a claim of constructive dismissal.

(iii)Date of Commencement

Many rights under employment legislation may depend on length of service. Therefore it is important to specify the exact date of commencement of employment.

(iv)Length of Employment

Employers may agree with the employee at the start of a new employment that it will be for a fixed period of time or that the period of employment will be open ended. In the case of fixed term contracts, it may be possible to exclude the provisions of unfair dismissals legislation in the event of non-renewal of the term at its end. Employers should note however that if termination takes place mid-term, they may be liable to compensate the employee for losses referable to the balance of the term.

As regards open-ended employments, it should be noted that they may only be terminated for cause (see later: Discipline/Dismissal), and subject to the giving of notice (see (x) below).

(v)Hours of Work

The European Community "Working Time" Directive has been introduced into Irish law and provides the following:-

(a)Breaks and Rest

Employees are entitled to rest of not less than 11 consecutive hours in each 24 hour period. Where an employee works more than 41/2 hours, he will be allowed to take a break for at least 15 minutes. If he is to work for up to six hours, the break has to be at least 30 minutes. In addition to daily rests and breaks, employees are to be granted not less than 24 consecutive hours' rest in a week or 48 hours in a period of 14 days. These must follow immediately the 11 hours of consecutive daily rest.

(b)Weekly working hours

Employers must not permit employees to work more than an average of 48 hours in a seven day period. This average may however be calculated over a period of four months, six months or a period of no more than 12 months where a Collective Agreement has been reached. (Certain transitional provisions apply in the first years of the legislation.)

(c)Collective Agreement

The thrust of the legislation in this area is to create a situation whereby non-unionised employers will not be able to enjoy a longer averaging period as regards the 48 hour maximum working week without recognising a Trade Union.

(d)Night Work

An employer cannot allow a night worker to work more than an average of eight hours at night i.e. a period between midnight and 7.00 a.m. the following day. A night worker in this context is somebody who normally works during at least three of those night hours and who works 50% of his annual total of the number of hours between those hours.

(e)Zero Hour

Under a zero hour contract an employee, while having no guarantee of work, contracts to make himself available as and when the employer requires. In these cases the legislation requires that compensation be paid to employees who are not called upon to work. The rate of this compensation is 25% of the contracted hours or 15 hours, whichever is less.

(f)Sunday Work

Employees involved in Sunday work are entitled to compensation in the form of additional pay, time off in lieu or a combination of both.

(g)Holidays

The Statutory minimum holiday period is currently 16 days (1997) extending to 20 working days a year by April, 1999. The employer's discretion as to when holidays may be taken is affected by the obligation to take account of the need for the employee to reconcile work and any family responsibilities. In addition, there are nine public holidays annually in Ireland for each of which an employee must be given a paid day off on that day, or a paid day off within a month of the day, an extra days annual leave, or another day's annual pay, all of which are at the employer's option.

(vi)Salary and Benefits

The contract should set out the annual salary or alternatively the hourly rate of pay. The amount should be expressed gross, and the contract should provide for the employer to deduct PAYE and PRSI at source. Any other agreed deductions (such as trade union membership dues) should also be specified. Payment of Wages legislation provides that employers must furnish employees, at the time of making payment, with details of all deductions. The legislation also sets out the position in relation to any other deductions, for example in respect of any omissions or damage caused by the employee.

Details of all benefits attaching to the employment such as payment of membership of Voluntary Health Insurance (VHI) in respect of health cover over and above State benefits, provision of motor car, and any bonus or commission arrangements, should also be set out in detail, or where general provisions will apply to a range of employees, a reference should be made to the document where details of the schemes are available.

It is usual to provide for the annual review of basic salary, and that it be at least as much as the rise in the Consumer Price Index (CPI).

(vii)Sickness

The contract should set out the procedures in relation to absence due to illness. Except in employments regulated by an Employment Regulation Order, there is no obligation upon employees to pay employees during such absence. However, by virtue of the payment of PRSI, employees have an entitlement to receive certain Social Welfare benefits. Many employers continue to pay employees during short absences grounded on illness.

It is usual to provide that a certificate from a doctor be furnished by the employee in respect of absences of more than two days, and to require the employee in respect of absences of more than two days to apply for the appropriate Social Welfare benefit, and to pay that benefit to the employer who will continue to pay the employee in full during the absence.

Some employers, in relation to longer-term illnesses, take out what is known as Permanent Health Insurance (PHI) to cover payment of part of the income of employees who suffer from long-term illnesses.

(viii)Maternity

Female employees are entitled by law to fourteen weeks leave in respect of maternity. This may be extended, at the employee's option, by a further period of four weeks. During such leave, the employer is not obliged to pay the employee. The employee is entitled to apply for certain Social Welfare benefits.

Again, as with sickness, it is customary for many employers to continue to pay the employee in full, but require the employee to pay over the amount received by way of Social Welfare benefits. During absence on such leave, the employment is preserved, and the employee cannot be dismissed.

(ix)Grievances

Many employers recognise that it is beneficial to have in place procedures to deal with issues of concern for employees that arise during the course of employment. Generally speaking, the object is to provide a mechanism for ensuring that such issues do not disrupt the working environment. The procedures should identify a person to whom an employee may bring a complaint, and if that does not succeed in resolving the issue, there should be a further stage provided with a view to achieving a resolution.

(x)Notice

Under legislation, employees are obliged to give the employer a minimum of one week's notice of termination. The employer and the employee can, of course, agree to longer notice being given by the employee. The following are the minimum periods of notice to be given by an employer to an employee:

Periods of Continuous Service	Notice Required

13 weeks - 2 years				1 weeks
2 years - 5 years					2 weeks
5 years - 10 years				4 weeks
10 years - 15 years				6 weeks
15 years and over					8 weeks.

The Contract of Employment should provide that the employer may pay the employee in lieu of the minimum notice entitlement.

The Contract of Employment may provide for the giving of longer than the minimum notice required by legislation.

12.7

TRADE UNIONS

Irish employers are not obliged to recognise trade unions. In other words, they are not obliged to enter into agreements with, or negotiate with trade unions, in relation to their employees. In certain instances, trade unions apply to the Labour Court for a recommendation that a particular employer "recognise" the trade union. Such a recommendation of the Labour Court is of no binding effect on the employer. However, it should be noted that if employees strike (withdraw their labour) and enter into an industrial dispute, including picketing, with the employer, in relation to the employer's refusal to "recognise" their trade union, that dispute constitutes a valid trade dispute and confers certain protections on the trade union and its members under various pieces of Irish industrial legislation.

Recognition of a Trade Union may, however, on occasions be desirable or preferred by the employer. In such instances the employer may go beyond pure recognition and enter into an Agreement (known as a "Collective Agreement") with a Trade Union. By such an Agreement, the employer and the Trade Union may agree terms as to the regulation of the day-to-day working relationship. Such terms do not automatically form part of the terms and conditions of employment of those employees who are members of the Trade Union but in certain circumstances they may be incorporated.

Under Irish Constitutional Law, employees have a right to join a trade union if they wish, and at the same time a right not to join a trade union. Despite this, a requirement that an employee prior to entering into employment be a member of a particular trade union with whom the employer has a relationship, is permitted. However, once an employee is in the employment, he cannot be required either to join a trade union, or to leave a trade union.

Industrial action is defined in legislation as any action which affects or is likely to affect the terms or conditions of a contract, and which is taken by any number or body of workers as a means of compelling their employer, or to aid other workers in compelling their employer, to accept or not to accept terms or conditions of or affecting employment. Actions such as peaceful picketing and strike, insofar as they fall within this definition, are protected by legislation. Trade Unions which may be involved in the industrial action are given immunity from liability, for instance, where a breach of contract arises, provided that the actions in which they are participating are in contemplation or furtherance of the industrial action.

Picketing may take place where the employer carries on business. It may also take place at the premises of another employer who may not be a party to the dispute, provided that the picketers believe that the other employer has directly assisted their own employer.

In certain instances an employer may apply to Court for an injunction restraining a particular form of action. If action has commenced either in breach of or without a ballot of employees having been conducted, or where employees are unlawfully remaining on the employer's property, or where there is action likely to result in death or personal injuries, an employer may be able to satisfy a Court that an injunction should be granted.

12.8

SAFETY

Safety in the work-place is increasingly important following the Safety, Health & Welfare at Work Act, 1989 and European Union legislation. All employers having control of a work-place are obliged to do all that is reasonably practicable to ensure that risks to the safety, health and welfare of employees are avoided. Employers are obliged to have a Safety Statement which must identify all hazards - both significant and insignificant - existing in the work-place, and the means that the employer has in place for avoiding risks from such hazards arising for employees.

Employees required to work for long hours at Visual Display Units (VDUs) should be provided with eye-sight tests, and if corrective lenses are required, these also should be provided.

12.9

SEXUAL HARASSMENT

It is recommended that all employers have in place a Code of Conduct to deal with any allegations of sexual harassment. Sexual harassment has been defined as conduct towards another person which is sexual in nature, or which has a sexual dimension and is unwelcome to the recipient. Whilst such actions may be without the authority of the employer, employers may nevertheless be liable in respect of such conduct. Accordingly it is important that the employer have an established procedure to allow employees wishing to make such complaints the opportunity of raising them, and to have them investigated by the employer with a view to ensuring that such conduct cease.

12.10

DISCIPLINE/DISMISSAL

All employers have an obligation to have in place a disciplinary procedure setting out the steps to be followed by the employer in dealing with issues of concern such as conduct and performance. The procedure must be fair and allow not only for the employer to bring issues of concern to the attention of the employee, but for the employee to defend him or herself before any decision is made as to disciplinary action. Dismissal should only take place after at least one previous warning (preferably written) and after the employee has had an opportunity to improve. In terminating the employment, the employee must be given the correct minimum notice. Failure to follow fair procedures, and to have good grounds for dismissal, may lead to a finding of unfair dismissal against the employer notwithstanding the giving of notice.

In certain circumstances of gross misconduct, the employee may be summarily dismissed, i.e. without notice.

With the exception of employments that have been terminated allegedly on grounds of the employee's trade union activity, or maternity, only employees with one year's continuous service (which includes the individual's notice entitlement, i.e. 11 months service plus one month's notice = one year's continuous service), are protected under Unfair Dismissals legislation. An employee with such service and who has been dismissed, may bring a claim to a Rights Commissioner or the Employment Appeals Tribunal ("EAT") for unfair dismissal. It is presumed that the dismissal has been unfair, leaving the employer having to prove that the dismissal was fair.

A dismissal arising from an employee's membership or proposal to join a Trade Union, the employee's religious or political opinions, civil or criminal proceedings by the employee against the employer, the race, colour, sexual orientation of the employee, or the pregnancy of the employee, or matters connected with that, or the employee's age or membership of the travelling community, are considered to be grounds of unfair dismissal. On the other hand, dismissal arising out of the capability, competence or qualifications of the employee to perform the work of the kind for which he was employed, or the conduct of the employee, or the redundancy of the employee, or the employee being unable to continue to work because to do so would be in contravention of law, is regarded as fair. It should be noted, however, that whilst these issues have all been identified in the legislation, each case should be examined on its own merits and employees should note that the onus will be upon them to prove the fairness of the dismissal both as regards reason and procedure. Where dismissal is contemplated in circumstances where it is believed to fall within one of the accepted categories, care should be taken to ensure that fair procedures, such as that outlined in the first paragraph of this section, are adhered to before making any decision to terminate the employment.

An employee succeeding in a claim of unfair dismissal may be awarded by the EAT reinstatement in the former job, or re-engagement in a suitable alternative position, or compensation. If compensation is awarded, it is limited to twice the employee's annual remuneration package, i.e. not only taking account of pay, but the value of any additional benefits provided. Whilst this represents the cap on an award of compensation, the EAT must take account of the actual financial loss suffered by the employee from the date of dismissal to the date of the hearing, and a notional value for future loss.

Decisions of the EAT may be appealed by the employer and/or the employee to the Circuit Court, and from there on a point of law to the High Court.

12.11

REDUNDANCY

Under the Redundancy Payments Acts, an employee is taken to be dismissed by reason of redundancy if the job in which he had been employed is to cease to exist. Redundancy mainly covers situations where there is a reduction in the number of employees. It may, however, include circumstances where a restructuring is taking place, with job functions being undertaken by other employees. In all cases of redundancy, it is vital that the circumstances should not solely satisfy one of the definitions of redundancy, but also that a fair selection should take place. Generally speaking, the practice by which the last employee to have been employed in the particular function that is ceasing or being altered, should be the first one selected for redundancy is regarded as fairest. However, this is not necessarily the only basis to be applied, and other relevant considerations may on occasions justify the selection of particular employees for redundancy.

Subject to the above, an employee whose position is being made redundant is entitled, provided that he has had two years' continuous service, is aged between 16 and 66 years, and PRSI has been properly discharged in relation to the employment, to receive a statutory lump sum payment. Subject to a statutory ceiling of IR£300 per week (IR£15,600 per annum), the lump sum is calculated at half a week's pay for each year of employment under the age of 41, together with one week's pay for each year of employment over the age of 41, together with a further week's pay. Particular notice must be given to the employee and to the Minister for Enterprise & Employment, and if that is given, the employer may be able to recover a proportion (currently 60%) of the lump sum from the State.

It is the practice in many redundancies for the employer to make a severance payment greater than the statutory level. Such sum may depend upon previous practice, any collective agreement with a trade union, and the strength or weakness (as applicable) of the employer in the particular circumstances.

Whilst the statutory lump sum payable is receivable by the employee free of tax, tax considerations arise in relation to additional payments.

The legislation sets out conditions where employees are not entitled to receive a redundancy payment, for example, where the business of one employer is being transferred to another, and the employee is being offered a contract of employment by the new employer on identical or similar terms.

Under separate Protection of Employment legislation, where a number of redundancies are taking place in a business at the one time, an employer is required to enter into a process of consultation with employee representatives, and notification to the employees before implementing redundancies.

12.12

TRANSFER OF BUSINESS TO OR FROM ANOTHER EMPLOYER

The EU Acquired Rights Directive has been implemented in Ireland since 1980, and relates to the transfer of "an undertaking, business or part of a business". If such circumstances exist, then if any employees are considered to attach to the particular business being transferred from one employer to another employer, they transfer over to that new owner of the business together with all existing employment rights. Specifically, the employee will join the new employer with the terms and conditions of employment that existed with the former employer, and with the benefit of whatever number of years of service have been given to that employer. Therefore, if for instance the employee has built up more than two years service with the former employer, yet within six months of employment with the new employer is to be made redundant, he will, despite having less than two years service with that new employer, be entitled to receive a statutory redundancy lump sum payment based upon service with both employers.

The regulations that exist in Ireland implementing the Directive require that where a transfer of the business is taking place, particular notification must be given to employees, and their representatives if they exist, in good time before the transfer of the business actually takes place.

Dismissals which are shown to be as a direct result of the fact of the transfer of the business are prohibited, and the employer terminating an employment will be liable to a claim of unfair dismissal.

The Directive may cover a wide range of business disposals, and has recently been taken to include the contracting out of services previously performed by employees, such as security and canteen facilities.

12.13

PENSIONS

While the provision of pensions for employees in Ireland impacts directly on other matters such as the contract of employment and taxation it is convenient to deal with the subject under a separate heading. At the outset it should be understood that there is no obligation in law for an employer to provide a pension for employees. The provision of a pension is a matter for agreement between the parties.

Retirement benefits for employees are funded through occupational pension schemes established under trust through which the assets of the scheme are held separately from the assets of the company. Pension schemes are voluntary arrangements entered into by employers and, subject to any commitments regarding pension in the contract of employment, there is no legal obligation on an employer to establish a pension scheme.

Subject to satisfying the requirements of the Revenue Commissioners regarding benefit levels and overfunding, pension schemes are normally approved by the Revenue Commissioners as "exempt approved" schemes under the Finance Act, 1972. The advantages of "exempt approved" status are (a) the employee's contributions are tax deductible, (b) the employer's contribution is allowable as a management expense for tax purposes, and (c) the investment income and capital profits of the scheme are generally exempt from tax.

Funds are set aside during the working lifetime of the employee to provide benefits at retirement. The benefits usually take the form of a lump sum coupled with a regular pension payment to the retired employee. Lump sum payments based on a multiple of salary are insured to provide protection for the employee's spouse/dependants in the event of his death during service with the employer.

There are generally two types of schemes:

(a)Defined Benefit Scheme - under which benefits promised to employees at retirement are linked to salaries at retirement.

(b)Defined Contribution Scheme - under which the contributions in respect of each employee who is to be a member of the scheme are defined and the benefits on retirement will depend on the amount of these defined contributions and the investment earnings thereon.

A defined benefit scheme involves a none too easily quantifiable future funding commitment by the employer, whereas, in a defined contribution scheme, the cost to the employer for a given year should be easily ascertainable.

The financing of small to medium sized schemes is mainly through insurance companies, either by way of traditional deferred annuity policies or more commonly nowadays through unit linked policies where returns are linked to investment funds maintained by the insurance company. The insurance company provides standard documentation and administration services as part of the package. Larger schemes are self-invested and a greater input by specialist consultants/actuaries and lawyers is required in relation to funding and documenting the scheme.

The administration of pension schemes in Ireland is subject to the general body of law relating to trusts, the specific terms of the trust instrument under which the scheme is established the Pensions Act, 1990 and the Pensions Amendment Act, 1996 ("the Acts"). The Acts provide a statutory framework for the regulation of pension schemes

The Acts and other provisions of Irish and EU law provide:-

(a)for the establishment of the Pensions Board to police occupational pension schemes;

(b)for preserved benefits to be provided for employees on leaving service in certain circumstances (in general terms on completion of five years' service, two of which fall after January 1, 1991);

(c)minimum funding standards for defined benefit schemes;

(d)for disclosure of information by trustees to scheme members and other interested parties;

(e)general duties for trustees and for registration of schemes with the Pensions Board; and

(f)for equal treatment between men and women in occupational benefit schemes.

This article is intended to provide general guidelines. Specialist advice should be sought about specific facts.