Redundancy: A Guide Through a Complex Employment Law Procedure

Redundancy – always a sensitive topic for both employees and employers.

In our legal and business system, the term “redundancy” is commonly used, though it actually refers to a situation in which, due to technological, economic, or organizational changes—according to the legal formulation—an employer no longer requires certain jobs to be performed or needs fewer employees.

While the term “redundancy” may sound bureaucratic and somewhat intimidating, it is, in practice, one of the most complex and sensitive procedures in employment relations.

This article provides everything you need to know about redundancy—clearly, simply, and usefully. Special attention is given to the “pitfalls” where employers most often make mistakes during this process.

What is redundancy?

Redundancy may arise for a variety of reasons: new technologies are introduced that existing employees are not (and cannot be) trained for, the workload decreases, unprofitable branches are shut down, and so on. The employer then determines that a redundancy situation exists.

Thus, when we talk about the reasons that lead to a reduction in workforce, they may include:

• Technological – existing employees lack the necessary skills for new work processes,
• Economic – a drop in revenue, decreased income, or business restructuring,
• Organizational – closure of departments, branches, or changes in work methods.

In any of these cases, it is crucial that the employer proceeds lawfully, as redundancy ultimately results in some individuals losing their jobs.

Declaring redundancy

Declaring redundancy is a strictly formal procedure that requires adherence to a set legal process. There are no minor oversights here—any mistake can render the dismissal decision unlawful or null and void. And if the decision is null, the employment relationship is considered to have never been terminated. Let’s examine the procedure.

Redundancy – the termination procedure

Depending on the number of employees being made redundant, the employer is legally obligated to adopt either a Redundancy Resolution Program or a Decision on Redundancy.

Redundancy Resolution Program

Any employer who, within a 30-day period, must lay off a certain number of employees due to redundancy, is required to adopt a Redundancy Resolution Program (hereafter: the Program), if:

1. At least 10 employees are to be dismissed and the employer has more than 20 but fewer than 100 permanent employees;
2. At least 10% of employees are to be dismissed and the employer has between 100 and 300 permanent employees;
3. At least 30 employees are to be dismissed and the employer has over 300 permanent employees;
4. At least 20 employees are to be dismissed within a 90-day period, regardless of the total number of employees.

When adopting the Program, one important note: the employer must involve the National Employment Service (hereafter: NES), and, if present, the trade union. These institutions must be informed about the measures the employer plans to take, as they provide opinions and suggestions both before and after the Program is adopted.

The Program must include:

• Reasons for terminating the need for employees,
• Total number of employees,
• Number of redundant employees, their qualifications, age, years of service, and job positions,
• Criteria for determining redundancy,
• Measures taken to assist employees (reassignment, employment with another employer, retraining, part-time work, etc.),
• Severance pay,
• Timeline for terminating employment contracts.

An employer who fails to adopt this Program in the prescribed manner and proceeds with redundancy acts unlawfully. All affected employees may sue, and such dismissals are considered illegal.

Decision on Redundancy

If a smaller number of employees is declared redundant, the employer may adopt a Decision on Organizational, Economic, or Technological Changes (hereafter: the Decision). This process is simpler and can be made by the director or an authorized person.

Even in this case, a termination cannot be delivered arbitrarily. It is necessary to:

• Explain why the specific position is being eliminated or the number of positions reduced;
• Demonstrate that reassignment to other positions is not possible, with reasons provided.

Criteria for determining redundancy

When an employer closes an entire unit or department, all employees in that unit are redundant. However, when only some positions are eliminated, clear criteria must determine which employees stay and which are dismissed.

The employer must apply objective and transparent criteria—unrelated to personal traits—focused on performance, skills, independence, and so on. Additionally, the Labor Act prohibits declaring certain employees redundant: those on sick leave, maternity leave, child care or special care leave. Terminating such employees would be unlawful.

Changes in job classification and elimination of positions

Whether adopting a Program or a Decision, an employer with a Rulebook on Organization and Job Classification must first amend it. A position must be formally removed from this document for it to legally cease to exist. Similarly, any reduction in headcount must be reflected in the rulebook.

Failure to amend the job classification rulebook renders the termination unlawful.

The same applies if the employer hires someone for the same position within three months after the employment ended due to redundancy. If a genuine need for the same role arises within that period, the former employee has priority for re-employment.

Severance pay for redundancy

Severance pay for a redundant employee is not only mandatory, but a constitutive element of the redundancy process.

This means that employment cannot be validly terminated unless severance is paid before the dismissal notice is served. Without this payment, the termination decision is unlawful, and the employment contract remains in effect.

In addition to fines for failing to pay severance, the timing of payment affects the legality of the termination. Severance must be paid prior to the end of the employment relationship.

Every employee made redundant is entitled to severance due to organizational, economic, or technological changes. Employees cannot waive this right, nor may severance be paid in an amount lower than the statutory minimum. Employers may, however, grant more generous severance through internal regulations or employment contracts.

Redundancy dismissal decision

The Redundancy Dismissal Decision is issued after completing all previously described steps. It must be in written form and must state the termination of employment, with a detailed explanation of the entire process.

An essential part of the decision is a legal notice stating that the employee has the right to register with the National Employment Service within 30 days.

The decision must be delivered personally or via registered mail.

Common mistakes employers make in redundancy cases

1. Failure to follow procedure
   Any skipped step—such as not adopting a Program, failing to notify the NES or trade union, or neglecting to amend job classification—invalidates the dismissal decision.
2. Unclear criteria and/or discrimination
   If criteria for redundancy are not clear and objectively applied, there is a high chance the dismissed employee will contest the decision. This also applies when an employee is selected due to personal traits rather than objective grounds.
3. Formal errors
   Seemingly minor issues—such as a typo in the decision, missing legal notice, or unpaid severance—can render the dismissal null and void. In redundancy cases, courts first examine the formal aspects of the process.

Conclusion

Redundancy requires legal precision—but also a humane approach.

Perhaps more than in any other employment matter, redundant employees are seen as the vulnerable party. Prolonged court disputes over unlawful redundancy procedures often result in employers having to pay large damages to former employees.

It is strongly recommended to engage a legal professional – an attorney – to ensure the lawfulness of the process, whether you are an employee or an employer.

Law Firm Petrović Mojsić & Partner