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. Failure to comply with the applicable statutory requirements may result in the dismissal being declared unlawful, with the legal consequences depending on the nature of the violation and the circumstances of the case.. 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:

At least 10 employees are to be dismissed and the employer has more than 20 but fewer than 100 permanent employees;

At least 10% of employees are to be dismissed and the employer has between 100 and 300 permanent employees;

At least 30 employees are to be dismissed and the employer has over 300 permanent employees;

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 employees’ personal characteristics, when selecting employees for redundancy.

Under Article 157 of the Serbian Labour Law, an employee’s absence from work due to temporary incapacity for work, pregnancy, maternity leave, childcare leave or special childcare leave cannot be used as a criterion for determining redundancy.

However, the scope of protection against dismissal differs. While temporary incapacity for work does not, in itself, prevent a lawful redundancy dismissal, employees are specifically protected against dismissal during pregnancy, maternity leave, childcare leave and special childcare leave under Article 187 of the Labour Law.

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

Under Article 158 of the Serbian Labour Law, an employer must pay severance to an employee before terminating their employment contract on the grounds of redundancy arising from technological, economic or organisational changes.

The amount of severance is determined by the employer’s general act or the employment contract, but it cannot be lower than one-third of the employee’s average monthly salary for each completed year of employment with the employer. The calculation also includes periods of employment with a predecessor employer in the event of a qualifying transfer, as well as with affiliated entities, in accordance with the law.

Under Article 159, the calculation is based on the employee’s average monthly salary paid during the last three months preceding the month in which the severance is paid.

Failure to pay the required severance before termination may render the dismissal unlawful and expose the employer to legal and financial consequences. Employers must therefore ensure that both the amount and timing of severance payments comply with the applicable statutory requirements.

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

Failure to follow the applicable procedure

Employers must comply with the statutory requirements applicable to the particular redundancy procedure. Failure to adopt a Redundancy Resolution Programme when legally required, to consult the competent bodies where applicable, or to comply with other mandatory procedural requirements may affect the lawfulness of the dismissal.

Unclear selection criteria or discrimination

Where redundancy involves selecting employees performing comparable duties, employers should apply objective, transparent and non-discriminatory criteria. Arbitrary selection or reliance on prohibited criteria may expose the employer to legal challenges and claims for damages.

Deficiencies in the dismissal decision and severance payment

A redundancy dismissal decision must comply with the applicable statutory requirements, including the obligation to provide adequate reasoning and instructions on legal remedies. Employers must also ensure that statutory severance is paid before terminating the employment contract.

Failure to comply with these requirements may result in the dismissal being found unlawful. However, the legal consequences depend on the nature of the violation and the circumstances of the case, in accordance with Article 191 of the Serbian Labour Law.

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.

Given the legal and financial risks associated with redundancy procedures, employers are advised to seek timely professional assistance. Our employment lawyers in Serbia advise employers on workforce restructuring, redundancy procedures, severance obligations and compliance with Serbian labour legislation.

Damir Petrović, Attorney at Law