Redundancy in Ireland
All about fairness
What is it ? Do you qualify and were you selected fairly?
The definition of redundancy is set in legislation and has been elaborated on by the Employment Appeals Tribunal.
The primary legislation in this area of the law are the Redundancy Payments Acts,1967 to 2007 .
The acts list a number of situations from which the redundancy can arise. The essential elements, as contained in the legislation and referred to by the Employment Appeals Tribunal are “impersonality” and “change”. The job must be the focus of selection, not the employee, and a change in the job must take place.
If the employer's selection process displayed bias or was flawed in any way then the dismissal will be held to be unfair.
Do I qualify for a redundancy payment?
As an employee, you must satisfy the following criteria, in order to qualify for a redundancy payment:
Be in employment that is insurable for all benefits under the social welfare system (PRSI Class "A")
Have worked continuously for the employer for at least 104 weeks
Have been in continuous employment for more that two years if a part-time worker
Be over 16 years of age.
The same rules applies to apprentices. Apprentices qualify for redundancy unless let go within one month of completing an apprenticeship.
What if I qualify for a Redundancy lump sum payment, but my employer does not acknlowledge it?
If you have not been served with the proper redundancy claim forms, or the lump sum has been incorrectly calculated or your employer has stated that you are not entitled to payment, in circumstances where you believe that you qualify, then you can use Form RP 77 to initiate your claim.
Form RP 77 Download here
Can I leave before the redundancy notice which I received expires?
The answer is yes, but you have to meet all of the requirements, otherwise you may lose your entitlement to redundancy payment. It is better to wait out the notice period before leaving.
If however you have been offered a job with another employer, you must serve notice to your current employer using Form RP 6.
If the employer serves a counter notice, requesting you to stay, you will lose your redundancy entitlement if you unreasonably refuse to stay and work with your current employer.
This area is very technical and you should seek advice before making a final decision.
Form RP 6 Download here
See related article, Losing your job here
Is a redundancy lump sum payment taxable?
Statutory redundancy payments arising from the Redundancy Payments Acts 1967 to 2014 do not attract tax. They are completely exempt from income tax under Schedule E (Section 203 TCA 1997). They do not affect the reliefs and exemptions applicable to other redundancy payments.
How is statutory redundancy calculated?
Statutory redundancy is calculated on the basis of 2 weeks pay per year of service
plus one additional week, subject to a maximum weekly pay figure of €600.
Are additional ex-gratia payments received taxable?
Additional ex-gratia payments, received as part of your redundancy package, over and above your statutory redundancy payments may be taxable, subject to certain reliefs.
That's a relief
In arriving at your taxable amount, you can avail of the better of the basic exemption, the increased exemption or the standard capital superannuation benefit (SCSB)
The basic exemption
This exempts from tax, payments made excluding the statutory redundancy payment, up to €10,160 plus €765 for each complete year of service.
The increased exemption
This relief frees an additional €10,000, when available. If you haven't availed of a tax free lump sum in the past 10 years, you can avail of this relief. You need Revenue approval to avail of this exemption. If you believe that you are elegible for this relief, you should check with Revenue that your employer has applied it. If not, you can apply for it yourself and get the refund from the Revenue.
If you are in an occupational pension scheme, your tax free lump sum on retirement will be reduced by this amount.
The standard capital superannuation benefit
If you have long service and high income, then this may be the one for you. It is based on average annual earnings and the number of years of service. You get a relief for each year of service. The relief is equal to one fifteenth of the average annual pay for the last three years of service. Don't forget to deduct any tax free lump sum payment from the pension scheme.
How much tax is due?
If there is still payment available to you, after applying all of the exemptions and reliefs mentioned above, then it will attract tax. PRSI is not payable on it, but health and income levies may apply.
You may end up paying tax at your higher rate.
Top slicing relief
If your redundancy ex-gratia payment pushes you into the higher tax bracket than you normally pay, then you should consider availing of top slicing relief. You can choose to have it taxed at your average rate of tax for the past three years.
What about tax back?
This depends on when you were made redundant and your earnings for the rest of the year. If you were made redundant early in the year and had a period of no pay for the rest of the year, then you may be able to apply for a year-end refund on some of the income levy paid.
Revenue Guide to Payments on Termination of an Office or Employment or Removal from an Office or Employment Download here
What can I do if my employer is insolvent?
The Social Insurance Fund, administered by the Department of Enterprise, Trade and Employment, was set up for this reason. You can apply for payment from this fund.
The Pension Insolvency Payment Scheme has been set up to deal with deficiencies which may arise in your employer's pension fund.
See related article, Losing your job here
See related article, Unfairly selected for redundancy here
See related article, Unfair Redundancy Case here
Where can I get impartial, confidential advice on what to do next?
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