Redundancy payments

Information

Where you lose your job due to circumstances such as the closure of the business or a reduction in the number of staff this is known as redundancy.

The Redundancy Payments Acts 1967-2007 provide a minimum entitlement to a redundancy payment for employees who have a set period of service with the employer. Not all employees are entitled to the statutory redundancy payment, even where a redundancy situation exists. If you do qualify for redundancy there are specific redundancy procedures which employers and employees must follow in order to comply with the legislation.

However, you and your employer may agree a redundancy payment above the statutory minimum, and in such circumstances, employees who have not reached the statutory minimum period of service may also receive a payment. For example, statutory redundancy only applies to employees with two years' service. However, an employer might agree to pay a lump sum to employees with less than two years' service. This payment arises through agreement and not through a statutory entitlement. As so often in employment law, the legislation is concerned with ensuring minimum rights, while allowing the parties to agree more substantial rights.

Employer rebate: The employer rebate of statutory redundancy payments made to employees on or after 1 January 2012 is 15% (was 60%).

Rules

The statutory redundancy payment is a lump-sum payment based on the pay of the employee. All eligible employees are entitled to:

• Two weeks' pay for every year of service over the age of 16, and
• One further week's pay

The amount of statutory redundancy is subject to a maximum earnings limit of €600 per week (€31,200 per year).

Payrefers to your current normal weekly pay including average regular overtime and benefits-in-kind, but before tax and PRSI deductions, that is your gross pay.

The statutory redundancy payment is tax-free.

Reckonable and non-reckonable service

All redundancies notified after 10 April 2005 take account of absences from work only over the last three years of service. Any absences outside of the three-year period ending on the date of termination of employment are disregarded.
When reckoning or calculating the actual length of your service for redundancy payment purposes, the following periods over the last three years of service only should be taken into account, (the absences listed here are called reckonable absences):

• The period you were actually in work
• Any period of absence from work due to holidays
• Any period of absence from work due to illness (see below for non-reckonable periods of illness)
• Any period where you were absent from work by agreement with your employer (typically career break)
• Any period of basic and additional maternity leave allowed under the legislation
• Any period of basic adoptive/parental/carer's leave
• Any period of lock-out from your employment
• Any period where the continuity of your employment is preserved under the Unfair Dismissals Acts.

However, in making the calculation of the length of your service, the following periods over the last 3 years will not be taken into account as service, (these are called non-reckonable absences):

• Any period over 52 consecutive weeks where you were off work due to an injury at work
• Any period over 26 consecutive weeks where you were off work due to illness
• Any period on strike
• Any period of lay off from work.

You can use this online redundancy calculator to help you to calculate your statutory redundancy entitlement. You should note that the online redundancy calculator does not purport to give a legal entitlement to any statutory redundancy amount.

Reduced hours and short-time work

If you were made redundant within a year of being put on reduced hours or pay, your redundancy payment would be based on your earnings for a full week. If you are made redundant after working reduced hours for more than a year, how your payment will be calculated depends on whether you accepted being on reduced hours or not. If you fully accepted the reduced working hours as your normal week and never asked to return to full-time work, then your redundancy payment will be based on your gross pay for the reduced working hours. If, on the other hand, you never accepted the reduced working hours as your normal hours and continually asked to be put back on full-time working, your payment would be based on your normal weekly earnings.

If you have been put on short time and then are made redundant your redundancy payment may be based on your pay for a full week.

If you have a dispute about this with your employer you could make a claim to the Employment Appeals Tribunal.

Taxation of lump sums

If you receive a lump sum in compensation for the loss of employment, part of it may be tax-free. The statutory redundancy lump sum is always tax-free. Read more about taxation of lump-sum payments on redundancy/retirement. The Revenue Commissioners have published a leaflet on taxation and redundancy.

Employer's insolvency

In the first instance it is up to the employer to pay the statutory redundancy lump sum to all eligible employees. The Social Insurance Fund (SIF) finances the redundancy rebate payment to employers who pay their eligible employees their full statutory redundancy entitlements. However, where the employer is unable to pay or refuses or fails to pay, the employee can apply for direct payment from the SIF - see 'How to apply' below.

Where your employment has been terminated due to the insolvency of your employer legislation provides for the payment of certain outstanding entitlements in relation to your pay. Under the Insolvency Payments Scheme these may be paid by the Department of Social Protection out of the Social Insurance Fund. You can find information about employers' insolvency on the Department of Social Protection website.

Rates

Since 1 January 2005 the maximum earnings taken into account in the calculation of statutory redundancy lump sum payments are €600 per week (€31,200 per year).

How to apply

On the date of the termination of employment your employer must give you a "Redundancy Certificate" - section B of form RP50 - and should pay the redundancy lump sum due to you.

If your employer has not paid your redundancy lump sum, you should apply to your employer for it, using form RP77 (available from Workplace Relations Customer Services - see 'Further information' below). If your employer still refuses to pay it, you can apply to the Department of Social Protection for direct payment from the Social Insurance Fund. You apply online using form RP50 as follows:

• If your employer is unable to pay your redundancy lump sum, he should sign the RP50 and submit a letter from an accountant or solicitor stating he is unable to pay and accepting liability for the 85% (from 1 January 2012) owing to the Social Insurance Fund together with documentary evidence such as audited accounts
• If your employer refuses to pay your redundancy lump sum or if there is a dispute about redundancy you can bring a claim to the Employment Appeals Tribunal using the new single complaint form(pdf) and guidance notes (pdf). This must be done within one year of your dismissal. To apply for your lump sum you should send a completed form RP50 together with a favourable decision from the Employment Appeals Tribunal

Insolvency: If the company has been liquidated or is in receivership, the completed form RP50 should be sent in by the liquidator or receiver on behalf of the employees.

The application for payment from the Social Insurance Fund should be sent to the Redundancy Payments Section, Floor 2, Department of Social Protection, Block C, The Earlsfort Centre, Lower Hatch Street Dublin 2.

You can request a form by texting “FORM REDUNDANCY” followed by your name and address to 51909 (standard text rates apply).

You can find a list of frequently asked questions about redundancy on the website of the Department of Social Protection. Further information about redundancy entitlements is in this Guide to the Redundancy Payments Scheme (pdf).

For further information about the Redundancy Payments Scheme contact Workplace Relations Customer Services. For information on the status of a claim for a redundancy lump sum or rebate which has been submitted for payment you can contact the Redundancy Payments section directly on 1890 800 699.

Further information

Workplace Relations Customer Services

(formerly Information Services of the National Employment Rights Authority)
Department of Jobs, Enterprise and Innovation
O'Brien Road
Carlow
IRELAND
Opening Hours: Mon. to Fri. 9.30am to 5pm
Tel: (059) 917 8990
Locall: 1890 80 80 90
Homepage: http://www.workplacerelations.ie/