Redundancy Advice

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REDUNDANCY ENTITLEMENTS EXPLAINED

Redundancy Packages are predominantly made up of the following.

    • A Statutory Redundancy Entitlement.
    • Ex Gratia Payment

Redundancy Package Explained:

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(A) A Statutory Redundancy Entitlement

      • This is a minimum compulsory entitlement under revenue rules that a company is
        obliged to offer its staff
      • All these funds are received by the employee tax-free.
      • This figure is calculated as follows.
        2 weeks’ pay for each complete year’s service plus 1-week pay (maximum allowed
        weekly wage is €600)’

(B) An Ex Gratia Payment

      • This is an optional extra sum of money over and above the Statutory Entitlement that the
        company offers as a goodwill gesture to qualifying employees for their years of service with the
        company.
      • There is a tax-free portion with this payment option any balance taxable at the employee’s
        marginal rate of tax.

Ex Gratia Payment calculations

There are 3 options available to all Ex-Gratia recipients in relation to how these funds are split between what’s received tax-free and/or taxable.

These 3 options are as follows

Redundancy Package Explained:

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BASIC EXEMPTION:

  • The Tax-Free Portion is calculated as follows.

‘€10,160 plus €765 for each completed year of service’

  • The remaining funds left over are taxable

INCREASED EXEMPTION:

  • The Tax-Free Portion is calculated as follows.

*‘€10,160 plus €765 for each completed year of service plus €10,000 minus any tax-free lump sum entitlement from the employees’ pension’.*

  • The remaining funds left over are taxable
  • With this option, you waive any right for a Pension Tax Free Lump Sum (if any) in lieu of an increased Redundancy lump sum.

STANDARD CAPITAL SUPERANNUATION BENEFIT (SCSB):

  • The Tax-Free portion is calculated as follows:

Average earnings over the last 36 months multiplied by complete years of service and answer divided by 15’.

  • The remaining funds left over are taxable
  • There is an option here to waive any Pension Tax-Free Lump Sum in lieu of an increased Redundancy lump sum.. This calculation is as follows.

(The same calculation as above)– (Pension Tax-Free Lump Sum Entitlement) *****

HOW TO MAKE THE BEST DECISION FOR ME?

Before making a final decision, all of the following options and calculations needs
to be examined in detail

All Ex Gratia payment options should be calculated in detail
See which of these options offers the most tax free. Then you need to calculate which pension transfer option makes the most financial since;
It is also important to examine when access to your pension fund can be gained for each option. For example;

Once all of these options are analysed, you will now be in a position to make an informed decision.

It is imperative to seek independent advice on all redundancies as due to the complexity of the calculations, many Companies offering these packages can get the calculations wrong.

They also don’t really analyse the impact your redundancy has on your pension entitlements.

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