Redundancy in Ireland: Implications and Entitlement

Losing your job through redundancy in Ireland can be one of the most stressful experiences in a professional’s life. The emotional and financial uncertainty can be overwhelming, making it crucial to understand your rights, options, and potential support systems. This comprehensive guide will provide you with an in-depth look at redundancy entitlements in Ireland, helping you navigate this challenging transition with confidence and clarity.

 

What is Redundancy in Ireland?

Redundancy is a specific type of job loss that occurs when an employee’s position becomes unnecessary due to external circumstances. Unlike termination for performance issues, redundancy is not a reflection of an individual’s work quality or capabilities.

 

Common Reasons for Redundancy

Employers may initiate redundancy for various strategic reasons:

• Complete business closure
• Significant company restructuring
• Technological advancements eliminating specific roles
• Economic downturns reducing business capacity
• Relocation of business operations
• Merger or acquisition activities

 

Legal Framework

In Ireland, redundancy is governed by the Redundancy Payments Act of 1967, which provides clear guidelines and protections for employees. This legislation ensures that workers are treated fairly and receive appropriate compensation when their jobs are eliminated.

 

Understanding Statutory Redundancy in Ireland

Eligibility Criteria

To qualify for statutory redundancy in Ireland, you must meet specific requirements:

• Be at least 16 years old
• Have worked continuously for a minimum of two years (104 weeks)
• Have made PRSI (Pay Related Social Insurance) contributions
• Be made redundant through no fault of your own
• Work for an employer covered by the Redundancy Payments Act

 

Important Nuances

• Part-time and full-time employees can be eligible
• Periods of parental leave or illness typically do not interrupt continuous employment
• The redundancy must be genuine and verifiable

 

How is Redundancy Calculated in Ireland?

The calculation of redundancy pay follows a standardised formula designed to provide fair compensation based on your service and earnings.

 

Detailed Calculation Method

For instance, if you have been employed by a company for 16.15 years and earn €400 per week before tax deductions, your redundancy payment would be calculated as follows:

• Commenced 9th December 2004
• On maternity leave January 22nd July 2018 – 19th January 2019 (182 days)
• Made redundant on 15th January 2021.

Service: 16.15 years (including maternity)

Weeks due: 33.3 weeks = [(16.15 x 2) + 1]

Wages: €400 per week Entitlements: €13,320

 

How Much Redundancy is Tax-Free in Ireland?

One of the most attractive aspects of redundancy in Ireland is the tax treatment of statutory payments.

Tax Exemption Details

• Statutory redundancy payments are 100% tax-free
• No income tax applied
• No Universal Social Charge (USC) deducted
• Entire lump sum goes directly to the employee

 

Additional Payment Considerations

While statutory redundancy is tax-free, be aware that:

• Extra ex-gratia payments might be taxable
• Voluntary redundancy packages could have different tax implications
• Professional financial advice is crucial for understanding your specific tax situation

 

Is Redundancy Capped in Ireland?

Earnings and Payment Caps

• Maximum weekly earnings considered: €600
• Annual income threshold: €31,200
• Payments calculated only on earnings up to this cap
• Ensures a standardised and fair approach to redundancy compensation

 

Redundancy Selection Process

Employers must follow strict, fair selection methods when determining redundancies:

 

Selection Methodologies

Your employer should implement a fair and objective selection process when determining redundancies. This means the decision should be based on clear, unbiased, and factual criteria that explain why you were chosen for redundancy while other employees were not.

1. Last In, First Out (LIFO)

•  Newest employees are typically selected first
• Provides a straightforward, transparent approach

2. Voluntary Redundancy

•  Employees can volunteer for redundancy
• Often includes enhanced compensation packages

3. Objective Points-Based System

•  Employees assessed using measurable criteria
• Factors might include:

* Work performance

* Attendance records

* Qualifications

* Skills relevance

 

Notice Periods and Rights

Statutory Notice Periods

Notice periods are structured based on years of service:

• 13 weeks to 2 years: 1 week notice
• 2-5 years: 2 weeks notice
• 5-10 years: 4 weeks notice
• 10-15 years: 6 weeks notice
• Over 15 years: 8 weeks notice

 

Challenging Redundancy

If you believe your redundancy is unfair:

• Request detailed justification from your employer
• Check for potential discriminatory practices
• Submit a complaint to the Workplace Relations Commission
• Seek legal advice if necessary

 

Alternatives to Redundancy

Employers might explore alternatives before finalising redundancies:

• Redeployment within the company
• Reduced working hours
• Temporary salary adjustments
• Four-week trial period for new roles

 

The Critical Importance of Financial Advice

Navigating redundancy requires strategic financial planning. Professional guidance can help you understand full entitlements, optimise financial strategy, explore investment opportunities, plan career transition and manage pension and long-term financial goals

At Fairstone, we specialise in providing comprehensive financial guidance during life’s most challenging transitions. Our expert advisors offer personalised redundancy consultations, comprehensive pension and investment strategy and a holistic financial planning tailored to your unique situation Book your no-obligation redundancy consultation with Fairstone today and transform uncertainty into opportunity.

Updated 10th February 2025

 

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