REDUNDANCY INFO

Independent Information on Redundancy in Ireland

Text Box: Calculating Redundancy Payments

All eligible employees are entitled to a statutory redundancy lump sum payment on being made redundant. An employee is entitled to two weeks pay for every year of service, with a bonus week added on, subject to the prevailing maximum ceiling on gross weekly pay (€600 for redundancies notified on or after 01.01.2005.  €507.90 before that date). 

Eligible Employees 
To be entitled to a redundancy lump sum?
(1) Employees must have at least two years continuous service (104 weeks).
(2) Employees must be in employment which is insurable under the Social Welfare Acts. If she/he is a full-time employee she/he must be in employment which is fully insurable for all benefits under the Social Welfare Acts; this does not apply if the person is a part-time employee. The question of insurability is decided by the Department of Social and Family Affairs in accordance with the rules and appeals procedures provided for in the Social Welfare Acts. An employee who wishes to appeal such a decision is advised to contact Scope Section of that Department. 
(3) Employee must be between the age of 16 and Old Age Pension age, which at present is 66 years of age - except for employees whose Date of Termination is on or after the 8th May 2007. For these, there is no upper age cap.
(4) Employee must be made redundant as a result of a genuine redundancy situation – in general this means that the job no longer exists and the person is not replaced. The emphasis is on the job and not the person, in contrast, for example, to a situation where a person is dismissed for alleged misconduct or where a person voluntarily resigns.

Calculating How much Statutory Redundancy an Employee is Entitled 
An eligible employee is entitled to two weeks statutory redundancy payment for every year of service, plus a bonus week. All statutory redundancy payments are tax-free. For redundancy purposes, a weeks payment is subject to a maximum ceiling called a statutory ceiling which is adjusted upwards every few years. The ceiling currently stands at €600 in respect of all redundancies notified/declared from 1st January, 2005 (€507.90 prior to that date). 

For example, a gross weekly wage of €610 is treated as €600 per week for statutory redundancy calculation purposes, while a gross weekly wage of €590 is still calculated as €590, as it is below the ceiling.

If the total amount of reckonable service is not an exact number of years, the “excess” days are credited as a proportion of a year in respect of redundancies notified/declared on or after 10th April, 2005 (being the date of commencement of Section 11 of the Redundancy Payments Act 2003. This simplified the method of calculating the number of “excess” days for redundancy entitlement purposes).

For example, 91 days, which almost amount to a quarter of a year will therefore give the employee an extra 24.93% of a years service, on top of whatever number of full years they have worked. Thus, the simple formula used for calculating the proportion of a year to be credited to the employee is 91 divided by 365 = .2493, or in percentage terms = 24.93%. 365 days is now used for redundancy calculation purposes rather that the figure of 364 days which was previously used.
Employment service which is non-reckonable for redundancy calculation purposes then needs looked at. Non-reckonable service applies only to the final 3 years ending with the date of termination of employment in respect of redundancies notified/declared on or after 10th April, 2005 (i.e. the date of the coming into operation of Section 12 of the Redundancy Payments Act, 2003). There is no question of non-reckonable service in respect of redundancies notified/declared prior to this 3 year period.

The Weekly Pay used for redundancy purposes is calculated by adding together Gross Weekly Wage, Average Regular Overtime and Benefits-in-Kind.

There is a ‘redundancy calculation facility’ on the website of the Department of Enterprise, Trade and Employment. People are advised to avail of this facility. To make a calculation, you simply double click on the Redundancy Calculator icon on the Home Page of the Department’s Website at www.entemp.ie

Redundancies notified on or after 10th April, 2005
Please note that in respect of redundancies notified on or after 10th April, 2005, the calculator will not differentiate between service under and over 41, showing total service, with two weeks statutory redundancy pay per year of service plus a bonus week being shown in the output field.
 




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