Redundancy - Taxation and Social Welfare

Below is a summary of individuals' redundancy entitlements in terms of taxation and social welfare payments. This is a general guide and specific queries on individual rights or personal circumstances should be directed to your employer, the Revenue Commissioners or your local office of the Department of Social and Family Affairs.

Before leaving your employment:

  • You are entitled to reasonable paid time off to look for a new job or arrange training.
  • The time-off may be taken in the two weeks before your notice expires
  • The Department of Social and Family Affairs may want to know if you have used this time to look for work.

Statutory Redundancy Payment

A statutory redundancy payment is a payment an employer must make to an employee only where an employee qualifies under the Redundancy Payment Act 1967-2007.

You qualify for statutory redundancy payment if:

  • you are aged 16 or over;
  • you have worked continuously for your employer for at least 104 weeks (2 years); and
  • you have been in employment insurable under the Social Welfare Acts (PRSI).

The amount of statutory redundancy payable is 2 weeks' pay for every year of service plus one further week's pay subject to a maximum of €600 per week.

60% of the statutory redundancy payment can be claimed back in tax by the employer.

Taxation and Redundancy

  • The lump sum payable as statutory redundancy is totally exempt from tax.
  • If you are married, your entitlement to exemption against a lump sum payment is calculated independently to your spouse.
  • You can also claim additional tax exemptions against your redundancy payment:

    Basic Tax Exemption
    • You can claim an additional €10,160
    • Plus an additional €765 for each completed year of service.

    Increased Tax Exemption
    • The basic exemption is increased by up to €10,000 if you have not availed of a tax free lump sum in the past 10 years.
    • However, if you are in an occupational pension scheme and you take this exemption, the tax-free lump sum from the pension scheme which you may be entitled to receive on retirement will be reduced by this amount.

    Standard Capital Superannuation Benefit (SCSB)
    • SCSB is aimed at those with long service and high earnings
    • Average earning for the last 3 years of service is multiplied by years of service and total is divided by 15. Deduct any tax free lump sum from approved pension.

    Top Slicing Relief
    The amount of tax charged may also be reduced by what is known as Top-Slicing Relief. There is a formula for calculating the relief, the effect of which is to reduce the tax rate of the lump sum payment to the individual's average rate of tax for the previous three tax years. This should be claimed at the end of the tax year.

Social Welfare Benefits

Job Seekers' Benefit is one of two main unemployment payments. This payment can be paid for up to 12 months and is not means tested.

To quality for Job Seekers Benefit, you must be:

  • Resident in the Irish Republic;
  • Aged under 66 years;
  • Fully unemployed or unemployed for at least 3 days out of any consecutive 6 days; and
  • Available for, capable of and genuinely seeking full-time work and training, education and/or development courses. (You must prove that you are genuinely seeking work).

The maximum payment for Job Seekers Benefit is €196

Claiming Social Welfare

To claim Jobseekers Beneft you must bring along the following information to the local office of the Department of Social and Family Affairs (failure to do so could delay your payment):

  • Birth Certificate;
  • PPS Number for yourself, spouse/partner and children;
  • Pay slip for spouse/partners employment (if any);
  • P45 and RP50 form from employer; and
  • Proof of residence/address.

Delay in Job Seekers Benefit

Job Seekers Benefit is not paid for the first three days of your claim.

There may also be a delay in receiving a Job Seekers Benefit Payment up to a maximum of 9 weeks if a person receives a Redundancy Payment of €50,000 or over. This does not apply to persons over 55 years of age.

 

REDUNDANCY: DELAY IN PAYMENT
€50,000-€55,0001 week
€55,000.01-€60,0002 weeks
€60,000.01-€65,0003 weeks
€65,000.01-€70,0004 weeks
€70,000.01-€75,0005 weeks
€75,000.01-€80,0006 weeks
€80,000.01-€85,0007 weeks
€85,000.01-€90,0008 weeks
€90,000.01-€85,0009 weeks

 


PLEASE NOTE THAT THERE MAY ALSO BE DELAYS IN THE PROCESSING TIME DUE TO THE DEMAND FOR THE JOB SEEKERS BENEFIT IN THIS PRESENT CLIMATE. CONTACT YOUR LOCAL OFFICE OF THE DEPARTMENT OF SOCIAL AND FAMILY AFFAIRS FOR ADVICE.

Job Seekers' Allowance

After Job Seekers' Benefit runs out, you can apply for the Job Seekers' Allowance. The maximum payment for the allowance is €196.00.

Job Seekers Allowance is means-tested. A person's means of income will determine entitlement to a Job Seekers Allowance and the level of that payment. The Job Seekers Allowance claimant will be interview about their means. They should keep bank statements and/or account details if possible as these may be required.

The following four potential means of income are taken into account:

  • Cash Income
  • Property (other than a person's own home)
  • Capital
  • Benefit and Privilege (this refers to benefit received by an unemployed person from living in a parent's home and only applies to people aged under 25).

The level of payment of Job Seekers' Allowance will be reduced if one or more of the above applies.

For further information on redundancy entitlements, the following websites may be of assistance www.redundancy.ie or www.inou.ie or www.revenue.ie