The prospect of redundancy poses opportunities/challenges which are unique to each individual and your redundancy entitlements will be dependent on your age, the length of your reckonable service in your job, and other factors such as the insurable status of your job.
Statutory Redundancy: Statutory redundancy payments are exempt from taxes and should give you two weeks salary for every year of service, plus one extra week, with each weeks salary capped at €600. A Statutory Redundancy Calculator is available HERE
Ex-Gratia Termination Payments: Your employer may also offer an extra payment, known as an ex-gratia termination payment and the maximum lifetime limit for tax free redundancy payments is €200,000. Ex-gratia termination payments may be liable to income tax & USC depending on the size of the payment and there are three methods to calculate the tax-free portion of your termination payment and you can claim the highest of the three exemptions:
- Basic Exemption: The basic tax-free exemption is calculated as €10,160 plus €765 for each completed year of service. Entitlement to the basic exemption may be impacted where an employee has received a previous termination payment from the same or an associated employer.
- Increased Exemption: The increased exemption is equal to the basic exemption plus a further €10,000 less the current actuarial value of any tax-free amount received or receivable from the company pension scheme. Entitlement to this relief may be impacted where an employee has claimed an exemption greater than the basic exemption in the last 10 years.
- Standard Capital Superannuation Benefit: A more complex method of calculating the tax-free portion but this option will most likely benefit individuals with longer service and higher salaries.
In calculating options 2 & 3 above, the present value of your occupational pension scheme tax-free lump sum is factored into the calculations so you will need to know the current value of your occupational pension.
Pension Benefits: As part of a redundancy decision making process, you need to consider your long-term financial planning requirements and the benefits of your occupational pension scheme, now and in the future. As part of your redundancy decision making process, it may be possible to waive your right to receive a future tax-free lump sum. However, you should consider this carefully as the wrong decision regarding your company pension benefits can be costly.
How Eolas Money Can Help: The tax laws around redundancy and pensions can become quite complex, so it is always best to seek professional advice specific to your situation. Eolas Money can help guide you make an informed decision on all aspects of your redundancy decision making. Download our Guide to Termination Payments & Tax Exemptions
Booking a Consultation: To discuss your redundancy options, to calculate your tax exemptions and determine your net redundancy payment, you can book an online consultation below by selecting a date/time with Jim Stapleton. The cost of this consultation is €200+vat and will be invoiced after our consultation. Please check with your Employer if an allowance is provided for professional fees such as taxation or legal advice as most employers will refund our fees to you.
Eolas Money are not legal advisors and our advice extends only to the financial/taxation review of your Redundancy.
