Understanding Your Redundancy Entitlements
The prospect of redundancy presents both challenges and opportunities, which will vary for each individual and household. Your specific redundancy entitlements will depend on factors such as your age, length of reckonable service, and your PRSI class.
If you are entering a redundancy process, the following are key areas to consider:
- Statutory Redundancy
Statutory redundancy payments are tax-free and are calculated as:
- Two weeks’ pay for every year of service, plus
- One additional week’s pay
Weekly pay is capped at €600 for calculation purposes & a Statutory Redundancy Calculator is available HERE.
- Ex-Gratia Termination Payments
In addition to statutory redundancy, your employer may offer an additional payment, known as an ex-gratia termination payment.
The maximum lifetime limit for tax-free redundancy payments is €200,000. However, depending on the size of the payment, part of your ex-gratia sum may be subject to Income Tax and USC.
There are three methods used to calculate the tax-free portion of your termination payment. You are entitled to claim whichever method provides the highest exemption:
- Basic Exemption
Calculated as:
- €10,160 plus €765 for each completed year of service
Note: This exemption may be reduced if you have previously received a termination payment from the same or a related employer.
- Increased Exemption
This builds on the basic exemption:
- Basic exemption plus an additional €10,000
- Reduced by the current actuarial value of any tax-free lump sum from your pension
Eligibility may be affected if you have claimed an exemption greater than the basic exemption within the last 10 years.
- Standard Capital Superannuation Benefit (SCSB)
This is a more complex calculation but can be beneficial for individuals with longer service and higher earnings.
Important: For both the Increased Exemption and SCSB, the current value of your occupational pension tax-free lump sum must be included in the calculation. You will need up-to-date pension information to assess these options accurately.
- Pension Benefits
Redundancy decisions should not be made in isolation from your long-term financial planning.
In some cases, maximising your tax-free redundancy payment may require you to waive your right to a future tax-free pension lump sum. This is a significant decision and should be considered carefully, as it may have long-term financial consequences.
Understanding the value of your pension benefits before making any decisions is essential.
- Jobseeker’s Pay-Related Benefit
If you become unemployed, you may be eligible for Jobseeker’s Pay-Related Benefit, provided:
- Your first day of unemployment is on or after 31 March 2025, and
- You have sufficient PRSI contributions
This payment is linked to your previous earnings and is structured as follows:
- Up to €450 per week for the first 13 weeks
- €375 per week for the next 13 weeks
- €300 per week for the final 13 weeks
You should apply within 6 weeks of losing your job, as delays may affect your entitlement.
- Loss of Employment Benefits
When your employment ends, you will also lose associated benefits such as:
- Death in service cover
- Income protection
- Health insurance
- Pension contributions
Even if this loss is temporary, it can significantly impact your financial security. We recommend the following:
- Health Insurance
Contact your provider immediately to continue cover in your own name. Avoid a lapse of more than 13 weeks to prevent new waiting periods. - Death in Service & Income Protection
These benefits often form the foundation of your financial protection. Consider putting temporary life insurance and serious illness cover in place until you secure new employment and re-enter an employer benefit scheme.
How Eolas Money Can Help
The tax and pension implications of redundancy can be complex. Seeking professional advice ensures you make informed decisions based on your specific circumstances.
Eolas Money can guide you through:
- Calculating your tax-free entitlements
- Understanding your pension options
- Assessing your overall financial position
Booking a Consultation
If you would like to review your redundancy options, calculate your tax exemptions, and determine your net redundancy payment, you can book an online consultation with Jim Stapleton by clicking HERE.
- Fee: €400 + VAT
- Payment: Invoiced after the consultation
You should also check with your employer, as many provide an allowance to cover professional advice (e.g. tax or legal), and our fee may be reimbursed.
Download our Guide
to Termination Payments & Tax Exemptions
Please note: Eolas Money are not legal advisors. Our advice is limited to financial and taxation aspects of redundancy.
