How Redundancy Works

When faced with the prospect of redundancy, it can be a challenging and frustrating time. This can be especially so if you do not understand how redundancy works and therefore are unsure of the next steps to take and how it will impact your life.

Redundancy can come as the result of the downsizing of a business, business closure or even as a result of your function being no longer required due to a change in direction of the business or advancements in technology. In the event of being made redundant, you need to be aware of your rights with regard to redundancy payments.

The Redundancy Payments Acts 1967-2014

This is the governing legislation in Ireland which sets the rules and regulations regarding the awarding of redundancy payments. It sets out the minimum entitlement redundancy payment for employees who have worked a set period of service with their employer and the time period in which this payment should be made.

How long do I need to have been employed to get a redundancy payment?

Under the Redundancy Payments Acts, statutory (legally required) redundancy only applies to employees with at least two years' service. However, an employer might agree to pay a voluntary redundancy sum to employees with less than two years' service. This voluntary redundancy is entirely at the discretion of your employer.

When calculating the length of your service to the company, your employer can discount any period over 52 consecutive weeks where you were off work due to an injury at work, any period over 26 consecutive weeks where you were off work due to illness, any period on strike or any period of lay off from work.

How much am I entitled to?

The statutory redundancy payment is based on the pay of the employee. All employees with more than 2 years of service are entitled to be awarded two weeks' pay for every year of service while over the age of 16 and one additional week's pay. In the event that you were assigned reduced hours in the year of being made redundant, your redundancy payment would be based on your earnings for a full week before your reduced hours came into effect.

The amount of statutory redundancy payment is subject to a maximum earnings limit of €600 per week, equating to €31,200 per year. This refers to your normal gross pay, including any typical overtime or benefits in kind. Any redundancy payment up to the maximum earnings limit is tax-free. Your employer can choose to award above the specified statutory redundancy payment amount. Any payment above the statutory amount is taxable.

What if my employer hasn’t paid my redundancy?

If your employer doesn’t automatically pay your redundancy payment on the date of your termination, you must apply directly to them for the payment using form RP77 that’s available from the Workplace Relations Commission. If your employer refuses or is unable to pay your redundancy payment, you can apply for payment from the Social Insurance Fund online. If your employer has refused to pay redundancy, you are entitled to bring a claim to the Workplace Relations Commission. This claim must be filed within a year of being made redundant.

We hope this guide helps you to become better informed of how redundancy works. Don’t feel anxious or scared when faced with redundancy. Rest assured that several supports are available.

Date Posted: 17 February 2016