Where you lose your job due to circumstances such as the closure of the business or a reduction in the number of staff this is known as redundancy.
The Redundancy Payments Acts 1967–2014 provide a minimum entitlement to a redundancy payment for employees who have a set period of service with the employer. Not all employees are entitled to the statutory redundancy payment, even where a redundancy situation exists. If you do qualify for redundancy there are specific redundancy procedures which employers and employees must follow in order to comply with the legislation.
However, you and your employer may agree a redundancy payment above the statutory minimum, and in such circumstances, employees who have not reached the statutory minimum period of service may also receive a payment. For example, statutory redundancy only applies to employees with two years' service. However, an employer might agree to pay a lump sum to employees with less than two years' service. This payment arises through agreement and not through a statutory entitlement. As so often in employment law, the legislation is concerned with ensuring minimum rights, while allowing the parties to agree more substantial rights.
The statutory redundancy payment is a lump-sum payment based on the pay of the employee. All eligible employees are entitled to:
- Two weeks' pay for every year of service they have since they were 16 and
- One further week's pay
The amount of statutory redundancy is subject to a maximum earnings limit of €600 per week (€31,200 per year).
The statutory redundancy payment is tax-free.
Gross weekly pay
Pay refers to your current normal weekly pay including average regular overtime and benefits-in-kind, but before tax and PRSI deductions, that is your gross pay. If you are paid monthly, your normal monthly pay is divided by 4.33 to calculate the weekly pay.
Wages vary from week to week
Where you do not have regular hours or regular pay, an average of the last 52 weeks worked is used.
Average weekly overtime earnings are calculated as follows:
- Overtime for the 13 weeks before the date of redundancy is excluded
- Find the total amount of overtime earned in the previous period of 26 weeks (excluding the 13 weeks before the date of redundancy)
- If there was any weeks in the 26 week period not worked then the 26 week period may be extended back for every week not worked
- Divide the total by 26 to get the average weekly overtime
This average overtime is added to the normal weekly pay.
You can read more about how gross weekly pay is calculated on gov.ie.
Reckonable and non-reckonable service
All redundancies notified after 10 April 2005 take account of absences from
work over the last 3 years of service. Any absences outside of this 3-year
period which ends on the date of termination of employment are disregarded.
When calculating the actual length of your service for redundancy payment purposes, the following are regarded as reckonable service, (the absences listed here are called reckonable absences):
- The period you were actually in work
- Any absence from work due to holidays
- Any absence from work due to illness (see below for non-reckonable periods of illness)
- Any period where you were absent from work by agreement with your employer (typically career break)
- Any period of basic and additional maternity leave allowed under the legislation
- Any period of basic adoptive/paternity/parental/carer's leave
- Any period of lock-out from your employment
- Any period where the continuity of your employment is preserved under the Unfair Dismissals Acts.
However, in making the calculation of the length of your service, the following periods over the last 3 years will not be taken into account as service, (these are called non-reckonable absences):
- 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
- Any period of lay off from work.
You can use this online redundancy calculator to help you to calculate your statutory redundancy entitlement. You should note that the online redundancy calculator does not give a legal entitlement to any statutory redundancy amount.
Reduced hours and short-time work
If you were made redundant within a year of being put on reduced hours or pay, your redundancy payment would be based on your earnings for a full week. If you are made redundant after working reduced hours for more than a year, how your payment will be calculated depends on whether you accepted being on reduced hours or not.
If you fully accepted the reduced working hours as your normal week and never asked to return to full-time work, then your redundancy payment will be based on your gross pay for the reduced working hours.
If you never accepted the reduced working hours as your normal hours and continually asked to be put back on full-time working, your payment would be based on your normal weekly earnings.
If you have been put on short time and then are made redundant your redundancy payment may be based on your pay for a full week.
If you agreed to reduced hours temporarily due to COVID-19 and you were getting paid through the Employment Wage Subsidy Scheme (EWSS) or the Temporary Wage Subsidy Scheme (TWSS), your lump sum redundancy payment should be calculated on your normal weekly pay.
If you have a dispute about this with your employer you could make a claim to the Workplace Relations Commission.
Taxation of lump sums
If you receive a lump sum in compensation for the loss of employment, part of it may be tax-free. The statutory redundancy lump sum is always tax-free. Read more about taxation of lump-sum payments on redundancy/retirement. There is more information about taxation and redundancy on the Revenue website.
In the first instance it is up to the employer to pay the statutory redundancy lump sum to all eligible employees. However, where the employer is unable to pay or refuses or fails to pay, the employee can apply for direct payment from the Social Insurance Fund - see 'How to apply' below.
Where your employment has been terminated due to the insolvency of your employer legislation provides for the payment of certain outstanding entitlements in relation to your pay. Under the Insolvency Payments Scheme these may be paid by the Department of Social Protection out of the Social Insurance Fund. There are more details about employers' insolvency legislation in 'Further information' below.
If you were earning less than the minimum wage you may be entitled to payment based on the minimum wage. There are certain exceptions for any period you were in a statutory apprenticeship or under 20 years of age.
Since 1 January 2005 the maximum earnings taken into account in the calculation of statutory redundancy lump sum payments are €600 per week (€31,200 per year).
How to apply
On the date of the termination of employment your employer should pay the redundancy lump sum due to you.
If your employer has not paid your redundancy lump sum, you should apply to your employer for it using form RP77 (pdf). If your employer still does not pay it, you can apply to the Department of Social Protection for direct payment from the Social Insurance Fund.
If your employer is unable to pay your redundancy lump sum, they should follow the steps below:
- Complete and submit the RP50 form online
- Print a copy of the completed form and get the employer and employee to sign it
- Post the signed form to the Redundancy and Insolvency Section of the DSP – see “Where to apply below”. (Include a letter with the form from an accountant or solicitor stating that the employer is unable to pay the redundancy lump sum and is accepting liability for 100% of the lump sum owing to the Social Insurance Fund. Documentary evidence such as audited accounts should also be included).
If your employer refuses to pay your redundancy lump sum or if there is a dispute about redundancy you can bring a claim to the Workplace Relations Commission.
You must complete the following steps:
- Use the online complaint form available on workplacerelations.ie. This must be done within one year of your dismissal
- Apply to the DSP for your lump sum by completing the RP50 form online
- Print off a copy of the form and sign it
- Send the form to the Redundancy and Insolvency Section of the DSP along with a copy of the Workplace Relations Commission decision. (Claims accompanied by a Workplace decision must be submitted within 52 weeks of a decision being made).
Insolvency: If the company has been liquidated or is in receivership, the form RP50 should be completed by the liquidator or receiver on behalf of the employees.
For further information about the Redundancy Payments Scheme contact the Workplace Relations Commission's Information and Customer Services. For information on the status of a claim for a redundancy lump sum or rebate which has been submitted for payment you can contact the Redundancy Payments section directly - see 'Where to apply below'.
Where to apply
The application for payment from the Social Insurance Fund should be sent to:
For further information about the Redundancy Payments Scheme contact:
Employers' insolvency legislation
The Protection of Employees (Employers' Insolvency) Acts 1984–2012 protect certain outstanding entitlements relating to the pay of employees in the event of their employers becoming insolvent as defined in the Acts.
Subject to certain limits and conditions (including statutory time limits), money due to employees in a range of situations may be paid by the Department of Employment Affairs and Social Protection out of the Social Insurance Fund. Instances where the Department may pay from this fund include circumstances where money due as a result of:
- Arrears of pay (including arrears of pay due under an Employment Regulation Order)
- Holiday and sick pay
- Entitlements under the minimum notice and terms of employment, employment equality and unfair dismissals legislation
- Court orders in respect of wages, holiday pay or damages at common law for wrongful dismissal.
The Insolvency Payments Scheme also protects employees' outstanding contributions to occupational pension schemes which an employer may have deducted from wages but not paid into the schemes. Unpaid contributions to an occupational pension scheme on an employer's own account may also be paid from the Fund, subject to certain limits. The Scheme applies to outstanding pension contributions for up to a year prior to the date of insolvency.
The Scheme covers employees who are over 16 years of age and are in employment which is insurable for all benefits under the Social Welfare Acts and includes those over 66 years of age who are in employment which, but for their age, would be insurable for all benefits under the Social Welfare Acts.
Employees should claim from the employer representative (usually the liquidator or receiver) for payment of outstanding entitlements. The employer representative can claim an insolvency payment online.
Implementation of Directive 2002/74/EC
The European Communities (Protection of Employees (Employers' Insolvency) Regulations SI 630/2005 amend the Protection of Employees (Employers' Insolvency) Act 1984 by including a provision to cover employees who are employed by an employer who has become insolvent under the laws, regulations and administrative procedures of another member state. The Regulations apply to insolvencies occurring from 8 October 2005.