Redundancy Payments Frequently Asked Questions


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This FAQ has been updated to take into account the Redundancy Payments Act, 2003, including the important changes resulting from the commencement as and from 10th April, 2005 of Sections 7, 11 and 12 of the Redundancy Payments Act, 2003).

It has also been updated to take into account the Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007 which removes the age cap on entitlement to Redundancy payments for employees who have reached the age 66 if their Date of Termination is on of after the 8 th May 2007.

Frequently Asked Questions

  1. If I cannot afford to pay my employees their full Statutory Redundancy should I pay what I can afford?
  2. If there is a change of ownership and if a person leaves a job on Friday evening and starts in the exact same job on Monday morning under a new owner, is that a redundancy?
  3. Can a person be paid both a redundancy lump sum and compensation for unfair dismissals on foot of a taking a case to the Employment Appeals Tribunal?
  4. What happens when different working conditions are offered?
  5. Is a redundancy lump sum payment taxable?
  6. If a person goes from company to company over the years, when does their reckonable service start?
  7. What is the difference between Ordinary Illness and Occupational Injury and how does it affect redundancy calculations?
  8. If an employee is on sick leave for 8 months, with 6 months therefore being reckonable, and 2 months being non-reckonable, returns to work for, say two weeks and goes sick again, does the 6 months of reckonable service start again?
  9. Does it make any difference to a redundancy calculation whether you are under or over 41 years of age?
  10. What is the present standard formula for calculating a redundancy payment?
  11. Where an employee was receiving Unemployment Benefit due to being temporarily laid off or being put on short-time due to lack of work for him/her at their place of employment, is there any affect on calculating how much redundancy payment he/she are due?
  12. Is absence from work due to a strike reckonable for redundancy payment purposes?
  13. What is the situation regarding workers on what is called “fixed-purpose” contracts?
  14. Can an employee be made redundant while on Maternity Leave or on Additional Maternity Leave?
  15. Are Maternity Leave, Additional Maternity and Parental Leave reckonable for redundancy calculation purposes?
  16. Is Adoptive Leave reckonable for redundancy purposes?
  17. Is Carer’s Leave reckonable for redundancy purposes?
  18. What is the position regarding the redundancy rights of Part-Time Workers?
  19. What is the redundancy position regarding employees who commence working abroad?
  20. If a person is given insufficient notice of redundancy, being told on Tuesday 1st that they will be made redundant on Thursday 3rd, and given money to compensate them for the remainder of their two weeks notice, (payment in lieu of notice), what date of termination is inserted on the RP50?
  21. Does the issuing of a P45 always mean there is a redundancy?
  22. If an employee is laid off or put on short time for more than 4 continuous weeks, or 6 non-continuous, broken periods of weeks, where all six weeks fall within a thirteen week period, are they entitled to claim for redundancy payment?
  23. If an employee gets the benefit of a house or childminder facilities as a benefit-in-kind, how is this calculated for RP50 purposes (calculation of statutory lump sum payment)?
  24. Where a person works for an agency, and the agency in turn is under contract to a company, who exactly is deemed to be the employer?
  25. What are the time limits for applying for a rebate and for a lump sum?
  26. Are apprentices entitled to lump sum payments?
  27. What is a piece-worker?
  28. How is the weekly pay of pieceworkers calculated for redundancy purposes?
  29. What option is open to an employee when their employer disputes their right to a lump sum?
  30. What happens if an employer refuses to pay redundancy?
  31. Can seasonal workers get redundancy payments?
  32. What is the minimum period of notice required for redundancy?
  33. How much is the minimum wage and how does it affect redundancy payments?
  34. If a person goes on a career break and then comes back, can they get a redundancy payment?
  35. In calculating a redundancy lump sum figure, what is the maximum gross pay per week which must be used?
  36. What is the situation regarding the calculation for redundancy entitlement purposes of “excess days” (Section 11 of the Redundancy Payments Act, 2003 in respect of all redundancies notified/declared on or after 10th April, 2005)?
  37. What is a collective redundancy as opposed to an ordinary redundancy?
  38. Are employees of FÁS CE/JI Schemes entitled to a redundancy payment?

1. If I cannot afford to pay my employees their full Statutory Redundancy should I pay what I can afford?

No, if an employer cannot afford to pay the full Statutory lumpsum to their employee(s) the Department will make payment out of the Social Insurance Fund, provided that the Employer provides evidence that they are not in a position to pay. Recently Audited accounts or a Statement of Affairs signed by accountant/auditor will be accepted as evidence. The Department will then become a preferential creditor of the Employer and will owe 40% (If Employment End Date prior to Jan 2012), 85% (If Employment End Date is between 1st January 2012 and 31st December 2012) or 100% (If Employment End Date is on or after 1st January 2013) of lump sum amount to the Social Insurance Fund

2. If there is a change of ownership and if a person leaves a job on Friday evening and starts in the exact same job on Monday morning under a new owner, is that a redundancy?

No. Under Transfer of Undertakings legislation, the employees should be re-employed by the new owners, without break of service. Of course, if the new owners carry out a complete re-organisation, effectively changing the working conditions of the employees, then there can be a redundancy situation.

3. Can a person be paid both a redundancy lump sum and compensation for unfair dismissals on foot of a taking a case to the Employment Appeals Tribunal?

No. You can’t claim both. You are either made redundant or you are dismissed. In a redundancy situation, the actual job disappears, due, for example, to a total closure, liquidation, rationalisation etc. Section 5 of the Redundancy Payments Act 2003 emphasises the objective nature of redundancy as being work related by using the phrase redundancy “for one or more reasons not related to the employee concerned”. In a dismissal situation, an employee is asked to leave, whether fairly or unfairly, and is simply replaced by another person doing exactly the same job.

4. What happens when different working conditions are offered?

As a general rule, where the terms and conditions offered are different from those of the existing job, the offer must be of “suitable employment” for that employee. Otherwise it would seem that a redundancy situation is involved i.e. where there is a material deterioration in the terms and conditions of employment.

5.Is a redundancy lump sum payment taxable?

A statutory redundancy lump sum, which under the law must be paid, is entirely tax-free. Only a payment above and beyond the statutory payment (an ex-gratia payment) is taxable, but only when it goes over a certain limit. For further information on this, callers should be referred to the Central Telephone Information Office of the Revenue Commissioners at 1890 60 50 90.

6. If a person goes from company to company over the years, when does their reckonable service start?

From the start of their employment at the last company, unless that company is a subsidiary of the previous company, in which case it would be the start of employment in the previous company.

7. What is the difference between Ordinary Illness and Occupational Injury and how does it affect redundancy calculations?

Ordinary Illness means illnesses which people can get in general e.g. influenza. The first 26 weeks of such leave are allowable in calculating a redundancy lump sum, whereas a full 52 weeks are allowable (reckonable) in respect of an Occupational Injury, which is work-related (occupational accident or injury).

PLEASE NOTE THAT IN RESPECT OF ALL REDUNDANCIES DECLARED/NOTIFIED ON OR AFTER 10 th APRIL 2005 , non-reckonable service applies only to a 3 year period ending on the date of termination. There is no non-reckonable service prior to this 3-year period.

8. If an employee is on sick leave for 8 months, with 6 months therefore being reckonable, and 2 months being non-reckonable, returns to work for, say two weeks and goes sick again, does the 6 months of reckonable service start again?

Yes. An employee can go out sick, return to work, go out sick again, and return again, and in each case gets the full benefit of 6 months sick leave being reckonable. Again, this question of non-reckonable service applies only to the last 3 years of employment.

9. Does it make any difference to a redundancy calculation whether you are under or over 41 years of age?

No, not since the coming into operation of the new redundancy rates on 25 th May 2003 by virtue of Section 10 of the Redundancy Payments Act, 2003. However, in respect of redundancies notified to this Department before 25 th May, 2003, there was a different method of calculation which worked as follows – every year of service over 41 meant a full week’s gross pay was used in calculating statutory redundancy as opposed to the situation of employees in the under 41 bracket where every year only yielded a half week’s pay in calculating redundancy. A bonus week was added to this.

10. What is the present standard formula for calculating a redundancy payment?

Under the Redundancy Payments Act, 2003, an eligible employee who is declared redundant on or after 25 th May 2003 is entitled to two weeks statutory redundancy payment for every year of service between 16 and 66. Employees who have reached 66 years of age and whose date of termination is on or after the 8 th of May 2007 are now eligible for a redundancy payment under the Redundancy Payments Acts 1967-2007. A bonus week is added to this. All of this is based on gross pay subject to the “ceiling” of €600 (from 1 st January, 2005 - €507.90 prior to that). This ceiling is adjusted every few years.

11. Where an employee was receiving Unemployment Benefit due to being temporarily laid off or being put on short-time due to lack of work for him/her at their place of employment, is there any affect on calculating how much redundancy payment he/she are due?

Yes. If it is a lay-off, all the period of lay-off is non-reckonable for redundancy purposes i.e must be excluded in deciding how many years were served and therefore in calculating how much redundancy is due. Periods of short-time, in contrast, are in fact fully reckonable. As stated already, all of this applies only to a 3-year period ending on the date of termination (for all redundancies notified on or after 10 th April, 2005). There is therefore no non-reckonable service prior to this 3 year period.

12. Is absence from work due to a strike reckonable for redundancy payment purposes?

No. It is regarded as non-reckonable service (again, only in the last 3 years of service).

13. What is the situation regarding workers on what is called “fixed-purpose” contracts?

The Redundancy Payments Act 2003 safeguards the right to redundancy of a worker employed under a “fixed-purpose” contract i.e. where the exact duration of the contract was incapable of being determined at the beginning. If the contract is not renewed following the fulfilling of the purpose, with the fixed-purpose contract therefore ceasing, a redundancy situation can arise.

There is already provision under Section 9(1)(b) of the Redundancy Payments Act, 1967 regarding fixed-term contracts under which a redundancy situation exists where a fixed-term of employment expires without being renewed under the same or a similar contract.

14. Can an employee be made redundant while on Maternity Leave or on Additional Maternity Leave?

No. Notice of Redundancy (included in RP50) cannot issue when a person is on Maternity Leave or indeed on Additional Maternity Leave. The Equality Authority are the experts on this and callers can be referred to them at (01) 4173333. (Lo Call –1890 24 55 45).

15. Are Maternity Leave, Additional Maternity and Parental Leave reckonable for redundancy calculation purposes?

From the 1 st March 2007 the first 26 weeks of maternity leave are fully reckonable for redundancy calculation purposes (up from 22 weeks since the 1 st of March 2006). Furthermore, in respect of all redundancies notified/declared on or after 10 th April, 2005, additional maternity leave is also reckonable. The same applies to protective leave or natal care absence within the meaning of the Maternity Protection Act 1994. Again, all this applies only to the 3 year period ending on the date of termination of employment. Absences from employment before that period (in respect of all redundancies notified/declared on or after 10 th April, 2005) are always fully reckonable.

The full 14 weeks of parental leave are fully reckonable for redundancy purposes (under the Parental Leave Act, 1998). So also is force majeure leave within the meaning of the Parental Leave Act 1998. Again, the 3 year rule referred to above applies here also.

16. Is Adoptive Leave reckonable for redundancy purposes?

Yes. Since 1 st of March 2007, the first 24 weeks of Adoptive Leave have been reckonable (20 weeks prior to that) under the Adoptive Leave Act, 1995 (as amended). The additional 16 weeks Adoptive Leave (unpaid) are also reckonable.

Again, the 3 year rule referred to above applies.

17. Is Carer’s Leave reckonable for redundancy purposes?

Yes. Carer’s Leave, up to a maximum period of 104 weeks in respect of any one care-recipient, is reckonable. Again, the 3 year rule applies – non-reckonable service applies only to the last 3 years of service. Everything before that is fully reckonable.

18. What is the position regarding the redundancy rights of Part-Time Workers?

The Redundancy Payments Act 2003 has secured the rights of part-time workers to a statutory redundancy payment through amending insurability requirements for redundancy to bring them into line with the Social Welfare Acts and the Protection of Employees (Part-Time Work) Act 2001. This is in line with the provision of the 2001 Act that part-time employees cannot be treated in a less favourable manner than comparable full-time employees in relation to conditions of employment. In particular, there is recognition for the rights of workers to statutory redundancy in the following cases – (a) casual employment, (b) subsidiary employment (where a person depends on another employment for his/her livelihood) and (c) employment of inconsiderable extent i.e. very low wage.

19. What is the redundancy position regarding employees who commence working abroad?

Under the Redundancy Payments Act 2003 employees who start work in a company abroad, work there for some time and are then transferred to the company or an associated company in the Republic of Ireland and work here for at least two years before being made redundant, will have all of their service counted in calculating their statutory redundancy entitlements.

20. If a person is given insufficient notice of redundancy, being told on Tuesday 1st that they will be made redundant on Thursday 3rd, and given money to compensate them for the remainder of their two weeks notice, (payment in lieu of notice), what date of termination is inserted on the RP50?

The date used is the date that would have been applicable if they had got their full notice i.e Tuesday 15 th.

21. Does the issuing of a P45 always mean there is a redundancy?

Not in all cases. A P45 could simply mean that a person is being laid off for a period of time.

22. If an employee is laid off or put on short time for more than 4 continuous weeks, or 6 non-continuous, broken periods of weeks, where all six weeks fall within a thirteen week period, are they entitled to claim for redundancy payment?

Yes, provided the employer does not counter claim by offering 13 weeks continual employment, the employee can claim a redundancy lump sum. However, he/she cannot then demand to be given notice under the Minimum Notice legislation as they are deemed to have voluntarily left their employment.

23. If an employee gets the benefit of a house or childminder facilities as a benefit-in-kind, how is this calculated for RP50 purposes (calculation of statutory lump sum payment)?

It is up to the employer and the employee to agree figures between them for rent and childminder costs, to be inserted in the form as weekly benefits-in-kind.

24.Where a person works for an agency, and the agency in turn is under contract to a company, who exactly is deemed to be the employer?

As a general rule, whoever pays the wages is deemed to be the employer. So if the agency pays the wages, then it is deemed responsible for making the statutory redundancy payment.

25.What are the time limits for applying for a rebate and for a lump sum?

6 months for a rebate (from the date of payment of the lump sum by the employer) and 52 weeks (one year) for a lump sum, though the Employment Appeals Tribunal (EAT) has the power to extend the lump sum deadline from 52 weeks to 104 weeks. The 52 week deadline applies both to the making of a claim to the employer (Form 77) and to the making of a claim to the EAT in a situation where the employer disputes payment of redundancy.

26. Are apprentices entitled to lump sum payments?

Yes, provided they fulfil the usual conditions i.e. aged between 16 and 66, are fully insurable for all benefits under the Social Welfare Acts etc. Employees who have reached 66 years of age and whose date of termination is on or after the 8 th of May 2007 are now eligible for a redundancy payment under the Redundancy Payments Act 1967-2007. However, when they finish their apprenticeships, their employers have one month in which to end their services without paying them redundancy. If an employee is fortunate enough to be kept on for more that one month after completing his/her apprenticeship, the period spent as an apprentice over 16 years of age will be reckonable in calculating the redundancy lump sum should he/she become redundant in the future.

27. What is a piece-worker?

A piece worker is a worker whose pay fluctuates according to the work he does e.g. a person living on bonuses, commissions etc, in contrast to a person with a fixed rate of pay per week, as is the situation with most people.

28. How is the weekly pay of pieceworkers calculated for redundancy purposes?

You go back 13 weeks from the date of termination. You then take a 26 week period ending on this date. Total pay for this 26 week period is calculated, with total hours worked also calculated. Total pay is divided by total hours to get pay per hour. Weekly pay for redundancy purposes is calculated by multiplying this hourly rate by the number of hours normally expected to be worked in a week.

It might be noted that where an employee does not work for any week or weeks during this 26 week period, these “empty” weeks are not counted for redundancy purposes, and the most recent week or weeks counting backwards are taken into account instead.

29.What option is open to an employee when their employer disputes their right to a lump sum?

They can bring a case to the Employment Appeals Tribunal under the Redundancy Payments Acts, 1967 to 2003. The Tribunal is an independent body and provides a speedy, fair, inexpensive and informal means for individuals to seek remedies for alleged infringements of their statutory rights, including rights to their correct statutory redundancy payment.

30. What happens if an employer refuses to pay redundancy?

The employee should first send him Form 77, applying for a redundancy payment. If the employer continues to refuse, but agrees to fill out and sign RP50 (redundancy Certificate), thereby acknowledging the employee’s right to a payment, as opposed to actually making the payment, the employee can then apply to Redundancy Payments Section of the Department for payment from the Social Insurance Fund (SIF). If the employer does not even agree to signing Form RP50, then the employee can apply to the EAT. If successful, they can firstly ask the employer again for payment. If he again refuses, they can apply to Redundancy Section for payment from the SIF. Payment will only be made out of the SIF once proper documentation has been received from the employer showing they are not in a position to make the redundancy payment.

31. Can seasonal workers get redundancy payments?

Yes, but only at the usual commencement time of his/her seasonal work. Only if he/she is not then re-employed does the question of redundancy arise, but not until then.

32. What is the minimum period of notice required for redundancy?

2 weeks notice for an employee with two to five years’ service (an employee needs at least two years service to qualify for redundancy). 4 weeks notice for an employee with five to ten years service, six weeks notice for employees with ten to fifteen years notice and 8 weeks notice for employees with more than 15 years notice.

As far as Redundancy Payments Section is concerned, the main requirement is that there must be at least 2 weeks notice. The redundancy legislation stipulates this. All of the longer periods of notice come under the Minimum Notice and Terms of Employment Acts 1973 to 2001 and are dealt with by Employment Rights Section (Davitt House, Adelaide Road).

33. How much is the minimum wage and how does it affect redundancy payments?

With effect from 1 July 2007 the national minimum hourly rate of pay for an experienced adult worker is €8.65 . On Form RP50, the total gross weekly wage (shown in section 2 on the back of the form) divided by the number of hours worked per week (on the front of the form) should never be lower than the existing minimum wage. Otherwise it is an underpayment and the employer is not entitled to his/her 60% rebate until full payment is made.

34. If a person goes on a career break and then comes back, can they get a redundancy payment?

Yes, provided they fulfil all the other conditions e.g. over 16, 2 years service, in employment that is fully insurable etc. Under Section 12(b) of the Redundancy Payments Act, 2003, career break-type absences “authorised by the employer” are fully reckonable for redundancy purposes in respect of redundancies notified/declared as and from 10 th April, 2005 (prior to that, such absences were reckonable for only 13 weeks within a period of 52 weeks).

35. In calculating a redundancy lump sum figure, what is the maximum gross pay per week, which must be used?

For employees given their notice from 1 st January 2005, the maximum figure, or “ceiling” as it is often referred to, is €600 per week (€507.90 prior to that). Any income higher than that is disregarded for redundancy calculation purposes.

36. What is the situation regarding the calculation for redundancy entitlement purposes of “excess days” (Section 11 of the Redundancy Payments Act, 2003 in respect of all redundancies notified/declared on or after 10th April, 2005)?

The old, pre- 10 th April, 2005 system for calculating “excess” days e.g. 3 years and 12 days was regarded as a bit too complicated and sometimes unfair. It all depended on whether or not the “excess” days were over or under 182 days, with periods under 182 days being disregarded.

The new post 10 th April, 2005 is much simpler. It is simply a case that all “excess” days will be credited as a proportion of a year. For example, 91 days, which almost amount to a quarter of a year (24.93% to be exact) will therefore give the employee an extra 24.93% of a years service, on top of whatever number of full years they have worked for, even though the excess days are under 182 days – the 182 day rule is therefore gone as and from 10 th April, 2005. Thus, the simple formula used for calculating the proportion of a year to be credited to the employee is 91 divided by 365 = 24.93%. Please note that 365 days is now used for redundancy calculation purposes rather that the figure of 364 days which was previously used.

37. What is a collective redundancy as opposed to an ordinary redundancy?

A collective redundancy generally means a large-scale redundancy. At the very minimum, there must be at least 20 people employed, with at least 5 of them being made redundant. This can rise to an entire workforce of hundreds of people being made redundant.

The legislation applicable here, the Protection of Employment Act, 1977, which requires that both the Minister for Enterprise, Trade and Innovation and employees’ representatives should be consulted at least 30 days in advance of people being made redundant, is entirely separate from the Redundancy Payments Acts, 1967 to 2007. A separate guidance booklet on the Protection of Employment Act, 1977, dealing with collective redundancies, is available from the Department.

Under amending regulations 21 st December, 2000 – The European Communities (Protection of Employment) Regulations, 2000, may present a complaint to a Rights Commissioner that an employer has contravened Section 9 or 10 of the 1977 Act in relation to the requirement to consult with employee representatives and give them all the relevant information.

38. Are employees of FÁS CE/JI Schemes entitled to a redundancy payment?

Yes. Provided that they fulfil the usual criteria, they are entitled to be paid by the company/organisation that employs them. By agreement with FÁS, it is always up to the employer to pay them, rather than the Department through the SIF Fund. Redundancy Payments Section then gives the employer the appropriate rebate.

Note: This set of Questions & Answers do not purport to give a legal interpretation of the Redundancy Payments Acts, 1967 to 2007, or other employment rights legislation.

 

Last modified:11/04/2012
 

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