Redundancy in Ireland explained

Going through redundancy can be a stressful experience, and you may be filled with concerns about your financial situation. Understanding your entitlement to redundancy payments in Ireland can help to ease some of your worries. 

Here, we take you through the redundancy process in Ireland, so you know your rights and how redundancy works. Discover everything you need to know about being made redundant, including answers to common questions about statutory redundancy, pay rates, and tax considerations.

Redundancy is a form of dismissal where someone loses their job because their employer is shutting down the business or reducing employee numbers. If you’re chosen for redundancy, your employer should use a fair selection process and give you proper notice.

Being made redundant means your role is no longer needed, and it is the job, not you personally, that is being removed. This usually happens through no fault of your own, unlike a termination of employment, which might involve performance issues. Reasons for redundancy can be financial, such as reduced demand for services or bankruptcy; structural, like a company restructuring; or functional, meaning there is no longer a need for your skills and expertise, perhaps due to new technologies.

In some cases, an employer can plan to make a significant number of employees redundant within 30 days, which is known as a collective redundancy. The scale of this redundancy depends on the size of the workforce, affecting a substantial portion of employees relative to the company’s overall size.

If you are made redundant, you might be entitled to benefits like statutory redundancy pay in Ireland, which is a lump sum based on your years of service and weekly pay.

According to the redundancy rules in Ireland, employers must be fair and reasonable when choosing to make someone redundant. They must have a genuine reason to justify their choice. 

Employers are responsible for presenting a solid case for redundancy, demonstrating that they have followed the procedures carefully, and the person has been fairly selected. 

Common methods for selecting employees for redundancy include:

• Last in, first out: This is where the newest employees are prioritised for redundancy.

• Voluntary redundancy: Employees are given the option to volunteer for redundancy.

• Points system: Employees in similar roles are assessed based on objective criteria such as attendance, work standards, and qualifications.

In general, redundancy in Ireland should be considered a last resort, only pursued after all other options have been explored.

In Ireland, the redundancy process typically starts at least 30 days before issuing redundancy notices, during which employers must consult with employee representatives. The idea is to explore alternatives to redundancies wherever possible.

In Ireland, statutory redundancy is a minimum lump sum payment you receive if you’re over the age of 16, have worked continuously for at least two years (104 weeks) with PRSI contributions, and are made redundant. This not only applies to full-time employees; part-time workers and various other types of employees are also entitled to redundancy. 

Certain situations like parental leave or illness might seem to interrupt this continuous employment requirement, but this is often not the case. Irish redundancy law is set out in the Redundancy Payments Act, 1967, and it gives you further information on your redundancy entitlement.

By law in Ireland, employers must provide eligible employees with statutory redundancy payments, along with a notice period.

If you’re being made redundant in Ireland, your job won’t come to an end straight away. Irish redundancy law guarantees you a minimum paid notice period, which your employer must give you in writing. The notice period depends on how long you’ve worked there:

• Between 13 weeks and two years: One week of notice

• Between two and five years: Two weeks of notice

• Between five and 10 years: Four weeks of notice

• Between 10 and 15 years: Six weeks of notice

• Over 15 years: Eight weeks of notice

Now, you might be wondering if you’re entitled to redundancy if you leave your job during this period to, say, take up a new job offer. The answer is yes, you can leave early, but you have to inform your employer in writing using the form RP6 - Leaving Before a Redundancy Expires (pdf). If you don’t, there’s a chance you could lose your redundancy pay entitlement.

Like the notice period, calculating statutory redundancy in Ireland depends on how long you’ve been with your employer and your weekly salary. Statutory redundancy pay in Ireland amounts to two weeks of gross pay for each year of service, up to a limit of €600 per week. On top of that, you receive one extra week’s pay, also capped at €600. This means that any income above €31,200 per year (€600 a week) is not considered when calculating statutory redundancy.

As an example of a redundancy payment, if you’ve been with a company for seven years and earn €500 weekly before tax deductions, your redundancy pay would be calculated as follows:

Two weeks x seven years = 14 weeks’ pay

Plus one extra week’s pay

Given your weekly earnings are below €600, each week would be capped at €500. Therefore:

14 weeks × €500 = €7,000

Plus one week × €500 = €500

Total redundancy pay = €7,500

For a quick and easy estimate of your statutory redundancy payment, you can use this Irish redundancy calculator from the Department of Social Protection.

If you are made redundant in Ireland, statutory redundancy is the responsibility of your employer.

If your employer is unable to pay you or is bankrupt, they can apply for redundancy pay from the government through the Redundancy Payment Scheme. This scheme, managed by the Department of Social Protection, ensures you still receive your redundancy pay if your employer can’t provide it.

When your job ends, your employer should pay you your redundancy money. This payment could happen on your last day of work or your next regular payday. When they pay you this lump sum, they should provide a written statement explaining how they calculated your redundancy payment.

If your redundancy lump sum hasn’t been transferred by the time your job finishes, you’ll have up to a year from your official redundancy date to apply for it yourself. You can do this by filling out form RP77 from the Workplace Relations Commission.

In Ireland, statutory redundancy payments are always tax-free, meaning you pay no income tax or Universal Social Charge (USC) on them.

However, redundancy packages in Ireland can vary, and an employer might choose to give their employees an extra lump sum payment on redundancy, such as an ex-gratia payment. This extra payment may be subject to tax.

Employers sometimes ask employees whether they want to put themselves forward for redundancy by offering them voluntary redundancy or early retirement packages instead of mandatory lay-offs. This is known as non-compulsory redundancy. 

If you suspect you might face redundancy soon, or if your employer has already asked for volunteers, there are some considerations to keep in mind. Some people suggest that waiting for statutory redundancy could be a better choice, provided you meet the eligibility criteria and have worked for your employer for over two years. This is because statutory redundancy payments in Ireland are tax-free, whereas voluntary redundancy payments may be taxable. Also, depending on your job situation, your employer might offer you a new role within the company if you prefer to stay.

If you believe your redundancy was unfair, you can challenge it. This is especially true if there’s no valid business reason behind it. For instance, if you were replaced by someone on a lower salary, targeted for personal reasons, or discriminated against, these could be grounds for unfair dismissal and you can dispute the decision. 

If your employer can’t justify the redundancy with valid reasons and didn’t follow proper procedures, your dismissal could be considered unfair. Even if the redundancy itself is genuine, you still have the right to fight against it if you feel unfairly selected.

You can submit a complaint to the Workplace Relations Commission using their online complaint form. This should ideally be done within one year after your employment ends.

Before making you redundant, your employer might offer you another job within the company, which is known as ‘alternative work’. This offer must be reasonable. Typically, offers that involve a lower position or worse terms and conditions wouldn’t be considered reasonable.

You do not have to accept this alternative work. However, if you decline a suitable alternative job without a valid reason, you might not be eligible for redundancy pay. If you do accept the alternative work, you are entitled to a trial period of four weeks to see if it suits you.

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