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Statutory Redundancy Payment in Ireland
If you are made redundant in Ireland, you may be entitled to a statutory lump sum payment from your employer. This payment is a legal right designed to compensate for the loss of your job due to redundancy. The amount is calculated based on your length of service and your gross weekly pay (subject to a cap). Crucially, statutory redundancy payments are fully tax-free.
How is it calculated?
The core formula for the gross statutory redundancy payment is straightforward:
- You receive two weeks' pay for every full year of reckonable service.
- Plus, you receive one additional week's pay on top of that.
Two important limits apply. First, your weekly pay used in the calculation is capped at €600 (as of 2026). If you earn more, the excess does not count. Second, you must have at least 104 weeks (2 years) of continuous service with your employer to qualify at all.
Not all service may count. Periods such as strikes, extended lay-offs (over 52 weeks), or unpaid career breaks are considered "non-reckonable" and are subtracted from your total service. The calculation uses full years only; part-years of service are not counted in the standard formula, though the law provides for a pro-rata entitlement in certain cases.
Tax Treatment
Under Section 201 of the Taxes Consolidation Act 1997, payments made under the statutory redundancy scheme are fully exempt from Income Tax, Universal Social Charge (USC), and Pay Related Social Insurance (PRSI). There is no need to apply a basic or increased exemption threshold to the statutory amount itself. The tax exemptions for ex-gratia (voluntary) severance payments are different and are not covered by this calculator.
Worked Example
Sarah worked for 12 years and 6 months, earning €750 per week. She is made redundant.
- Reckonable Service: 12 full years (the 6 months are a part-year).
- Capped Weekly Pay: €600 (her €750 pay is above the €600 cap).
- Qualifies? Yes (over 2 years of service).
- Gross Statutory Payment: €600 × (2 × 12 + 1) = €600 × 25 = €15,000.
- Result: Her €15,000 statutory redundancy payment is fully tax-free.
Frequent Scenarios
Short Service: Employees with less than 104 weeks of service are not entitled to a statutory redundancy payment.
High Earners: The €600 weekly cap significantly affects the calculation for those earning well above that amount. Their entitlement is based on the cap, not their actual salary.
Contractual Enhancements: Many employment contracts or collective agreements provide for enhanced redundancy terms (e.g., 3 or 4 weeks' pay per year). This calculator only covers the legal minimum. Always check your contract.
Next Steps and Documentation
After calculating your entitlement, it is important to have your employment terms clearly documented. A well-drafted Contract of Employment specifies crucial details like notice periods and grounds for termination, which are relevant in any redundancy situation. Having a clear contract helps prevent disputes by ensuring both employer and employee understand their rights and obligations from the start.