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What is redundancy?

A redundancy situation occurs where an employee loses their job due to circumstances such as the closure of the business or a reduction in the number of employees required for the business. It reflects a situation where a person's job no longer exists rather than a person's employment being terminated.

Redundancy payments

An employee will be entitled to a statutory redundancy payment provided that they are:

• employed under a contract of employment
• in employment which is insurable for all social welfare benefits for the past 4 years
• aged between 16 and 66 years
• continuously employed for 104 weeks

Calculation of Statutory Redundancy Payments

Under the Redundancy Payment Acts, the statutory lump sum is calculated based on the income of the employee. Payment is calculated by reference to the years of service and employees will be entitled to;

• two weeks pay for each year of continuous and reckonable service and
• the equivalent of one normal weeks pay.

The statutory redundancy is subject to a maximum earnings limit of €600 a week. The Department of Enterprise, Trade and Innovation provide a free redundancy calculator.

Employers and Redundancy Payments

The employer must pay statutory redundancy to all eligible employees. There is discretion as to whether employers will pay more, unless additional payment is included within the employee's contract. Employers can claim a rebate of 60% of the statutory lump sum from the Social Insurance Fund. Where an employer is unable to make payment or refuses to, then the Department of Enterprise, Trade and Innovation will ensure that employees are paid their statutory redundancy. Particular care should be taken by employers when selecting employees for redundancy. Where a number of people are being made redundant at the one time a collective redundancy may be deemed to exist. Employers should always take legal advice before making any employee redundant.