A redundancy situation occurs when you need to reduce your workforce. This may be due to a period of trading difficulty, a structural change, or advances in your technology.
In this guide, we’ll explain exactly how statutory redundancy pay works to ensure your employees receive their legal entitlement to statutory redundancy pay.
How to approach redundancy
Redundancy can be a difficult issue to approach your employees about. It can be difficult for your business, too, as it may involve removing longstanding employees from your workforce.
As such, it’s important you handle redundancy carefully to ease the burden on yourself and your staff members. You also have to consider the legal angles for your business so you can safeguard your situation.
Before making any staff members redundant, you’ll need to take a fair approach to your dismissal procedure. So to avoid claims to the Workplace Relations Commission, or other legal action, against you, it is vital to offer a severance package that complies with redundancy payments legislation.
Statutory redundancy pay rates
Your employees may be eligible for statutory redundancy pay depending on their length of service. Employees that have two or more years of continuous service with your business will be eligible to receive a statutory redundancy entitlement.
Calculating a redundancy payment
During the redundancy process, you’ll have to calculate the amount of pay to give to affected employees.
This is a big consideration—you have to remember there are statutory redundancy terms and certain qualifying employees will have an entitlement to statutory severance pay.
The Redundancy Payments Acts 1967-2014 provide employees with a (minimum) statutory redundancy entitlement to receive a payment in the event of redundancy. The result is you’ll need to calculate your employee’s statutory redundancy pay. This can be a significant financial cost for your business, especially if you have multiple employees leaving your business at the same time.
The amount you should pay each employee depends on their weekly pay and years of continuous service. If they meet the relevant criteria, then your employee can claim:
- Two weeks’ pay for each year they worked for you (while over the age of 16).
- One further week of pay.
This payment is a lump-sum they will receive. The amount is subject to a statutory redundancy cap of €600 per week.
The maximum statutory redundancy payment (as of 2018) is €1,200 for every year of reckonable service. Statutory redundancy payments are available for employees as a tax-free lump sum.
Reckonable and non-reckonable service
You should also keep in mind that certain absences your employee accrued within the last three years of employment (prior to a redundancy) may not be taken into consideration for the purposes of calculating statutory redundancy payments.
When working out the length of your employee’s continuous service and the amount of pay they should receive, the following examples constitute reckonable service:
- The time they were in work.
- Absences due to holidays.
- Absences due to illness.
- Time off work after an agreement with you.
- Absence due to maternity leave.
- Absence due to adoptive/paternity/parental/carer’s leave.
Non-reckonable service includes the following:
- 52 consecutive weeks of absence due to an injury at work.
- Authorised absences of 13 weeks or more in a 52-week period.
- 26 consecutive weeks of absence due to illness.
- Strike periods.
- Any time spent laid off from work.
Statutory redundancy pay calculator
If you’re trying to work out statutory minimum redundancy pay, or the maximum amount, then you can use an online redundancy calculator to help you.
Need help with statutory redundancy notice?
We can help make sure you pay the correct amount of statutory redundancy. Get in touch today: 0818 923 923.