Making an Employee Redundant
Redundancy is never an easy decision for an employer to make but there may come a time when circumstances arise which leave an employer with no alternative but to declare redundancies.
A redundancy situation can often arise in the following situations:
- an employee’s job ceases to exist
- the employer ceases to carry on the business
- the requirement for employees has diminished
- an employee is not skilled for work that is to be done
In the event of a redundancy, employees are covered under Redundancy Payments Acts 1967-2014, if they meet the following requirements:
- aged 16 or over
- have at least 2 years continuous service (104 weeks)
- are a full-time employee insurable under PRSI class A, or PRSI Class J for a part-time employee
How to calculate Statutory Redundancy Pay
Statutory Redundancy is payable at a rate of:
- 2 weeks’ pay for each year of service. If the period of employment is not an exact number of years, the excess days are credited as a portion of a year
- plus one week’s pay
The term ‘pay’ refers to the employee’s current normal gross weekly pay, including average regular overtime and benefits in kind. The above, however, is based on a maximum earnings limit of €600 per week (before PAYE, PRSI & USC).
An employer may also choose to pay a redundancy payment above the statutory minimum. In such circumstances, the statutory payment element will be tax free but some of the lump sum payment may be taxable.
Employers should ensure that a redundancy policy is included in their company handbook and that all staff are aware of the procedures in place if redundancies were to arise.
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