October 14, 2021
Budget 2022 was announced on the 12th October, 2021. It is Minister for Finance, Paschal Donohoe’s fifth budget and the second of the coalition government between Fianna Fáil, Fine Gael...
Severance Pay Advice for Employers
If your business or organisation is exploring the legal requirements and implications of redundancy or voluntary redundancy, Lavelle Partners can guide you through the complete process. Our team of specialist redundancy Solicitors have the experience and in-depth knowledge of the Redundancy Payments Act of 1967 and can advise you in relation to the options available for severance packages.
Within Ireland, only employees with two or more years of continuous service are entitled to redundancy/severance pay. In addition, if you are considering asking for employees to volunteer to take redundancy, voluntary severance pay may be owed.
It is important to ensure any severance package offered in writing is accurate and reflects the legal rights of the employee. Procedural errors made during this process can lead to claims of unfair dismissal.
For staff members with two or more years of continuous service, as a minimum, you must pay a statutory severance payment; calculated as two week’s pay for every year of service, and one further week’s pay. This is paid tax-free but is capped at €600 per week.
At your own discretion, you may agree to pay more than the statutory amount, perhaps in the form of a lump sum; this is referred to as an ex-gratia payment.
When calculating each employee’s total length of continuous service, you may make adjustments for absences from work. It is important to understand and apply the rules precisely for reckonable and non-reckonable service. Failure to do so may lead to an incorrect calculation of severance pay, and a claim of procedural error. Non-reckonable service (which does not contribute to the period of service) includes:
Voluntary severance pay differs from redundancy pay as outlined above, in that it reflects compensation if an employee voluntarily leaves their position – i.e. it is mutually agreed between you and the employee. If you do offer the option of voluntary redundancy, it is important that any employee who accepts the financial incentive understands that it will be taxable and they may not be entitled to Jobseeker’s allowance.
Lavelle Partners work with Talbot Pierce to provide a seamless service in respect of Human Resource Management. Talbot Pierce are a team of specialist HR professionals who work with us on a range of matters including advice on and delivery of conflict/dispute resolution solutions, best-practice HR strategies, policies and procedures.
If you are an employer based in Ireland and require guidance relating to severance packages, please contact Lavelle Partners in confidence on (01) 644 5800*.
*Please note that fees apply to all consultations and advice cannot be given free of charge.
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