A Guide to Voluntary Redundancy in Ireland



A guide to voluntary redundancy in Ireland

If you’re considering a change in your career path or perhaps facing a crossroad at your current job, understanding voluntary redundancy in Ireland is crucial. Voluntary redundancy occurs when your employer offers you the option to leave your job in return for a financial payment. This can arise from various situations, such as company restructuring or a business aiming to reduce its workforce. Unlike compulsory redundancy, you have a choice in the matter, and it’s important to be well-informed before making any decisions.

When embarking on the voluntary redundancy process, you’ll encounter the Redundancy Payments Acts, the framework that governs redundancy payments in Ireland. The Acts set out the rights of employees and the obligations of employers regarding redundancy compensation. It’s vital to grasp the nuances of these regulations to ensure that you receive the entitlements due to you and that the redundancy process is carried out fairly and transparently.

Considering voluntary redundancy isn’t just a financial decision; it’s also about weighing up your career goals and personal circumstances. Engaging with a clear and concise guide can help simplify the complexities surrounding voluntary redundancy, allowing you to evaluate your options with confidence. Whether you’re in the early stages of contemplation or ready to take the leap, understanding the ins and outs of voluntary redundancy will be a valuable compass as you navigate this significant career juncture.

Understanding Redundancy

Redundancy may seem complex, but it’s essentially about fairness and genuine business needs. Let’s navigate through the essential details.

Defining Redundancy and Its Types

When you are made redundant, it means your job position ceases to exist, often due to your employer’s operational requirements. In Ireland, there are two main types of redundancy recognised:

  • Statutory Redundancy – This is a scenario where you’re legally entitled to redundancy payments after being employed for over two years. The statutory redundancy payment is a lump sum, based on your pay, age, and length of service.
  • Genuine Redundancy – It’s important that your redundancy is fair and genuine. This refers to situations where your dismissal is not due to any personal shortcoming but the result of business decisions, such as company restructuring or closure.

Legal Framework Surrounding Redundancy

Your redundancy rights in Ireland are governed by several legal provisions. It’s crucial to understand these to ensure fair treatment:

  • Redundancy Payments Acts 1967–2014: These acts outline your rights to statutory redundancy payments and the conditions under which these apply.
  • Unfair Dismissals Acts 1977–2015: To protect against unfair dismissal, these acts serve as a checkpoint, ensuring that redundancy is indeed genuine and not an excuse for an unfair dismissal.
  • Redundancy in Ireland: It’s administered in line with EU directives, which require your employer to engage in a consultation process with you before any redundancy is confirmed.

Your understanding of redundancy and its legal framework bolsters your ability to navigate through the process. Familiarity with these basics acts as a safeguard, securing your entitlements.

The Voluntary Redundancy Process

An old photo of unemployed men

Voluntary redundancy in Ireland is a considered decision for both you and your employer. It involves clear steps, good communication, and due diligence to ensure the process is fair and agreeable.

Steps for Initiating Voluntary Redundancy

When your employer is considering workforce reductions, they may offer voluntary redundancy. This process begins with your employer illustrating the reasons behind the proposed reduction and outlining selection criteria to ensure transparency. Here is what typically happens:

  • Employer Announces Redundancy Plan – Notices are provided explaining the situation and inviting interested employees to apply.
  • Employee Expression of Interest – If you’re interested, you submit a formal application or expression of interest in the voluntary redundancy package.

Consultation and Negotiation

Effective consultation is a key part of the voluntary redundancy process. It includes:

  • Open discussions between you and your employer regarding the terms and implications.
  • Negotiations on the redundancy package, informed by employment law and any collective agreements.
  • An opportunity to ask questions and seek further clarification about how the process affects you.

During the consultation period, either party has the right to involve external bodies like the Workplace Relations Commission for guidance and to ensure fair practice.

Finalising the Agreement

Once you and your employer have reached an agreement:

  • A formal redundancy agreement is drawn up, detailing the terms, financial package, and any other conditions.
  • You will be encouraged to seek independent advice to review the agreement.
  • Upon mutual agreement, both parties sign the redundancy agreement, and the voluntary redundancy is processed, bringing your employment to an end.

Remember, voluntary redundancy is just that – voluntary. You are under no obligation to accept the offer, and likewise, your employer is not obliged to accept every application.

Financial Aspects of Redundancy

Figurines of a man and a woman placed onto a stack of Euro coins

Understanding the financial aspects of voluntary redundancy is essential, as it affects your immediate and long-term financial situation. It’s important to know how your redundancy pay is calculated, the tax implications, and the influence on your social welfare entitlements.

Calculating Redundancy Pay

When you’re considering voluntary redundancy, the first thing to do is to engage in a bit of financial modelling, i.e. to figure out is how much you’re entitled to in terms of redundancy pay. Generally, you’re entitled to:

  • Two weeks’ pay for every year of service—up to a maximum of €600 per week.
  • A bonus week’s pay, which is also capped at €600.

The actual amount you’re entitled to can be calculated using an online redundancy calculator, which considers your weekly pay, years of service, and age. You may also want to utilise company secretary services to review your redundancy agreement and ensure you are receiving your full entitlements. Please remember that the total sum is subject to a maximum earnings limit.

Years of ServiceRedundancy Pay (Per Year)Bonus Pay
1-102 weeks’ pay€600
10+2 weeks’ pay€600

Tax Implications

Your redundancy lump sum is treated favourably by the tax system in Ireland. Generally, redundancy payments up to €200,000 are tax-free — this includes your statutory redundancy entitlement. Any amount above that threshold may be subject to tax. However, taxation can be quite complex, and it’s advisable to seek professional advice to understand your specific tax liabilities.

When it comes to redundancy pay, keep in mind:

  • The first €10,160 plus €765 for each year of service you’ve completed are tax-free.
  • Any additional amounts from your employer above the statutory requirement may be taxable.

Implications for Social Welfare Payments

After receiving the redundancy lump sum, your eligibility for social welfare may be affected. It is assessed under the Social Welfare Acts, taking into account your lump-sum payment as part of your means. This could impact payments such as Jobseeker’s Benefit or Allowance.

It’s important to note:

  • Your social insurance fund contributions determine your entitlement to certain benefits.
  • A large lump sum could reduce your weekly social welfare payments or disqualify you temporarily.

To ensure you get accurate information relevant to your situation, it’s suggested to directly contact your local social welfare office or visit their official website.

Employee Rights and Protections

When you are considering voluntary redundancy, it’s crucial to be aware of the rights and protections afforded to you under Irish law. Specifically, your protections against unfair dismissal and during lay-offs or short-time working are governed by established legislation.

Unfair Dismissal Protections

In Ireland, the Unfair Dismissals Acts 1977–2015 provide you with safeguards against unfair dismissal. If you have accrued at least one year of continuous service with your employer, you are protected. In the case of a redundancy situation, it must be a true redundancy situation as defined by the Acts. A sham redundancy occurs when the role is not genuinely redundant, and this could give grounds for an unfair dismissal claim.

In a true redundancy situation, the burden of proof falls on the employer to justify the redundancy. Your employer must also follow fair procedures, which include:

  • Giving reasonable notice
  • Applying objective selection criteria
  • Offering suitable alternative employment, if available

If you believe you’ve been unfairly dismissed, you can file an unfair dismissal claim to the Workplace Relations Commission (WRC). The claim must be lodged within six months of the dismissal, which can be extended to 12 months in exceptional circumstances.

Rights During Lay-Offs and Short-Time Working

The Protection of Employment Acts 1977-2014 outline your rights during periods of lay-off and short-time working. These rights apply during periods when there is a temporary shortage of work.

  • Lay-off – If you’re temporarily not provided with work, you won’t be paid, but you keep your employment rights.
  • Short-time working – If your weekly work hours or pay are reduced to less than half of the normal, this is considered short-time working.

During both lay-offs and short-time working, you have certain protections:

  • Right to a statutory redundancy payment after four weeks of lay-off or short-time working or after six weeks within a 13-week period.
  • You must be notified of the lay-off or short-time working in accordance with the legislation.

Do bear in mind that periods of sick leave and maternity leave are protected by law, so they cannot be considered as a reason for lay-off or short-time working. Moreover, if your employment rights are breached during these periods, you may have grounds to seek redress through the WRC.

Lastly, should there be a strike, the provisions related to lay-offs and short-time working may not apply, as industrial action can alter the terms under which lay-off and short-time measures are instigated by employers.

After Redundancy: Next Steps

A man in an outdoor setting writing in his notebook

Once you’ve received redundancy, it’s important to consider your options carefully. This might involve looking for new work, enhancing your skills through education, or even starting your own business.

Seeking Alternative Employment

Initiate your job search by updating your CV and tailoring it for the roles you’re interested in. Employers value candidates who can show relevance to the positions they apply for. Make use of online job boards, recruitment agencies, and your professional network.

  • Remember to claim any redundancy entitlements you’re due from your former employer. You may want to utilise risk management consulting to help evaluate your financial standing after redundancy and ensure you maximize any social welfare or retraining benefits you are entitled to.
  • Register with the Department of Employment Affairs and Social Protection, as they can offer job-seeking support and may provide access to employment schemes.
  • Check if you are eligible for support from the Social Insurance Fund.

Training and Education Opportunities

To enhance your employability in the job market, consider engaging in training and further education.

  • Investigate courses that align with the work you were employed in or that prepare you for emerging economic needs.
  • Research funding options, such as grants or subsidies, potentially available through the Department of Social Protection.

Starting Your Own Business

Starting your own business can be an alternative path to traditional employment.

  • Evaluate the market to determine if there is an economic need for your business idea.
  • Seek out legal and financial advice to understand your obligations and any available governmental support for startups.