Being made redundant is one of the most financially significant events in a person’s working life. Yet most people arrive at that moment without a clear understanding of what they are legally entitled to, how the payment is calculated, and how to structure it in the most tax-efficient way possible. The difference between the best and worst financial outcome from a redundancy situation can run to tens of thousands of euros, and it comes down entirely to the decisions made in the weeks and months surrounding the redundancy date.
At Money Sense Financial Services in Killarney, our redundancy advice service helps Irish employees understand their entitlements, structure their payments correctly, and make smart decisions about pension options and tax planning in the aftermath of redundancy. This is the most comprehensive guide to statutory redundancy in Ireland we have written, updated to reflect current rates and rules.
| Facing redundancy? Get expert advice before you sign anything. |
What Is Statutory Redundancy in Ireland?
Statutory redundancy is the minimum payment the law requires your employer to make when you are made redundant. It is set by the Redundancy Payments Acts 1967–2022 and applies to employees who have at least two years of continuous insurable employment with the same employer. It is payable regardless of the reason for redundancy, provided the redundancy is genuine.
Statutory redundancy is 100% exempt from income tax, USC, and PRSI. You receive it entirely tax-free.
It is important to note that redundancy is only genuine if your job, not just you, is being made redundant. If your employer fills the same role with another person shortly after letting you go, the dismissal may constitute unfair dismissal rather than genuine redundancy, and you may have a claim to the Workplace Relations Commission (WRC).
How to Calculate Your Statutory Redundancy Payment
The statutory redundancy formula is fixed by law:
Two weeks’ pay per complete year of service, plus one additional bonus week, with weekly pay capped at €600 regardless of your actual earnings.
In formula terms: Statutory Redundancy = (Years of Service × 2 + 1) × €600 (or your actual weekly pay if lower)
Note: only complete years of service count. If you have worked for 9 years and 8 months, only 9 years are counted in the formula.
Here are three worked examples:
| Example A (10 yrs, €500/wk) | Example B (10 yrs, €700/wk) | Example C (20 yrs, €700/wk) | |
| Weekly pay used | €500 | €600 (capped) | €600 (capped) |
| Statutory weeks | 21 (10×2 + 1) | 21 (10×2 + 1) | 41 (20×2 + 1) |
| Statutory payment | €10,500 | €12,600 | €24,600 |
| Tax on statutory pay | NIL | NIL | NIL |
Key point: if your weekly earnings exceed €600, you still only receive €600 per week in the statutory calculation. A person earning €1,500 per week and one earning €600 per week receive exactly the same statutory redundancy payment for the same number of years of service.
What Is an Ex-Gratia Redundancy Payment?
Many employers pay more than the statutory minimum, either through negotiation, company policy, or as recognition of longer service. Any amount above the statutory minimum is called an ex-gratia or enhanced redundancy payment. Unlike statutory redundancy, ex-gratia payments are potentially taxable, but three specific tax exemptions can significantly reduce, or eliminate, the tax due.
The Three Tax Exemptions for Ex-Gratia Redundancy Payments
Revenue allows one of three exemptions to apply to the taxable portion of your redundancy package. You choose whichever produces the highest tax-free amount. All three are subject to a lifetime limit of €200,000 for ex-gratia payments (statutory redundancy does not count towards this limit).
| Exemption | Formula | Best For |
| Basic Exemption | €10,160 + (€765 × years of service) | Shorter-service, lower-paid employees |
| Increased Exemption | Basic Exemption + €10,000 (if no prior redundancy in last 10 yrs and not claiming pension lump sum) | Moderate service, no recent redundancy history |
| SCSB | (Avg 36 months pay × years ÷ 15) minus pension lump sum entitlement | Higher earners with long service, often the most generous exemption |
1. The Basic Exemption
The Basic Exemption is available to all qualifying employees. It is calculated as:
€10,160 + (€765 × number of complete years of service)
For a 10-year employee: €10,160 + (€765 × 10) = €17,810 tax-free. For a 20-year employee: €10,160 + (€765 × 20) = €25,460 tax-free. This is on top of the statutory redundancy payment, which is already entirely tax-free.
2. The Increased Exemption
If you meet two conditions, you can add €10,000 to your Basic Exemption:
- You have not received a redundancy payment or retirement lump sum in excess of the Basic Exemption from the same or another employer in the previous 10 tax years
- You are not receiving a tax-free lump sum from an occupational pension scheme, OR you waive your right to that pension lump sum
For a 10-year employee meeting both conditions: Basic Exemption (€17,810) + €10,000 = €27,810 tax-free ex-gratia amount.
3. The SCSB, Standard Capital Superannuation Benefit
The SCSB is generally the most generous exemption for employees with high earnings and long service. The formula is:
(Average annual pay over last 36 months × Complete years of service ÷ 15) − Tax-free pension lump sum entitlement
Example: Employee with 18 years’ service, average annual earnings of €95,000 over the last three years, and a pension tax-free lump sum entitlement of €11,000.
SCSB = (€95,000 × 18 ÷ 15) − €11,000 = €114,000 − €11,000 = €103,000 tax-free.
This employee would choose the SCSB over the Basic Exemption (€23,930) or Increased Exemption (€33,930), as it produces the highest tax-free figure by a significant margin.
Note: statutory redundancy does not count towards the €200,000 lifetime cap on ex-gratia exemptions. The cap applies only to the ex-gratia element.
| Not sure which exemption gives you the best outcome? We will calculate all three for you. |
What Happens to Your Pension When You Are Made Redundant?
If you were a member of your employer’s pension scheme, redundancy triggers a set of ‘Leaving Service Options’ from your pension provider. This is one of the most important financial decisions you will face during redundancy, and it is one where the wrong choice can cost you significantly. Our previous pension advice service covers all of these options in detail.
Your typical options are:
- Deferred pension: leave the pension with your former employer’s scheme and receive it at retirement age. Benefits are usually based on service to date of leaving
- Transfer to a Personal Retirement Bond (PRB): a Buy-Out Bond in your own name, giving you full investment control and allowing consolidation with other pensions
- Transfer to a new employer’s scheme: if you take up new employment with a pension scheme, you may be able to transfer your prior benefits across
- Transfer to a PRSA: if eligible, a Personal Retirement Savings Account provides maximum flexibility and access from age 50
One important interaction: if you elect to take a tax-free lump sum from your pension scheme as part of the redundancy settlement, this reduces the SCSB calculation by the value of that pension lump sum. Depending on your numbers, it may be better to waive the pension lump sum and apply the Increased Exemption instead. Your advisor will calculate both scenarios.
Maximising Your Pension After Redundancy
Redundancy can create a significant opportunity for pension funding, particularly if you receive a substantial ex-gratia payment above the tax-free threshold. In some cases, it is possible to make a lump sum pension contribution from your redundancy payment, sheltering the taxable element from income tax at 40%.
For higher earners who have accumulated significant pension allowance capacity, particularly if they have not been contributing at the maximum age-related level in previous years, the combination of a large redundancy lump sum and available pension capacity can result in a very tax-efficient outcome. Our pensions advice and retirement planning advice services address both aspects of this planning challenge.
Notice Periods and Payment in Lieu of Notice
Irish employment law entitles employees to minimum notice based on length of service, from one week for employees with 13 weeks to two years’ service, up to eight weeks for those with 15 or more years. Many employment contracts provide for longer notice terms.
Payment in lieu of notice (PILON), where the employer pays you instead of requiring you to work out the notice period, is generally treated as regular income and taxed accordingly, unless it forms part of a contractual termination package. The tax treatment of PILON depends on whether the payment is contractual or discretionary, and this distinction matters for the overall redundancy tax calculation.
Voluntary Redundancy: The Same Rules Apply
Voluntary redundancy, where the employer offers redundancy and the employee chooses to accept, is treated exactly the same as compulsory redundancy for statutory and tax purposes. The key question is whether the redundancy is genuine (the role is disappearing) rather than whether the employee volunteered for it.
Employees considering voluntary redundancy offers should be particularly careful to:
- Verify the statutory calculation before signing anything
- Understand which tax exemption gives the best outcome before agreeing to a package
- Review pension options before leaving, decisions made at this point can be very difficult to undo
- Check whether the package includes any benefits like private health insurance continuation, outplacement support, or extended notice
- Take independent legal advice if there is any uncertainty about the genuineness of the redundancy or the terms being offered
| About to sign a voluntary redundancy offer? Get advice before you commit. |
Frequently Asked Questions
How is statutory redundancy calculated in Ireland?
Statutory redundancy in Ireland is two weeks’ pay per complete year of service, plus one additional bonus week. Weekly pay is capped at €600 for the calculation, regardless of your actual earnings. Only complete years of service are counted. The payment is 100% exempt from income tax, USC, and PRSI.
How much redundancy pay am I entitled to in Ireland?
You are entitled to two weeks’ pay (capped at €600/week) per complete year of continuous insurable employment with your employer, plus one bonus week. An employee with 10 years of service is entitled to 21 weeks × (up to) €600 = up to €12,600 in statutory redundancy, all tax-free. Your employer may pay more than this as an ex-gratia enhancement.
Is redundancy pay taxed in Ireland?
Statutory redundancy is 100% tax-free. Ex-gratia payments above the statutory minimum are potentially taxable, but three exemptions, the Basic Exemption, Increased Exemption, and Standard Capital Superannuation Benefit (SCSB), can shelter all or part of the ex-gratia amount from tax. All three exemptions are subject to a lifetime cap of €200,000 on the ex-gratia element.
What is the tax-free redundancy amount in Ireland?
The basic tax-free amount for ex-gratia redundancy is €10,160 plus €765 per complete year of service. For a 15-year employee, this is €21,635. The Increased Exemption adds €10,000 to this if conditions are met. The SCSB formula, (average pay × years ÷ 15) minus pension lump sum, is often more generous for high earners with long service. You choose whichever is highest.
What is the basic exemption for redundancy tax in Ireland?
The Basic Exemption for ex-gratia redundancy payments is €10,160 plus €765 for each complete year of service with the employer. This amount can be received tax-free in addition to any statutory redundancy payment (which is separately 100% tax-free). The Increased Exemption allows a further €10,000 on top, subject to conditions.
What is the SCSB (Standard Capital Superannuation Benefit)?
The SCSB is a Revenue formula for calculating the tax-free portion of an ex-gratia redundancy payment: (average annual pay for the last 36 months × complete years of service ÷ 15) minus any tax-free pension lump sum entitlement. It is generally the most beneficial exemption for higher earners with long service. It is subject to the overall €200,000 lifetime cap on ex-gratia exemptions.
Can I contribute my redundancy payment to my pension in Ireland?
In some circumstances, yes. If you receive a taxable ex-gratia payment above your available exemptions, it may be possible to make a pension contribution that shelters some or all of the excess from income tax, depending on your age-related contribution limits and existing pension capacity. This is a complex area that benefits from professional advice before the redundancy is finalised.
What are my pension options when I am made redundant?
If you were in your employer’s pension scheme, you will receive Leaving Service Options documentation. You can typically: (1) leave the pension deferred in the employer’s scheme; (2) transfer to a Personal Retirement Bond (PRB/Buy-Out Bond) in your own name; (3) transfer to a new employer’s scheme if applicable; or (4) transfer to a PRSA if eligible. The right choice depends on your age, fund size, and retirement plans. Independent advice is strongly recommended.
Know What You Are Entitled To, Before It Is Too Late
Redundancy is a time-pressured situation. Employers often present packages quickly and expect decisions within days. The financial decisions you make in this window, about your statutory entitlement, your tax-free amount, your pension, and your future income, can have a lasting impact.
Money Sense Financial Services provides fast, clear, independent redundancy advice to employees across Kerry and Ireland. We will calculate your entitlements, identify your best tax-free strategy, review your pension options, and help you make confident, well-informed decisions at one of the most financially significant moments of your career. Book your free consultation today.
| Money Sense Financial Services | Killarney, Kerry | Regulated by the Central Bank of Ireland |
