Redundancy Payments.
Over the past two years, we have unfortunately become used to people losing their jobs. This can often arise due to the closure of the business for financial reasons or, due to reduction in the number of staff being employed, for financial reasons. The cutting of numbers in such a manner is referred to as redundancy.
Not every person that is made redundant is entitled to a redundancy payment.
The Redundancy Payments Acts, 1967-2007, set out the minimum entitlement to redundancy payments to staff.
The Acts set out the entitlement to statutory redundancy. The principal condition is that you have at least 2 years continuous service with your employer. Certain absences will not affect the amount of service concerned. These include absence on maternity leave, adoptive leave, parental leave, carers’ leave, sick leave or, annual leave. There are other circumstances where the employment is deemed to be continuous, which include being dismissed due to redundancy before reaching the 2 year threshold and, then being taken back by the employer within 26 weeks of that dismissal. There are other examples as well where service is deemed to be continuous, even where a break has existed, such as strike or, re-instatement on foot of an Unfair Dismissal finding by the Employment Appeals Tribunal. The right of part-time workers to redundancy payments is contained in the Redundancy Payments Act, 2003.
The basic requirement for redundancy is that the selection must be fair. The statutory redundancy payment is a lump sum payment based on the pay of the member of staff. The amount is 2 weeks pay for every year of service over the age of 16, and 1 further week’s pay in addition. There is a maximum earnings limit of €600 per week applicable to statutory redundancy. The statutory redundancy payment is tax free.
Only absences since the 10th April 2005 can be taken into account in relation to calculating the amount of redundancy payment due. Any absences outside the 3-year period ending on the date of termination are disregarded.
Only certain matters can be taken into account as non-reckonable service, ie., absences which will affect the amount of the redundancy payment. These include absences of over 52 weeks, due to injury at work or, over 26 weeks in relation to illness.
An online calculator of the amount of the redundancy payment is available on the Department of Enterprise, Trade and Innovations website: www.deti.ie.
If you have been made redundant within 1 year of being put on reduced hours or pay, your redundancy payment will be based on your earnings for a full week. Similarly, if you have been put on short-time, then the redundancy will be based on a full week’s pay.
The statutory element of the redundancy payment is tax free. It is open of course to an employer to pay a sum in addition to the basic amount of statutory redundancy. Any amount over and above the statutory payment will incur a tax liability.
Unfortunately, in a lot of cases, the employer is not solvent and therefore not in a position to pay the statutory lump sum. The Social Insurance Fund steps in where the employer is unable to pay or, fails to pay the amount of the redundancy payment.
Employers are entitled to a 60% rebate of the amount of statutory redundancy payment paid out of the Social Insurance Fund.
In order to obtain redundancy, a form RP50 must be completed by both, the employer and employee.
If your employer has not paid a redundancy lump sum, then you can apply for it by submitting a form RP77 to your employer. If your employer still refuses to pay it, you can then apply to the Department of Enterprise, Trade and Innovation for a direct payment from the Social Insurance Fund. In such circumstances, your employer must sign the RP50 form and submit a letter from his/her/its accountant or, solicitor, confirming that he/she/it is unable to pay, with documentary evidence such as audited accounts.
In many cases there can be a dispute between the employer and the employee as to the entitlement to redundancy. This can be determined by the Employment Appeals Tribunal and, full details of the forms required are available at: http://www.eatribunal.ie/
01-Nov-2010
Patrick Mullins,
Managing Partner
Mullins Lynch Byrne Solicitors.
