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redundancy situation
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If you find yourself in a redundancy situation, it is very important that you understand all the options open to you in relation to the taxation of your redundancy and what happens your pension. This is where Oaktree Financial can help.
Redundancies are different for everyone, unique to your individual circumstances. We have worked with many people going through redundancy, and we have yet to come across the same situation twice.
As part of a redundancy, you need to consider the long term picture. It’s important to know what your pension is worth, and understand the consequences of all your options. Making a decision regarding your pension now can waive your right to receive a tax-free lump sum in the future. If you do decide to take a lump sum now, you need to have a clear plan for what to do with the money. The wrong decision regarding your company pension can be costly. At Oaktree Financial, we’re here to help guide you through a considered decision making process.
What is redundancy?
Redundancy is a form of dismissal from your job. Losing your job can have many implications for the rest of your life, not least your financial situation. Should you be made redundant, you may be eligible for various different things, from a redundancy pay package to a notice period.
Sadly, the concept of a ‘job for life’ is rare in the modern world. Redundancy is now a fact of the working world. It happens frequently, for many different reasons. The organization could be restructuring, changing its business plan, downsizing, in serious financial trouble, or else it could be liquidated or go bankrupt. People are made redundant all the time, and most nonetheless go on to continue successful and fulfilling careers in all sectors.
Redundancy can be a stressful and worrying time. Financial uncertainty can combine with emotional distress to create a highly difficult personal situation. If you need reassurance and solid advice, Oaktree Financial can help.
OUR PROCESS
Chat – Discover – Analyse – Present – Implement – Monitor & Support
At Oaktree Financial, our way of doings things puts the client first and foremost. If you think you could benefit from our help, come to us for a complimentary chat. We’ll assess whether we can help you, and then the next step would be to discover the details of your situation. One of our friendly expert team will go through your finances with you in detail, before analysing your data to establish the best course of action. We will then present our findings to you in a clear and easy-to-understand format, answering any queries you may have along the way. Once you are decided on your way forward, we will help you implement your financial plan, and continue to monitor and support your progress into the future.
Oaktree Financial are Financial, not Legal Advisors. Our advice extends only to the financial review of your Redundancy.
Frequently Asked Questions
Am I entitled to redundancy pay?
Statutory Redundancy pay
Statutory Redundancy pay is a lump sum payment which is based on your pay. Eligible staff members receive two weeks’ pay for every year of service (over the age of 16) along with an additional week’s pay. If you have been working for the company for four years, you should receive five weeks’ salary. This payment has a maximum earnings limit of €600 per week.
The weekly amount you receive is based on your typical weekly salary including benefits-in-kind and average regular overtime; before PRSI and tax deductions. In other words, you receive statutory redundancy payments based on your gross pay.
Ex-Gratia payments
Legally, your employer only needs to pay you the statutory redundancy payment if you are made redundant. However, some employers also offer an ex-gratia payment which is a fancy term for payments above the bare minimum.
Your employer is legally obliged to give you a minimum of two weeks’ notice of redundancy, and on the date, your contract of employment is terminated, your employer must pay you the redundancy amount which is paid in lump sum form.
What makes you eligible for redundancy pay?
Eligibility for statutory redundancy pay
To be eligible to receive statutory redundancy pay:
- You must be over 16 years old
- You must be in employment that is insurable according to the Social Welfare Acts. Those younger than 65 years old must also be paying Class A PRSI.
- You must have worked for the same employer continuously for a minimum of two years, whilst being over the age of 16.
- You must be made redundant.
What is reckonable and non-reckonable service?
A reckonable service period is the amount of time you have been in your role that counts towards your redundancy payment calculation. If you have been on maternity, paternity, parental, adoptive or carer’s leave during your term of service, you are still eligible for statutory redundancy, as all these absences still count towards your period of reckonable service. Likewise, absences for illness or holidays, being laid off temporarily, or via agreed absence also don’t count against your term of service and are reckonable. Part time workers are also covered, due to the Redundancy Payments Act of 2003.
Non-reckonable absences include:
Any period over 52 consecutive weeks where you were off work due to an injury at work.
Any period over 26 consecutive weeks where you were off work due to illness.
Any period on strike.
Any period of lay off from work.
How can I calculate my redundancy payment?
While there are numerous redundancy calculators available online, to help you estimate what you may be entitled to, we would always recommend you take advice from an expert before counting on a certain amount of money. An online calculator such as that on the gov.ie website can be useful to give you a rough ballpark figure.
What are my redundancy entitlements?
Your redundancy entitlements will be dependent on your age, the length of your reckonable service in your job, and other factors such as the insurable status of your job. Entitlements will vary from person to person. Statutory redundancy pay should give you two weeks pay for every year of service, plus one extra week’s pay. But your employer may also offer an extra payment, known as an ex gratia payment.
What happens to my pension if I am made redundant?
You will stop paying into your company’s pension scheme, and will have to choose how to proceed with your retirement planning. Perhaps you will transfer your pension elsewhere, to a new company scheme if you get a new job, or to a private pension. Perhaps you will choose to leave it where it is, and simply draw it when you reach retirement. Perhaps early retirement will even be an option for you. With a wealth of complex choices and serious financial implications, it is worth seeking professional advice when dealing with redundancy and pensions.
What are the tax and pension implications?
While you pay no tax on a statutory redundancy payment, it is very important to realise that redundancy payments may come with other tax implications. The maximum lifetime limit for tax free statutory redundancy payments is €200,000. You are also entitled to basic and increased tax exemptions for redundancy and retirement payments.
The tax laws around redundancy and pensions can become quite complex, so it is always best to consult a financial expert who will be able to properly explain your position with regard to taxes and your redundancy.
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