Redundancy Payments

Persons Covered

Redundancy payment entitlements are available to employees, persons serving under a contract of apprenticeship and to officers of public bodies. They must be over 16 years and be party to contract of employment, apprenticeship or hold an office in the public service. A civil servant is deemed an employee and is deemed to be employed by the relevant State or Government or the relevant authority.

Redundancy entitlements have been extended to persons who serve under certain employment agency arrangements, by which a contract is entered with an employment agency to perform work or services for another, even if that other is not a party to the contract. The Minister may make orders declaring classes of persons to whom the Act does not apply.

The Redundancy Payments Act applies to employees

  • in insurable employment for all benefits under social welfare legislation;
  • employees who were so employed in the period of four years ending on the date of termination and
  • employees who are over 66 years old, and who would be insurable, but for their age.

The Act also applies to certain employees, who would be insurable under the social welfare legislation but for the fact, the employment is excepted under that legislation.

An employee employed in a private household is in most cases, subject to the legislation as if the household were a business and the maintenance of the household was carrying on that business by the employer.


Exceptions

The legilsation does not apply to employment, where the employer is father, mother, grandmother, grandfather, stepfather, stepmother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister of the employee, where the employee is a member of the employee’s household and the employment is related to a private dwelling or a farm in or on which both the employer and the employee reside.

The legislation does not apply to a cessation of employment in consequence of a strike or lockout. A lock-out is the closing of a place of employment, the suspension of work or the refusal by an employer to continue to employ any number of persons employed, in consequence of a dispute, done with a view to compelling the persons, or to aid another employer in compelling persons employed by him, to accept terms or conditions of or affecting employment.

A strike is the cessation of work by a body of persons employed acting in combination, or a concerted refusal or a refusal under a common understanding of any number of persons employed to continue to work for an employer in consequence of a dispute. It must be done as a means of compelling their employer or any person or body of persons employed, or to aid other employees in compelling their employer or any person or body of persons employed, to accept or not to accept terms or conditions of or affecting employment.


Notice of Redundancy

An employer who proposes to dismiss an employee by reason of redundancy, who has at least two years’ service with that employer, must not later than two weeks before the date of dismissal, give the employee notice in writing of the proposed dismissal.  The contract may give the employee an entitlement to greater notice by statute or contract. This longer period of notice  of redundancy should be given.

Formerly, the notice was combined with a redundancy certificate in form  RP 50  incorporating combined RP 1 (notice of redundancy), RP 2 (certificate of redundancy), RP 3 (rebate claim), and RP 14 (employee’s application for a lump sum from the Social Insurance Fund). The rebate has now been abolished.

An employee who has at least two years’ continuous service, must be paid at least the statutory redundancy amount and be given a redundancy certificate not later than the date of dismissal.

Failure to give the notice or the certificate or the giving of false information in a notice is an offence.

If the employer pays the redundancy lump sum, it is not required to submit an RP50 form to the Department. However the employer should furnish  proof of payment of the lump sum.

If the  employer does not pay the statutory redundancy lump sum the employee may be able to recoup it from the Social Insurance fund under the insolvency  legislation. The  form RP50 should be issued in this case with proof of employer insolvency.


Date of Termination

The definition of termination of employment for redundancy purposes is similar to that relating to unfair dismissal.  The date of dismissal is the date on which notice expires. If the employment is terminated without notice, it is the date on which the termination takes effect. If the employee terminates the contract in circumstances where he is entitled to do so by reason of the employer ‘s conduct, it is the date of termination.

Where the person is employed under a fixed term contract or for a specified purpose (being a purpose of such a kind that the duration of the contract was limited but was, at the time of its making, incapable of precise ascertainment), the date is when that term expires or that purpose ceases without being renewed under the same or a similar contract.


Lump Sum on Redundancy

On a dismissal by reason of redundancy, an employee who is entitled to a redundancy payment or who becomes entitled to a redundancy payment where there is a lay off or short-time work, is entitled to be paid the redundancy lump sum  Schedule III  of the legislation applies to the calculation of the lump sum.

The amount of the redundancy lump sum is two weeks of the employee’s normal weekly remuneration, for each year of continuous employment from the age of sixteen to the date of dismissal plus a sum equal to the employee’s normal weekly remuneration.  If the total amount of reckonable service is not an exact amount of years, the excess days are credited as a part of a year.

Normal weekly remuneration includes regular overtime payments.  There are rules for averaging out overtime earnings.

The Redundancy Payments Act 1979, provided that in the lump sum calculation, earnings in excess of a certain specified amount are disregarded.  The Minister may make regulations specifying the disregard.  This may be changed in accordance with changes in earnings in the transportable goods industry, as published by the CSO. The sum is €600 per week  as of March 2017. One weeks’ salary at the full rate is not subject to this cap.


Continuity of Employment I

Employment is deemed continuous unless terminated by dismissal or voluntary leaving of the employment.  Dismissal does not include unfair dismissal. Continuity of employment is not broken by interruption by

  • sickness,
  • lay-off,
  • holidays,
  • service in the Reserve Defence Forces;
  • other causes (other than voluntarily leaving) authorised by the employer,
  • periods of adoptive leave, protective leave, maternity leave, parental force majeure leave or carer’s leave; or
  • periods of absence from work because of a lockout or participating in a strike

Continuity of Employment II

There are rules affecting the calculation of reckonable service.  During the three-year period before termination of employment, none of the following absences is allowable as reckonable service:

  • absence in excess of 52 weeks by reason of occupational disease;
  • absence of more than 26 weeks by reason of other illness;
  • absence by reason of layoff;
  • absence from work by reason of a strike in the business or industry.

Absence on adoptive leave, certain protective natal care absence, parental leave, force majeure carer’s leave and other authorised leave is reckonable.  During the three years ending upon the date of termination, absence by reason of a lockout is allowed.


Post Notice Changes

Where an employer gives notice of termination of a contract of employment, and at any time within the notice period, the employee gives notice in writing to the employer to terminate the contract on an earlier date, the employee is deemed to be dismissed by the employer and the date of dismissal is the date on which the employee’s notice expires.

If, however before the employee’s notice is due to expire, the employer gives him notice in writing requiring him to withdraw his notice terminating the contract and to continue in employment and stating that, unless he does so, the employer will contest any liability to pay him a redundancy payment in relation to termination of a contract, but the employee unreasonably refuses to comply with the requirement, then the employee is not entitled to a redundancy payment.

Where an employer agrees in writing with an employee to alter the date of dismissal in a notice above, the employee’s entitlement to redundancy payment shall be unaffected and the employee shall, for the purposes of legislation, be deemed to be dismissed by his employer, on the date of dismissal being the date when the employee’s notice expires.


Assistance

Where an employee has two years’ service and has been given notice of the redundancy, he is entitled during two weeks ending on the expiration of his notice of dismissal, to reasonable time off during employee’s working hours in order to look for new employment and make arrangements for training for future employment.

The employee is entitled to be paid for the period of absence at the appropriate hourly rate, as at the date of his dismissal. He is entitled to further remuneration at this rate. where the employer unreasonably refuses time off.  Disputes may be referred to the WRC.

The Minister may for the purpose of promoting national and economic social policy, make regulations with the consent of the Minister for Finance, providing for financial assistance to persons who are obliged to change their place of residence in order to take up an offer of employment approved by state training and manpower service or to enable persons to travel for selection for training and for training at approved centres.

Regulations may provide for payment or recoupment of the cost of the transport and an allowance in respect of accommodation.  They may be subject to conditions.  No such regulations are in force at present. Regulations were made in earlier periods.


Former Employer’s Rebate

Formerly, the Minister / Department of Social Protection granted a rebate to employers of a part of the redundancy lump sum, paid to employees by way of statutory obligation. This was paid from the social insurance fund. Where an employer failed to comply with its obligations, in relation to giving notice, redundancy certificates, etc., the rebate could be reduced to as little as 5% of the sum. After 2007, the rebate could be denied in relation to exceptional collective redundancies.

After 1 January 2012, the previous provision for a 60% rebate was reduced to 15%. The rebate was abolished and does not apply where a dismissal by reason of redundancy occurs after 1st January 2013.


Fund Payment on Insolvency I

Where an employee claims that an employer is liable to pay a lump sum and

  • he has taken all reasonable steps to obtain payment (other than legal proceedings), and the employer has refused or failed to pay the same;
  • the employer is insolvent, and the whole or part of the lump sum remains unpaid; or
  • the employer has died, and neither probate nor administration of his will has been granted;

the employee may apply to the Minister for payment of the redundancy lump sum from the social insurance fund.


Fund Payment on Insolvency II

If on the application, the Minister is satisfied the employee is entitled to a lump sum which remains unpaid in whole or in part, he may pay the unpaid lump sum or such of it as remains unpaid.  On payment of the lump sum, the right to recover the payment from the employer is transferred from the employee to the Minister.

The Minister may claim the payment from the employer, where the refusal or failure on the employer’s part to pay was without reasonable excuse. The Minister is entitled to claim in the bankruptcy, insolvency or the administration of the deceased employer’s estate, etc., in respect of the relevant payment made.

Redundancy payments owed by employers who enter insolvency (bankruptcy or liquidation) which are incurred up to 12 months before the commencement of insolvency are preferential debts.  Sums due to the redundancy fund are recoverable as contract debts by the Minister.


Disputes

The Redundancy Payments Acts established the Redundancy Payments Tribunal.  Its functions were transferred to the Employment Appeals Tribunal in 1977. Each Tribunal had a legally qualified chairman, one representative of trade unions and other employee representative organisations and one representative of bodies representative of employers. The functions have been now transferred to the Workplace Relations Commission adjudication officer (or Labour Court on appeal).

An employer who is dissatisfied with the decision given by the Minister in relation to a rebate may appeal to the WRC adjudication officer.. The general WRC arrangements for formal (adjudication) and informal resolution apply. There is an appeal to the Labour Court.

The WRC adjudication officer (or Labour Court on appeal). has the power to administer oaths and hear witnesses.  It is an offence to give false evidence.  Persons may be required to attend and produce documents.  The failure to comply with a requirement is an offence.

Where certain types of questions arise, the matter on the request of the WRC may be referred for the decision of the High Court.  Where this is done, the court may in its discretion order the payment by the Minister of the taxed costs of parties involved.  The Minister may be represented as a party in the proceedings in question.


Late Claim

An employee is not  entitled to a lump sum unless before the end of 52 weeks beginning on the date of dismissal or termination of employment,

  • payment has been made or agreed,
  • the employee has been made a claim in writing given to the employer or
  • the question as to the entitlement has been referred to the WRC adjudication officer (or Labour Court on appeal).

Where an employee makes a claim for a lump sum after one year but before two years after the date of dismissal or termination, the WRC adjudication officer (or Labour Court on appeal)., if satisfied that the employee would have been entitled to a lump sum, and that failure was due to reasonable cause, may declare the employee to be entitled to the lump sum.

Where an employee fails to make a claim within period of two years and this was due to ignorance on the part of the employee as to the identity of the employer or change in identity of employer which ignorance was contributed to by a breach of statutory duty to give the employee notice of the proposed redundancy or redundancy certificate, the period of two years shall be deemed to commence on such date as the WRC adjudication officer (or Labour Court on appeal).determines.


Ex gratia Payments on Redundancy

Ex gratia payments are commonly made over and above the level of statutory redundancy. Voluntary agreements are often entered, in particular in larger workplaces. They may be part of a severance package for a high level employee.  Commonly ex gratia payments are significantly more than, and dwarf the level of the statutory minimum. There may be accelerated pension scheme benefits.

There is generally no legal requirement to pay anything above the statutory level of redundancy payment. If the employee has significant contractual rights or tenure, he may receive a payment in commutation of these rights.  There may be a collective agreement which provides a legal obligation to pay enhanced redundancy. They may be paid by custom in certain industries.

Redundancy packages may be negotiated collectively by a union or other representative. Industrial relation factors may affect the level of payments made. Redundancy packages may be negotiated with the assistance of legal advisers and other consultants in other cases. In the case of senior employees, there may be a desire to avoid publicity and obtain a swift settlement of all issues.

Statutory redundancy payments are exempt from income tax. Other ex gratia payments  receive favourable tax treatment. The previous reliefs have been curtailed.


Settlements

An employer may enter an agreement with the employee on the basis of a full and final settlement of all claims arising out of the termination of employment. The decision must be fully informed, and the employee must be aware of his rights and entitlements. It is highly desirable that the employee has independent legal advice

The employer will usually seek to ensure the settlement relates to all employment claims whether arising from redundancy unfair dismissal equality, holidays, minimum notice, etc. stop.  If the agreement is signed under pressure and without independent legal advice, it may be set aside by later by the Workplace Relations Commission adjudication officer.


General

Any provision in a contract of employment is void, insofar as it attempts to exclude or limit the operation of the Redundancy Payment Act.

Where an offences are committed by bodies corporate with the consent, connivance or attributable to the neglect of any director, manager, secretary or other officer; such persons may also be convicted of the offences concerned.

The Minister may make regulations providing for the keeping of records, furnishing of information by employers for inspection by authorised officers of records. The Regulations may provide for offences for contravention.


References and Sources

Primary References

Employment Law  Meenan  2014 Ch. 21

Employment Law Supplement Meenan 2016

Employment Law Regan & Murphy  2009  Ch.15 ( 2nd Ed 2017)

Employment Law in Ireland Cox & Ryan 2009 Ch.22

Other Irish Books

Employment Law Forde & Byrne 2009

Principles of Irish Employment Law         Daly & Doherty   2010

Employment Law Contracts (Book & CD-ROM)        Beauchamps, Solicitors          2011

Legislation

Redundancy Payments Act 1967 (21/1967)

Redundancy Payments Act 1971 (20/1971)

Redundancy Payments Act 1973 (11/1973) (not amended)

Redundancy Payments Act 1979 (7/1979)

Protection of Employees (Employer’s Insolvency) Act 1984 (21/1984), s. 12

Social Welfare Act 1990 (5/1990), ss. 26, 27 and 29

Worker Protection (Regular Part-Time Employees) Act 1991 (5/1991),

Social Welfare Act 1991 (7/1991), s. 39 other than subs. (2)

Protection of Employees (Part-Time Work) Act 2001 (45/2001), in so far as it relates to the Redundancy Payments Acts 1967 to 1990

Redundancy Payments Act 2003 (14/2003)

Protection of Employment (Exceptional Collective Redundancies and Related Matters) Act 2007 (27/2007),

Periodicals and Reports

Employment Law Yearbook (annual) Arthur Cox

Employment Law Reports

Irish Employment Law Journal

Employment Law Review

Legislation

Dismissal & Redundancy Consolidated Legislation   Barrett, G   2007

Irish Employment legislation (Looseleaf) Kerr  1999-

Employment Rights Legislation (IEL offprint)   Kerr  2006

Dismissal & Redundancy Consolidated Legislation   Barrett, G   2007

Principles of Irish Employment Law         Daly & Doherty   2010

Termination & Redundancy, What is the law?  Hayes, Barry & O’Mara 2005

Termination of Employment Statutes (IEL)       Kerr  2016

Termination of Employment: Practical Guide for Employers        Purdy         2011

Shorter Guides

Employment Law Nutshell    Donovan, D         2016

Employees: Know Your Rights       Eardly        2008

Essentials of Irish Labour Law       Faulkner    2013

Websites

Workplace Relations Commission http://www.lrc.ie/en/

Irish Human Rights and Equality Commission https://www.ihrec.ie/

Health and Safety Authority http://www.hsa.ie/eng/

UK Texts

Textbook on Employment Law, Honeyball, et al. 13th Ed. 2014

Labour Law, Deakin and Morris 5th Ed. 2012

Employment Law, Smith and Wood 13th Ed 2017

Selwyn’s law of Employment Emir A 19 Ed. 2016

Employment law : the essentials. Lewis D Sargeant M and Schwab M 11 Ed.2011

Labour Law Collins H, Ewing K D and McColgan  2012

Industrial relations law reports. (IRLR): Law Section,

Employment law Benny R Jefferson M and Sargent  5th Ed.  2012

Pitt’s Employment Law 10th  Ed. Gwyneth Pitt 2016

CLP Legal Practice Guides: Employment Law 2016 Gillian Phillips, Karen Scott

Cases and Materials on Employment Law 10th  Ed. Richard Painter, Ann E. M. Holmes 2015

Blackstone’s Statutes on Employment Law 2015 – 2016 Richard Kidner

UK Practitioner Services

Tolley’s Employment Handbook 2017 Mrs Justice Slade 2017

Butterworths Employment Law Handbook 2017 Peter Wallington 2017

Blackstone’s Employment Law Practice 2017 Edited by Gavin Mansfield, John Bowers, John Macmillan 2017

UK Periodicals and Reports

The Employment Law Review 8th  Ed.   Erika C. Collins 2017

Industrial Relations Law Reports

Employment Law in Context: Text and Materials 2nd  Ed. David Cabrelli 2016