Jack Chambers (Dublin West, Fianna Fail)
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The matter of whether a payment made to an individual is a redundancy or termination payment, and a statutory or ex-gratia element of same, depends on the specific circumstances of each individual case and may sometimes give rise to tax implications.

By way of background, the Redundancy Payment Act 1967 imposes a statutory obligation on employers to recompense employees dismissed for reasons of redundancy, laid off or kept on part time for a minimum period. This includes statutory redundancy, which is calculated on the basis of two weeks’ pay per year of service, plus one additional week, subject to a maximum weekly pay figure of €600. Section 203 Taxes Consolidation Act 1997 (TCA) exempts from income tax any payment arising in respect of statutory redundancy.

A taxpayer might also receive a lump sum payment as part of a redundancy. A liability to tax arises on the amount of the payment that exceeds either the:

• Basic exemption and increased exemption, if due, or
• Standard Capital Superannuation Benefit (SCSB).

The Basic Exemption is €10,160 plus €765 for each complete year that a taxpayer worked for their employer. A termination payment will be tax free if it does not exceed the Basic Exemption.

Additionally, a taxpayer may be entitled to an increase of €10,000 on the basis exemption if:

1. They have not received an amount in excess of the basic exemption in the previous ten years, and,
2. They are not a member of an occupational pension scheme, or, if they are a member of an occupational pension scheme, but they revoke their entitlement to receive a tax-free lump sum from that scheme.

The SCSB if a further relief taxpayer may be entitled to and is provided in Schedule 3 of the TCA. SCSB is computed at 1/15th of a taxpayer’s average annual pay for the last 36 months in employment. This is then multiplied by the number of complete years of service with the employer. Any tax-free lump sum payments received, or which the taxpayer is entitled to receive, from their work pension, are subtracted from this benefit.

The basic exemption, increased exemption and the SCSB are subject to a lifetime limit of €200,000 and the individual may apply whichever of the three exemptions is most beneficial. This lifetime limit is only applicable to ex-gratia lump sum payments which might arise as part of a redundancy package and if any individual receives an amount exceeding the €200,000, the balance would be subject to income tax.

Section 201 TCA contains the provisions which provide for the basic exemption, increased exemption, and lifetime exemption limit of €200,000, in respect of additional ex-gratia payments which might arise as part of a redundancy.

If a person is in a marriage or civil partnership, his or her entitlement to exemption against a lump sum payment is calculated independently of their spouse or civil partner. This applies whether the person is taxed under joint assessment, separate assessment, or separate treatment.

The Department of Enterprise, Trade and Employment (DETE) provides guidance on an individual’s statutory redundancy entitlements, and further information on same can be found on their website at:

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In addition, the Revenue website sets out further information on the tax treatment of lump sum termination payments in the hands of the employee, and that information is accessible at:

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The current rules in relation to the tax treatment of redundancy and termination payments are well established. While it is the case that all tax measures are kept under review, I do not currently have any plans to make changes to these reliefs and exemption thresholds.