Hiring, Terminations, and Transfers

Hiring, Terminations, and Transfers

 

Hiring

Before PAYE modernization

Currently, an individual receives a Form P45 from their employer when they leave their employment. When that individual finds a new job, they give Part 3 from that form to their new employer. This form will show the new employer their new employee’s PPS number and some additional information discussed below. The new employer must complete Part 3 of the new employee’s Form P45 and submit it to Revenue immediately in order to receive the employee’s Tax Credit Certificate (P2C). If they do not receive a P45 from the new employee, then the new employer should submit a Form P46. The P2C will show the details the information that an employer needs to calculate an employee’s taxes.

 

Parts of a P45

Each part of the P45 serves a separate purpose.

You must submit Part 1 to Revenue immediately after your employee leaves your employment. If you delay in sending Part 1, your employee’s previous pay and tax record is incomplete. They will be taxed on a week 1 basis in a future job until we receive this.

Any new employee should give their P45 Parts 2 and 3 to you. You keep Part 2 for your records. You must submit Part 3 to Revenue to request a Tax Credit Certificate (P2C) for a new employee.

An employee uses Part 4 if they wish to claim Jobseeker’s Benefit  from the Department of Employment Affairs and Social Protection (DEASP).

All four parts of the P45 must be sent to Revenue if your employee dies.

 

Temporary Basis

You use a temporary basis to calculate your employee’s tax if they provide you with a Form P45 that states:

• their Personal Public Service Number (PPSN)
• that they were not on an emergency basis.

The P45 must be from an employment that ceased in the current year or the previous year.

The temporary basis is the same as the week 1 basis. You do not take account of your employee’s cumulative pay and tax credits.

However you use the tax credits and tax and Universal Social Charge (USC) cut-off points provided on the P45 to calculate tax and USC. This is because you do not have a Tax Credit Certificate (P2C) for the employee.

You usually receive a cumulative P2C for your employee after you complete and return Part 3 of the Form P45.

While waiting for the P2C, the new employer can use the ‘temporary basis’ to calculate the new employee’s tax if: the new employee’s P45 shows that emergency basis was not applied, and their previous employment ended within the current or previous years.

 

Week 1 Basis

The week 1 basis is also known as ‘non-cumulative basis’ or month 1 basis for monthly employees.

You tax each pay day on its own, separate from previous weeks. Pay and tax credits are not accumulated from the previous 1 January.

 

Emergency Tax Basis

While waiting for the P2C, the new employer can use an ‘emergency basis’ to calculate the new employee’s tax if the employer:

1) has received a P45 with no PPS number

2) has received a P45 from the current or previous year that shows that the emergency basis has been applied

3) or has not received either a P2C for the current year or a P45 for the current or previous years.

If a new employee has never worked in Ireland before, then they must first apply for a PPS number and also register with Revenue. The employer should provide their employer registration number and, if applicable, the employee’s staff/personnel/works/payroll number. Then, the employee can register their new job in the “Jobs and Pensions” section of myAccount, and Revenue will then send a P2C to the employer.

 

After PAYE modernization

Once PAYE modernization is finalized (scheduled for 1 January 2019), employees will no longer receive a P45 when their employment ends. Instead, the old employer, new employer, and employee will be able to enter changes and access all relevant information through the online Revenue portal.

A P60 is a certificate of an employee’s annual pay and deductions. A P45 is a statement of an employee’s pay and deductions for the year up to the date they leave their employment.

 

Probation and training periods

Contracts of employment can include a probationary period and can also allow for the probationary period to be extended. The only statutory limitations are that the contract of employment must be in writing and that the duration of probation or training is one year or less and specified in the contract. In practice, Irish employers tend to hire new employees with a probationary period of 6 months with the employer reserving the right to extend if necessary.

Generally, if a new employee is dismissed during their probation or training period, then it will not be considered an unfair dismissal as long as it does not result from trade union membership or activity, pregnancy-related matters, or entitlements under the maternity protection, parental leave, adoptive leave and carer’s leave legislation(as per The Unfair Dismissals Acts.) Just to be clear, employers should include a clause that allows the employer to dismiss the employee at any time during the probation period without the application of fair procedures.

 

Changes to your contract of employment

Changes to your contract of employment can occur due to a change in the law, but otherwise, changes must be agreed between your employer and yourself. The requirement for both the employer’s and the employee’s consent to changes in the terms of the contract is part of contract law.

 

Quitting Employment

Overview

Tax payments and refunds should be done in the normal way, but should be calculated based on the date of leaving instead of the pay period’s end date.

Before PAYE modernization is fully enacted, a Form P45 must be filed according to instructions in section entitled “Obtaining and Filing a Form P45 or Form P45 Supplement”.

 

Notice requirements

If an employee works for their employer for 21 hours or more in a week, then they must give their employer notice when they intend to leave their employment. The statutory minimum amount of notice is one week. However, contracts of employment often stipulate rules for notice that go above the statutory minimum.

The minimum notice periods are specified under the Minimum Notice and Terms of Employment Act and depend on the employee’s period of service and us as follows:

(a) if the employee has been in the continuous service of his employer for less than two years, one week,

(b) if the employee has been in the continuous service of his employer for two years or more, but less than five years, two weeks,

(c) if the employee has been in the continuous service of his employer for five years or more, but less than ten years, four weeks,

(d) if the employee has been in the continuous service of his employer for ten years or more, but less than fifteen years, six weeks,

(e) if the employee has been in the continuous service of his employer for fifteen years or more, eight weeks.

Employees do not have to give their employers notice if they have been working for their employer for less than 13 weeks and have no contract of employment that specifies a notice period. In addition, employees do not have to give notice if their employer is guilty of gross misconduct.

Once an employee has given notice, the only way to withdraw it is by agreement with their employer.

If the employee and employer agree, then the employer can waive their right to notice. In addition, the employee and employer can agree that the employer pay the employee in lieu of notice. If the employee accepts payment in lieu of notice, then the date of termination of their employment is the day on which notice, if it had been given, would have expired.

 

Retirement

Overview

Before PAYE modernization is fully enacted, there are some cases in which a Form P45 must be filed according to instructions in section entitled “Obtaining and Filing a Form P45 or Form P45 Supplement”.

 

1)    Employer-paid pension that uses same registration number

An employer might have one registration number for both employees and pensioners. If so, an employee who retires on a pension paid by the employer should not be treated as having left employment. The pension should be done as though it represented continuation of pay, and deduction or refund of tax should continue in the normal way.

 

2)    Employer-paid pension that uses separate registration number or pension paid by separate body

If an employer pays a pension but uses a separate registration number for employees and pensioners OR the pension is paid by a separate body (like a trust fund or life assurance company), then the employee should be treated as though they have left employment. Tax payments and refunds should be done in the normal way, but should be calculated based on the date of retirement instead of the pay period’s end date.

 

Death

Overview

Tax payments and refunds should be done in the normal way, but should be calculated based on the date of death instead of the pay period’s end date.

After the date of death, any remaining payments should be made to the deceased employee’s personal representative(s).

Before PAYE modernization is fully enacted, a Form P45 must be filed according to instructions in section entitled “Obtaining and Filing a Form P45 or Form P45 Supplement”.

Where a payment not shown on a P45 is made to the personal representative(s) it is dealt with for tax purposes as below.

 

Arrears payment made in the year of death

If the employer has a Tax Credit Certificate (P2C) they must deduct tax on the arrears. This should be done by reference to the former employee’s tax credits and tax and USC cut-off points as if the payment is being made at date of death.

If no P2C is held by the employer, the emergency basis of tax deduction should be applied to the arrears.

A P45 supplement should be completed and sent to the employee’s Revenue office immediately.

Arrears payment made in the year(s) following the year of death

A former employee might receive a payment of arrears in the year(s) following the year of death. If so the emergency basis of tax and USC deduction should be applied to the arrears.

The PAYE and Pay Related Social Insurance (PRSI) entries should be made on the PAYE and PRSI record for the Income Tax week or month in which payment is made.

A P45 supplement should be completed and sent to the employee’s Revenue office immediately.

 

Death of a spouse or civil partner

Under joint assessment, the tax credits and reliefs available to a couple in a marriage or civil partnership can be divided between each spouse or civil partner to suit their circumstances. One spouse or civil partner is nominated as the ‘assessable spouse’ or ‘nominated civil partner’. The assessable spouse or nominated civil partner is responsible for completing the couple’s tax return and is chargeable to tax on their joint income. The other spouse or civil partner is referred to as the ‘non-assessable spouse’ or ‘other civil partner’.

Where the assessable spouse or nominated civil partner dies and the non-assessable spouse or other civil partner remains in employment, Revenue will issue a new P2C.

The employer should set up a separate pay record with effect from the date of death of the employee’s spouse or civil partner. Revenue may allocate a new PPS number to the widow(er) or surviving civil partner. Where this happens, Revenue will notify the employer of the new PPS number.

It will be necessary to have two separate entries on the end of year return (P35). One entry will be for the period from 1 January to the date of death of the employee’s spouse or civil partner. The other entry will be for the period commencing from the date of death of the employee’s spouse or civil partner.

Revenue will notify the employer of any change in the employee’s tax credits and tax and USC cut-off points. They will also give instructions in regard to the employee’s PPS number and PAYE record. In the meantime, the employer must operate PAYE in accordance with the latest P2C issued.

Once PAYE modernization is finalized (scheduled for 1 January 2019), the P35 and related forms will no longer be used. Instead, employers and employees will be able to enter changes and access all relevant information through the online Revenue portal.

 

Terminations

Overview

Before PAYE modernization is fully enacted, a Form P45 must be filed according to instructions in section entitled “Obtaining and Filing a Form P45 or Form P45 Supplement”.

 

Fair Dismissals

the dismissal of an employee shall be deemed, for the purposes of this Act, not to be an unfair dismissal, if it results wholly or mainly from one or more of the following:

a)the capability, competence or qualifications of the employee for performing work of the kind which he was employed by the employer to do,

(b) the conduct of the employee,

(c) the redundancy of the employee, and

(d) the employee being unable to work or continue to work in the position which he held without contravention (by him or by his employer) of a duty or restriction imposed by or under any statute or instrument made under statute.

 

Capability

Capability covers issues such as

• Absence from the workplace
• Absence through Illness
• Persistently poor time-keeping
• A dismissal on any of these grounds, though, should be well supported with documentary evidence justifying the termination.

This evidence would range from time-keeping records to absenteeism records to medical reports.

There is also different approaches to be taken to long term illness versus intermittent short term sick days. How to manage sickness related absence elsewhere on this site should help.

 

Competence

Competence refers to the standards required of you to do the job you were hired to do.

Before a dismissal on the grounds of lack of competence the employer should

• Set out the employee’s shortcomings
• Point out the required improvements
• Give time to make the necessary improvement
• Warn of the possibility of dismissal.

Monitoring the employee’s performance can be time consuming, but this falls under the employee’s general entitlement fair procedures and natural justice before being dismissed.

 

Conduct

Conduct, or misconduct, covers a wide range of behaviour.

Gross misconduct can justify summary dismissal, while a series of lesser misconducts can justify termination too. But fair procedures and natural justice should be shown to the employee, unless gross misconduct justifies summary (immediate) dismissal.

 

Qualifications

Dismissal on this ground can arise in 2 ways:

• The employee has lied at interview or in the application process about his/her qualifications
• A precondition in the offer of employment has not been complied with.

Redundancy

Redundancy is a defence to a claim for unfair dismissal.

There are 5 different situations defined in the legislation as being instances of redundancy.

It’s critical for the employer that the redundancy is a genuine one, that is the role is being eliminated, and this cannot be used as a way of getting rid of someone for reasons unconnected to redundancy.

Employers also need to ensure fair selection procedures in choosing what role will be made redundant.

If the redundancy is not genuine, or the selection for redundancy is unfair, a claim for unfair dismissal may be successful.

 

Illegality

This can arise if, for example, an employee needs a driving licence to discharge his duties and loses the licence, and their continued employment would lead to a breach of the law.

However, the employer should look to see is there alternative employment that can be offered, before dismissing on this ground.

 

Other substantial grounds

If you are an employer you can dismiss an employee. But you must have substantial grounds for doing so:

And you generally must afford fair procedures and natural justice to the employee in arriving at the decision.

 

Unfair dismissal

Under the Unfair Dismissals Acts circumstances in which unfair dismissal can occur are where:

• Your employer terminates your contract of employment, with or without notice or
• You terminate your contract of employment, with or without notice, due to the conduct of your employer. This is known as constructive dismissal

Under the legislation an employee ask the  employer for a written statement of the reasons for your dismissal. The employer should provide this within 14 days of your request.

If you are found to have been unfairly dismissed you may be placed back in your job or, more commonly, you may receive compensation for the loss of earnings caused by the dismissal.

 

Unfair dismissals

A dismissed employee must show that they qualify to bring a claim under unfair dismissal legislation or employment equality legislation. Then, if their application is accepted by the Workplace Relations Commission, the employer must prove that the dismissal was fair.

If an employee has had 12 months’ continuous service and then is dismissed, then that employee has 6 months from the date of dismissal to file a claim for unfair dismissal. If there is reasonable cause, then an employee may be allowed to extend this period up to 12 months from the date of dismissal. The following reasons for dismissal are deemed automatically unfair by legislation:

• Trade union membership or activity
• Pregnancy, giving birth, breastfeeding, or any matters connected with pregnancy or birth
• Availing of rights under legislation to maternity leave, adoptive leave, paternity leave, carer’s leave, parental, or force majeure leave
• Making a protected disclosure under the Protected Disclosures Act 2014
• Religious or political opinions
• Legal proceedings against an employer where an employee is a party or a witness
• Race, colour, sexual orientation, age or membership of the Traveller community
• Unfair selection for redundancy

If an employee has had less than 12 months’ continuous service and is dismissed, then that employee may bring a claim for unfair dismissal within the same time limits as above if the dismissal was caused by any of the below reasons (which are also in the list above).

• Trade union membership or activity
• Pregnancy, giving birth, breastfeeding, or any matters connected with pregnancy or birth
• Availing of rights under legislation to maternity leave, adoptive leave, paternity leave, carer’s leave, parental, or force majeure leave
• Making a protected disclosure under the Protected Disclosures Act 2014

Some dismissed employees may not be able to bring a claim under the unfair dismissals legislation, but they may still be protected under employment equality legislation, which prohibits dismissal based on: gender, civil status, family status, age, disability, religious belief, race, sexual orientation or membership of the Traveller community.

A constructive dismissal is also considered an unfair dismissal.

 

Constructive dismissal

A constructive dismissal occurs when the employee terminates their own employment due to the conduct of their employer, with or without prior notice. In order to file a claim for constructive dismissal, the same time limits, service lengths, and exclusions apply as listed above for unfair dismissal claims.

If the Workplace Relations Commission accepts a claim for constructive dismissal, then it is the responsibility of the employee to prove that their resignation was justified. In particular, they must show that they resigned as a last resort after having used all available means of resolving the problem, including the use of any complaints or grievance procedure that was available to them. In addition, the employee must show that the employer’s conduct:

• Amounts to an actual breach of the contract of employment or, although it falls short of such a breach, is serious enough to warrant the employee’s resignation
• Shows that the employer no longer intends to be bound by one or more of the essential terms of the contract of employment
• Has been unreasonable

Conduct by fellow employees that goes unchecked by the employer may also be taken into account in relation to constructive dismissal.

 

Fair dismissal

The employee can request a written statement from their employer that gives the reasons for dismissal, and the employer must provide this within 14 days of the request.

When the Workplace Relations Commission accepts an unfair dismissal claim, the dismissal is presumed to be unfair unless the employer can show substantial grounds to justify it, except for a case that involves a constructive dismissal.

In order to prove the dismissal was fair, the employer must:

• Show that the employee’s dismissal was connected with one or more of the potentially fair grounds set out in Ireland’s legislation
• Have acted fairly and show that fair procedures were followed
• Disprove any allegation by the dismissed employee that their case involves any of the automatically unfair reasons for dismissal

Fair grounds for dismissal can be due to capability, competence, qualifications, conduct, redundancy, legal authorization, or other substantial grounds.

When dismissal is being considered, the employer is expected to have disciplinary procedures in place and to follow them. Disciplinary procedures set out the stages and process which the employer will follow in relation to alleged shortcomings of an employee. Generally, the procedure allows for informal warnings leading to written warnings and ultimately to dismissal, as described here.

If an employee has worked for their employer for more than 13 weeks, then there are statutory notice periods that an employer must follow when performing a fair dismissal; these are detailed in the below section. However, the contract of employment may establish longer notice periods.

 

Notice entitlements

When dismissing an employee, the employer does not need to give their employee notice in the following scenarios.

• Employee has been working for employer for less than 13 weeks
• Employee is guilty of gross misconduct
• Employee agrees to waive their right to notice
• Employee works for the employer for less than 21 hours per week

The contract of employment can establish notice periods that are greater than the statutory minimums. However, the legal minimum notice that an employer must give an employee depends on the duration of employment and is as below:

Duration of Employment	Minimum Notice
13 weeks to 2 years	1 week
2 years to 5 years	2 weeks
5 years to 10 years	4 weeks
10 years to 15 years	6 weeks
15 years or more	8 weeks

 

If the employee and employer agree, then the employee can waive their right to notice. In addition, the employee and employer can agree that the employer pay the employee in lieu of notice. If the employee accepts payment in lieu of notice, then the date of termination of their employment is the day on which notice, if it had been given, would have expired.

 

Service continuity and calculation

For the purposes of calculating notice entitlements, the service of an employee in their employment is deemed to be continuous unless that service is terminated by the dismissal of the employee by the employer or by the employee voluntarily leaving their employment. An employee who gives notice of intention to claim redundancy payment in respect of lay-off or short-time is deemed to have voluntarily left their employment, thus breaking that employee’s service continuity. However, the following scenarios do NOT break service continuity:

• A lock-out
• A strike
• A lay-off (this is not considered a termination)
• The dismissal of the employee by their employer followed by the immediate re-employment of that employee
• The transfer of a trade or business from one entity to another

Even if an employee has a period of continuous service, not each week of that period will be considered ‘computable service’ for the purposes of determining notice entitlements. The following scenarios do NOT count as a week towards an employee’s period of service:

• Any week in which an employee is normally expected to work for less than 21 hours
• Any week or part of a week that an employee is absent from their employment in order to take part in a strike in relation to the trade or business in which they are employed

An employee’s period of service DOES include any time that an employee is absent from their employment by reason of:

• Service in the Reserve Defence Force
• A lock-out by their employer
• A strike or lock-out in a trade or business other than that in which they are employed
• A lay-off, sickness, injury, or by agreement with their employer and for 26 weeks or less between consecutive periods of employment

 

Exclusions from protection under unfair dismissal legislation

Unfair dismissals legislation does not apply to the following categories:

• an employee who is under 16, who has reached normal retiring age, or who is not covered by the Redundancy Payments Acts because of age
• a person working for a close relative in a private house or farm, provided both also live in the same house or farm
• a member of the Defence Forces
• a member of the Garda Síochána(Irish Police)
• a person undergoing full-time training or apprenticeship
• an officer of education and training boards, a county or city manager, and the chief executive of the Health Service Executive
• an employee who is employed under a fixed-term/specified-purpose contract and where the contract is in writing, is signed by both parties and contains a clause that the unfair dismissal legislation shall not apply in relation to a dismissal consisting only of the expiration of the fixed-term contract or the completion of the specified purpose
• an employee who works outside the State (unless the employee is resident in the State for the duration of the contract or is domiciled in the State and the employer is resident in the State for the duration of the contract)
• statutory apprentices who are dismissed within 6 months after beginning apprenticeship or within one month after the completion of the apprenticeship
• an employee who is on probation or undergoing training at the beginning of employment, provided that the duration of probation or training is one year or less and is specified in the written contract of employment
• an employee who is dismissed during training for qualification or registration as a nurse or for other specified para-medical employment

The exclusions from unfair dismissals legislation of persons referred to in points (b), (e), (i), (j) and (k) do not apply where the dismissal results from:

• Pregnancy, giving birth, breastfeeding, or any matters connected with pregnancy or birth
• Availing of rights under legislation to maternity leave, adoptive leave, paternity leave, carer’s leave, parental, or force majeure leave

The exclusions from unfair dismissals legislation of persons referred to in points (a) and (d) do not apply where the dismissal results from the employee availing of the right to parental leave, force majeure leave, or carer’s leave.

The exclusions from unfair dismissals legislation of persons referred to in points (d) and (e) do not apply where the dismissal results from the employee making a protected disclosure.

Unfair dismissals legislation does not apply to a dismissal where the employee’s employer at the commencement of the employment informs the employee in writing that the employment will terminate once another employee returns to work after being absent due to maternity leave, adoptive leave, paternity leave, or carer’s leave.

 

Redundancies

Overview

Redundancies occur when an employee loses their job due to the changing circumstances of the business. Generally, it means that the employee’s job ceases to exist and they are not being replaced. Reasoning for the redundancy situation could be the financial position of the firm, lack of work, reorganization within the firm, or closing of the firm. Examples include:

• Employer ceases to carry on business or ceases to carry on business in the place where the employee has been employed (unless there is a change of ownership under transfer of undertaking legislation)
• Employer’s requirements for employees in a certain category has ceased or diminished
• Employer has decided to carry on the business with fewer or no staff; in deciding this, close members of the employer’s family are not taken into account
• Employer has decided to let an employee’s work be done in a different manner in future and that employee is not sufficiently qualified or trained to do the work in the different way
• Employer has decided that an employee’s work will in future be done by another person who can do other work as well and that employee is not sufficiently qualified or trained to do that other work

 

Procedures

In selecting a particular employee for redundancy, an employer should apply selection criteria that are reasonable and are applied in a fair manner. An employee is entitled to bring a claim for unfair dismissal if they consider that they were unfairly selected for redundancy or consider that a genuine redundancy situation did not exist. Examples of these situations might include where the custom and practice in a workplace has been last in, first out and the employer’s selection did not follow this procedure. Another example may be where a contract of employment sets out criteria for selection which were not subsequently followed.

As with any dismissal, an employer must act reasonably when dismissing an employee in a redundancy situation. This requires prior consultation with the employee before the decision is made. In addition, the employer should consider all options including possible alternative job positions. An employee may take an alternative position on trial for up to 4 weeks. If the alternative involves a reduction of 50% or more in hours or pay, then working under the new arrangements for up to 52 weeks will not count as an employee’s acceptance of the new position.

During their last two weeks of employment, an employee who has 104 weeks of service or more is entitled to reasonable paid time off to look for new employment or make arrangements for training for future employment.

An employee is entitled to any outstanding holidays or leave, or payment in lieu of holiday or leave.

 

Notice entitlements

The minimum notice period that an employer must give an employee in the situation of a redundancy is dependent on the employee’s length of service and is as below:

Employee’s period of service	Notice required from employer
104 weeks to 5 years	2 weeks
5-10 years	4 weeks
10-15 years	6 weeks
Over 15 years	8 weeks

 

Between receiving notice of redundancy and the date employment ends, an employee may give their employer notice that they wish to leave before the end of their notice period by completing a Form RP6 and giving it to their employer. The employer has discretion as to whether to grant this request or not. Leaving during the notice period without the employer’s agreement may affect an employee’s entitlement to a redundancy payment.

In deciding an employee’s entitlement to redundancy notice, the following situations will not break the continuity of the employee’s service:

• Employee was on maternity leave, paternity leave, adoptive leave, parental leave or carer’s leave
• Employee was off work through illness, agreed absence, holidays or lay off
• Employee was dismissed due to redundancy before reaching 104 weeks’ service and then taken back by their employer within 26 weeks of that dismissal
• Employee was re-employed within 4 weeks of dismissal by an associate company of their previous employer
• Employee was voluntarily transferred to another employer and it is agreed that the continuity of their service will not be broken
• Employee was placed back in their employment under unfair dismissals legislation
• Employee was on strike or locked out of their employment
• There has been a transfer of the business the employee works for to a new owner

 

Redundancy payments

If an employee is due a redundancy payment, then the employer should pay it on the employee’s date of dismissal. Some employees may be entitled to a statutory minimum redundancy payment, and some contracts of employment may offer a redundancy payment that goes above the statutory minimum.

If an all of the below conditions are satisfied, then an employee is eligible for the statutory minimum redundancy payment:

• Employee must be aged 16 or over
• Employee must be in employment that is insurable under the Social Welfare Acts; full-time employees under the age of 66 must be paying Class A PRSI; this insurability requirement does not apply to part-time workers
• Employee must have worked continuously for their employer for at least 104 weeks over the age of 16
• Employee must have been made redundant

The statutory redundancy payment is a lump-sum and based on the pay of the employee. All eligible employees are entitled to two weeks’ pay for every year of service over the age of 16 plus one additional week’s pay. The amount of statutory redundancy is currently subject to a maximum earnings limit of €600 per week.

If an employee is eligible for a Redundancy payment, they are entitled to:

• Two weeks pay for each year they have been employed and
• A bonus week’s pay
• If an employee has worked part of a year, they are entitled to two weeks multiplied by the part of the year

Pay refers to an employee’s current normal weekly gross pay including average regular overtime and benefits-in-kind, but before tax and PRSI deductions. The statutory redundancy payment is tax-free. However, non-statutory redundancy payments are not tax free.

When calculating the actual length of an employee’s service for redundancy payment purposes, the following are regarded as reckonable service or do not break reckonable service:

• The period the employee was actually in work
• Any absence from work due to holidays
• Any absence from work due to illness (see below for non-reckonable periods of illness)
• Any period where the employee was absent from work by agreement with their employer (i.e., a career break)
• Any period of basic and additional maternity leave allowed under the legislation
• Any period of basic adoptive/paternity/parental/carer’s leave
• Any period of lock-out from employment
• Any period where the continuity of employment is preserved under unfair dismissal legislation

However, in making the calculation of the length of an employee’s service, the following periods over the last 3 years will not be taken into account as service, and are called non-reckonable absences:

• Any period over 52 consecutive weeks where the employee was off work due to an injury at work
• Any period over 26 consecutive weeks where the employee was off work due to illness
• Any period on strike
• Any period of lay off from work

This online calculator can help calculate an employee’s statutory redundancy entitlement.

If the employer cannot pay the redundancy lump sum, then they should submit a Form RP50. They should also submit a letter from an accountant or solicitor stating that they are unable to pay and accepting liability for 100% of the lump sum owing to the Social Insurance Fund (SIF). The employer should include documentary evidence, such as audited accounts. If approved, then the SIF would pay the redundancy lump sum to the employee, and the employer would repay SIF.

 

Disentitlement to redundancy payment

If the employer makes the employee a reasonable offer of alternative work, then the employee can lose their entitlement to a redundancy payment if they refuse the alternative work. Generally speaking, alternatives which involve a loss of status or worsening of the terms and conditions of employment would not be considered reasonable.

If an employee accepts a new contract or re-engagement with immediate effect and the terms do not differ from those of the previous contract, then they will not be entitled to claim redundancy. This also applies if an employee refuses such an offer unreasonably.

If the employee accepts an offer in writing from their employer for a new and different contract which will take effect within 4 weeks of the ending of the previous contract, the employee will not be entitled to claim redundancy. Equally, if the employee refuses such an offer unreasonably, then they will lose their right to a redundancy payment.

Any offer of alternative work should be given in writing to the employee, who is entitled to full information concerning the details of the offer.

If an employee leaves during the notice period without the employer’s agreement, then their entitlement to a redundancy payment could be impacted.

 

Collective redundancies

Collective redundancies arise where, during any period of 30 consecutive days, the employees being made redundant are:

• 5 employees where 21-49 are employed
• 10 employees where 50-99 are employed
• 10% of the employees where 100-299 are employed
• 30 employees where 300 or more are employed

In the case of a collective redundancy, an employer is required to enter into consultations with representatives of the employees. The aim of the consultation is to consider whether there are any alternatives to the redundancies. These consultations must take place at the earliest opportunity and at least 30 days before the notice of redundancy is given. The following information must be given to the employee’s representative(s) in writing:

• The reasons for the redundancy
• The number and descriptions of the employees affected
• The number and descriptions of employees normally employed
• The period in which the redundancies will happen
• The criteria for selection of employees for redundancy
• The method of calculating any redundancy payment

The employer is also required to inform the Ministry for Employment Affairs and Social Protection in writing of the proposed redundancies at least 30 days before the occurrence of the first redundancy. The following information must be provided in this notice:

• The name and address of the employer, indicating whether they are a sole trader, a partnership or a company
• The address of the establishment where the collective redundancies are proposed
• The total number of persons normally employed at that establishment
• The number and descriptions or categories of employees whom it is proposed to make redundant
• The period during which the collective redundancies are proposed to be effected, stating the dates on which the first and the final dismissals are expected to take effect
• The reasons for the proposed collective redundancies
• The names and addresses of the trade unions or staff associations representing employees affected by the proposed redundancies and with which it has been the practice of the employer to conduct collective bargaining negotiations
• The date on which consultations with each such trade union or staff association commenced and the progress achieved in those consultations to the date of the notification

Redundancy occurs when you lose your job due to the closure of a business or a reduction of the workforce. This can happen due to lack of work available or the financial circumstances of the firm.

Alternatively, an employer may lay you off or put you on short time for a number of weeks.

Under the Redundancy Payments Acts  a lay-off situation arises where your employer is unable to provide work for you, but believes this to be a temporary situation and gives you notification of the lay off before the work finishes.

A short-time situation arises where, due to a reduction in the amount of work to be done, your weekly pay is less than half your normal weekly pay or your hours worked are reduced to less than half the normal weekly working hours. This must be a temporary situation and your employer must notify you before the reduction starts.

The employer should explain to the employees the reason for the lay off or short-time working and keep employees informed of the situation during this time. In both cases these must be temporary situations and your employer must notify you to this effect before they start. The best way to do this is by using Part A of form RP9 (pdf). If your employer fails to notify you of the lay off or short-time working, there could be a claim for statutory redundancy payment against your employer.

Your employer can lay you off or put you on short time if it is in your contract of employment or if it is custom and practice in your workplace. Otherwise your employer should not lay you off or put you on short time without your agreement. However if you do not agree you may be made redundant. You can read more about your options if you do not agree to the lay off or short-time working in our document on being asked to reduce your pay or hours of work.

 

Selection of employees for short term layoff

When selecting employees for lay off or short-time working an employer should apply the same standard of selection criteria as for redundancy. The criteria should be reasonable and applied in a fair manner. For example, the custom and practice in the workplace may be last in, first out or the contract of employment may set out criteria for selection. Under employment equality legislation, the selection must not discriminate against employees on any of the following 9 grounds: gender, civil status, family status, age, disability, religious belief, race, sexual orientation or membership of the Traveller community.

 

Social welfare payments

If you are laid off or are on short-time working you may be entitled to Jobseeker’s Benefit or Jobseeker’s Allowance. If you are getting Family Income Supplement this may be affected by the reduction in your working hours.

 

Claiming redundancy

If a lay-off or a short-time situation exists and has continued for 4 weeks or more, or for 6 weeks in the last 13 weeks, you may give your employer a notice in writing of your intention to claim redundancy under the Redundancy Payments Acts . If the period of lay-off or redundancy has ended, you must do this within 4 weeks.

Unless your employer gives you a counter-notice within 7 days of your notice, you may be entitled to a redundancy payment provided that you qualify for redundancy. If your employer gives you a counter-notice within the allotted time, it must be to the effect that within 4 weeks of the date of your claim for redundancy, it will be possible to offer you not less than 13 weeks’ work without lay off or short time.

You should note that if you claim redundancy in this way you are considered to have left your job voluntarily and therefore you will lose any right to notice from your employer under the Minimum Notice and Terms of Employment Acts 1973-2005. However if you have been laid off and you are subsequently made redundant by your employer you do not lose your notice entitlements.

 

Redundancy payment and notice when on short time

If you have been put on short time and then are made redundant your redundancy payment may be based on your pay for a full week. It has been the view of the Employment Appeals Tribunal (now the Workplace Relations Commission) that when a person is put on short time, that is, less than half their normal weekly earnings, the gross wage for the calculation of a redundancy lump sum is based on a full week’s pay.

Notice: When your employer gives you notice, your notice entitlement is based on your full-time work. When you were put on short-time work, your contract of employment was temporarily suspended. When your employer decided to make you redundant, he or she had to re-activate your contract in order to dismiss you on grounds of redundancy. If you were made redundant and you were not required to work out your notice you are entitled to payment in lieu of notice which is your normal pay for that notice period. This means that your notice entitlement is based on the hours of work in your contract of employment, not on the short-time hours of work.

 

Duration of lay off or short time

If you do not wish to claim redundancy but the lay-off or short-time situation continues, the question arises as to whether it is a temporary situation. If it becomes apparent that it is no longer temporary then the situation is now a redundancy rather than a lay-off or short-time working. It is the employer who initially decides whether or not there is a redundancy situation. If there is a dispute about this it should be referred to the Workplace Relations Commission to make a decision.

 

Seasonal workers

In the case of workers who have been laid off for an average period of more than 12 weeks during the 4 years prior to redundancy, the provisions relating to lay off above will not apply until the end of that average period. If you are a seasonal worker, therefore, there will normally be no question of redundancy until the usual commencement time of your seasonal work. If you are not then re-employed, the question of redundancy arises, but not until then.

 

How to apply

If you have been laid off or on short-time working for 4 weeks or more, you may give your employer notice of your intention to claim a redundancy payment on form RP9 (pdf).

If your employer has not paid your redundancy lump sum, you should apply to your employer for it using form RP77 (pdf). If your employer still refuses to pay it, you can apply to the Department of Employment Affairs and Social Protection for direct payment from the Social Insurance Fund. This must be done online using form RP50 as follows:

If your employer is unable to pay your redundancy lump sum, they should sign the RP50. They should submit a letter from an accountant or solicitor stating they are unable to pay and accepting liability for 100% of the lump sum owing to the Social Insurance Fund. Documentary evidence such as audited accounts should also be included.

If your employer refuses to pay your redundancy lump sum or if there is a dispute about redundancy you can bring a claim to the Workplace Relations Commission. You must use the online complaint form available on workplacerelations.ie. This must be done within one year of your dismissal. Then you apply for your lump sum by sending a completed form RP50 together with a favourable decision from the adjudicator of the Workplace Relations Commission.

 

Lump Sum Payments

Overview

When an employee retires or leaves work, the employer may choose to pay that employee a lump sum payment. This payment should be exempt from taxes up to a certain point, but should be treated as normal pay if it is more than either 1) the basic exemption and increased exemption (if due) or 2) the Standard Capital Superannuation Benefit.

 

Basic exemption

The basic exemption is €10,160 plus €765 for each complete year that the employee has worked for their employer. If the employee has taken a career break, then this time is not counted. The following items can be counted towards a full year of work:

• Time worked before and after a career break
• Period of job-sharing or part-time work
• For group companies, all work carried out in Ireland

 

Increased exemption

An employee may claim an increased exemption, up to €10,000, if they have not claimed an increased exemption in the previous 10 years. This increased exemption is reduced by the following:

—any tax-free lump sum from the pension scheme that the employee is entitled to

-the current actuarial value of any lump sum they may receive from a pension scheme in the future

The employee may have agreed with their pension provider that they will never receive a lump sum payment. The employee must inform their employer of this agreement in order to receive the increased exemption.

 

Standard Capital Superannuation Benefit (SCSB)

SCSB is an additional relief that an employee may be entitled to. It benefits employees with high earnings and long service. SCSB is calculated at 1/15 of the employee’s average annual pay for the last 36 months in employment. This is multiplied by the number of full years of service. Any tax-free lump sums received are subtracted from this benefit.

 

Formula for SCSB: Take the average annual earnings over the previous 3 years (or the whole period of service, if less than 3 years), multiply this figure by the number of years’ service; divide by 15 and subtract the lump sum superannuation payment received or that may be receivable.

 

Taxation of Lump sum Benefit

A certain amount of your redundancy payment is tax free, as described above, and the balance will be taxed. This is taxed as part of the current year’s income.

Previously there was a second method based on your average rate of tax for the previous 3 years. This was known as Top Slicing Relief which was not available on lump sums of €200,000 or more paid on or after 1 January 2013 and was abolished for all ex-gratia lump sum payments made on or after 1 January 2014.

The amount of your lump sum that is subject to tax is not subject to social insurance (PRSI), but the Universal Social Charge may be payable.

 

How to apply

Your employer is obliged to deduct tax from all your income. They may take account of the basic exemption, that is the €10,160 plus €765 for each year of service. Revenue may inform the employer about the correct amount to be treated as tax free and the rate of tax to be applied to the rest. If this does not happen or if it is incorrect and you have paid too much tax, you should contact your regional Revenue office to claim a refund – see ‘Where to apply’ below.

You must declare the fact that you have received such a lump sum on your annual return of income to Revenue.

 

Payment in lieu of notice

A payment in lieu of notice should be treated as pay if it is part of the employee’s contract. This payment cannot benefit from the basic exemption.

 

Transfer of Employees

If a business is being taken over by another employer as the result of legal merger or transfer, then the employees have certain protections. For a transfer of undertaking to take place, there must be a change in the person (either an individual or a company) responsible for running the undertaking/business, the previous economic activity of the undertaking/business must be carried on by the new employer, and the undertaking/business must be transferred as a “going concern”.

The new employer is legally obliged to take on the existing employees of the business. The terms and conditions and the employer’s obligations in a contract of employment are automatically transferred to the new employer, except for pension rights. If there is a collective agreement, then the new employer must continue to its terms and conditions until it expires or is replaced.

If a contract of employment is terminated because a transfer involves a substantial change in working conditions to the employee’s detriment, then the employer concerned is regarded as having been responsible for the termination of the employment.

The following is considered when an employee is transferred:

 

Contract of employment

Under the Regulations the new employer is legally obliged to take on the existing employees of the business. The terms and conditions and your employer’s obligations in your contract of employment are automatically transferred to your new employer, except for pensions – see below. If there is a collective agreement your new employer must continue to its terms and conditions until it expires or is replaced.

 

P45: In some circumstances employees involved in a transfer of business may be given a P45 by their old employer. They should give this to their new employer. For the purposes of redundancy legislation a transfer of business does not break the employees’ continuity of service. Instead it is transferred to their new employment.

 

Pensions

Employee pension rights, apart from those provided for by social welfare legislation, do not transfer to the new employment. However, where there is a pension scheme in operation in the original employer’s business at the time of the transfer, the legislation provides that:

If the scheme is an occupational pension scheme covered by the Pension Acts, then the protections given by that legislation apply

In the case of other pension schemes, the new employer must ensure that rights are protected

The employer must consult with the employees’ union or, in the absence of a union, with the chosen representative(s) of the employees. In addition, employees must be given details of the transfer as follows:

• If the employees are in a union, not later than 30 days before the transfer, the employer must provide the union with details of the reasons for the transfer; the date or proposed date of the transfer; and the legal, economic and social implications for the employees
• If the employees are not in a union, the employer must give the details already mentioned in writing to each employee not later than 30 days before the transfer

 

Obtaining and Filing a Form P45 or Form P45 Supplement

Overview

Currently, an employer must complete a Form P45 when an employee leaves employment, retires, or dies. Once PAYE modernization is finalized (scheduled for 1 January 2019), the P45 and related forms will no longer be used. Instead, employers and employees will be able to enter changes and access all relevant information through the online Revenue portal.

Under the current rules, the Form P45 and Form P45 Supplement must be filed through the Revenue Online Service if the employer is an ROS user. If the employer is a non-ROS user, then they can request these forms from Revenue’s forms ordering service and submit them as a paper copy.

Part 1 of the P45 should be submitted directly to Revenue. The other parts of the P45 go to different parties, depending on whether the employee leaves, dies, or retires; the below relevant sections detail this.

 

Leaving or terminated employee

When an employee leaves their job, their employer should immediately send Part 1 of the P45 to Revenue. Parts 2, 3, and 4 should be given to the employee. The employee keeps Part 2, submits Part 3 to their future employer, and uses Part 4 to submit a claim for Jobseeker’s Benefit.

 

Death of an employee

If an employee dies, then their employer must complete all four parts of the Form P45 and send it to Revenue.

 

Retiring employee

When an employee retires, their employer should complete a Form P45 in either of the below scenarios. Part 1 should be submitted to Revenue, and Parts 2, 3, and 4 should be given directly to the pension provider.

• Employee retires on a pension paid by a trust fund or life assurance company, or
• Employee retires on a pension that is paid by the employer but has a separate registration number for pensioned employees than that for current employees

If BOTH of the following conditions apply, then the employer should not complete a Form P45:

• Employer is still paying the retired employee a pension, and
• Employer uses the same registration number for current and pensioned employees

The employee may retire at an age when they are entitled to make a claim for Jobseeeker’s Benefit. If that is the case and the employer is not giving the employee a P45, then the employer should give the retiring employee a letter that includes the same information that would be entered on a P45 in Parts 2, 3, and 4. The employee can then use this to apply for the Jobseeker’s Benefit.

 

 

Transferring employee

If BOTH of the following conditions apply, then an employer must complete a P45 when an employee transfers to another branch within the same company.

• Each branch has separate registration numbers, and
• Each branch makes separate employer returns

 

Form P45 Supplement

If the employer gives their former employee an additional payment that was not included on the P45, then the employer must complete a Form P45 supplement. If this additional payment was made before the January 1 that follows the employee’s date of leaving, then the employer should calculate tax using the P2C that applied on the employee’s date of leaving. If this additional payment was made in the years following the employee’s date of leaving or the employer doesn’t have a P2C, then the employer should calculate tax on an emergency basis.