How is statutory redundancy calculated in Ireland? Statutory redundancy in Ireland is calculated as two weeks’ pay for every year of continuous employment, plus one additional bonus week. Pay is capped at EUR 600 per week regardless of actual earnings. So the formula is: (Years of Service x 2 x Weekly Pay up to EUR 600) + EUR 600 for the bonus week. For example, someone with 10 years of service earning EUR 700 per week would receive (10 x 2 x EUR 600) + EUR 600 = EUR 12,600. Statutory redundancy is completely tax-free and does not have to be declared to Revenue.
Joe Coyle Financial Consultants, a CBI-regulated financial broker in Donegal and part of the Money Maximising Advisors group, provides redundancy advice Ireland, helping people across Ireland who face redundancy understand their full financial entitlements, manage their redundancy payment tax-efficiently, and make sound decisions about their pension and next steps. Further guidance at Money Sense Financial Services.
Being made redundant is one of the most financially significant events in a working person’s life. Understanding exactly how much statutory redundancy you are entitled to, whether it is taxable, and what to do with the money once you have it can make an enormous difference to your financial position. This guide walks through the complete picture, the statutory formula, the weekly cap, ex gratia redundancy tax rules, and the most important financial decisions you face once the payment arrives.
The Statutory Redundancy Formula
Under the Redundancy Payments Acts 1967 to 2022, every eligible employee in Ireland is entitled to a minimum statutory redundancy payment calculated as follows:
(Years of Continuous Service x 2 x Weekly Pay up to EUR 600) + EUR 600 Bonus Week
Weekly pay cap: EUR 600 per week, if your actual weekly pay exceeds EUR 600, only EUR 600 is used in the calculation
Years of service: Counted in full years only, partial years at the end do not count (however some employers round up as goodwill)
Continuous service: Must be continuous employment, breaks in service may affect entitlement
Eligibility: Employees aged 16+ with at least 2 years of continuous service, in insurable employment under the Social Welfare Acts
Statutory Redundancy Worked Examples
| Scenario | Years Service | Weekly Pay | Calculation | Total |
| 10 years, EUR500/wk | 10 | EUR 500 | (10x2xEUR500) + EUR500 | EUR 10,500 |
| 10 years, EUR700/wk (capped) | 10 | EUR 700 (cap EUR600) | (10x2xEUR600) + EUR600 | EUR 12,600 |
| 20 years, EUR600/wk | 20 | EUR 600 | (20x2xEUR600) + EUR600 | EUR 24,600 |
| 20 years, EUR800/wk (capped) | 20 | EUR 800 (cap EUR600) | (20x2xEUR600) + EUR600 | EUR 24,600 |
| 30 years, EUR600/wk | 30 | EUR 600 | (30x2xEUR600) + EUR600 | EUR 36,600 |
💡 The EUR 600 weekly cap was last increased in 2005 and has not been updated since, despite significant wage inflation over the past 20 years. Many workers earning EUR 800, EUR 1,000 or more per week receive the same statutory redundancy as someone earning EUR 600, a significant shortcoming of the statutory system. This is why negotiating an enhanced ex gratia redundancy payment above the statutory floor is so important for higher earners.
Is Statutory Redundancy Tax-Free in Ireland?
Yes, statutory redundancy is completely tax-free in Ireland. You do not pay income tax, USC or PRSI on your statutory redundancy payment, and you do not need to declare it on your tax return. Revenue does not count statutory redundancy toward your annual income for any purpose.
► Talk to Joe Coyle Financial Consultants About Your Redundancy Options, Free Consultation
What Is Ex Gratia Redundancy and How Is It Taxed?
Ex gratia redundancy is any payment above the statutory minimum made by your employer as part of the redundancy package. It is common in voluntary redundancy situations, where employers offer enhanced packages to encourage uptake. The tax treatment of ex gratia redundancy is more complex than statutory redundancy.
The Basic Exemption: First EUR 10,000 Tax-Free
The first EUR 10,000 of any ex gratia payment above the statutory redundancy is exempt from income tax. If your total redundancy package (statutory + ex gratia) is below EUR 10,000 above the statutory amount, the entire ex gratia element is tax-free.
The Increased Exemption: An Additional EUR 10,000 for No Pension
If you are not a member of your employer’s pension scheme, or you are giving up the right to pension benefits, you may be entitled to an additional EUR 10,000 exemption, bringing the total ex gratia exemption to EUR 20,000.
The Standard Capital Superannuation Benefit (SCSB) Formula
For long-service employees with significant earnings, the SCSB formula may provide a much higher exemption than the basic exemptions. The SCSB formula is:
(Average Annual Pay for Last 3 Years x Years Service / 15) minus any tax-free pension lump sum you have received
The SCSB is chosen where it gives a higher exemption than the EUR 10,000 or EUR 20,000 basic exemption. For a senior employee with 25 years service on EUR 80,000 per year, the SCSB could provide an exemption of (EUR 80,000 x 25 / 15) = EUR 133,333, vastly more than the basic exemption. Joe Coyle Financial Consultants calculates the SCSB for every redundancy client to ensure the most tax-efficient treatment.
⚠️ Important: You cannot receive both the SCSB and the EUR 10,000/20,000 basic exemption, you choose whichever is higher. You also cannot claim the SCSB on multiple redundancies in your career without adjustment. Joe Coyle Financial Consultants reviews your lifetime SCSB history as part of every redundancy advice consultation.
What Should You Do With Your Redundancy Payment?
The decisions you make in the weeks immediately following redundancy can significantly affect your long-term financial position. The most important financial decisions are:
Contribute to Your Pension
You can contribute all or part of your redundancy payment into a pension, claiming income tax relief at your marginal rate, subject to Revenue age-related limits on your earned income. For a higher-rate taxpayer, EUR 30,000 invested in a pension from a redundancy payment can attract EUR 12,000 in tax relief, turning a EUR 30,000 contribution into an EUR 30,000 pension pot at a net cost of EUR 18,000. Joe Coyle Financial Consultants calculates the optimal pension contribution from every redundancy situation.
Clear Mortgage Debt
If you have an outstanding mortgage, using some or all of the redundancy payment to reduce or clear the balance can save significant interest costs, particularly in the current rate environment. Joe Coyle Financial Consultants models the interest saving vs alternative investment returns for every client facing this decision.
Build an Emergency Fund
Before any other use, ensure you have at least three to six months of living expenses held in an accessible deposit or State Savings account. This provides security while you plan your next career step or return to employment.
Review Your Protection Cover
Leaving employment often means losing group income protection and death-in-service cover that was provided by your employer. Replacing these individually is important if you have dependants. Joe Coyle Financial Consultants reviews protection needs as part of every redundancy consultation.
Frequently Asked Questions: Statutory Redundancy Ireland
How is statutory redundancy calculated in Ireland?
Two weeks’ pay per year of continuous service, plus one bonus week. Weekly pay is capped at EUR 600 regardless of actual earnings. For 10 years of service at EUR 600 per week or above, the statutory payment is (10 x 2 x EUR 600) + EUR 600 = EUR 12,600. Joe Coyle Financial Consultants calculates your exact entitlement at the first free consultation.
What is the maximum statutory redundancy payment in Ireland?
There is no maximum, it depends on years of service. However, the weekly pay cap of EUR 600 limits the payment for higher earners. For 30 years of service at the cap, the statutory payment is (30 x 2 x EUR 600) + EUR 600 = EUR 36,600.
Is statutory redundancy tax-free in Ireland?
Yes. Statutory redundancy is completely tax-free, no income tax, USC or PRSI. You do not need to declare it on your tax return.
What is the EUR 600 weekly cap on redundancy pay?
The statutory redundancy calculation uses your weekly pay, but this is capped at EUR 600 per week regardless of what you actually earn. If you earn EUR 1,000 per week, the calculation uses EUR 600. This cap has not been updated since 2005.
What is the difference between statutory and ex gratia redundancy?
Statutory redundancy is the legally required minimum, two weeks per year plus a bonus week, capped at EUR 600 per week, fully tax-free. Ex gratia redundancy is any additional payment made by the employer above the statutory floor. The first EUR 10,000 (or EUR 20,000 in some cases) of ex gratia is tax-free; the SCSB formula may provide a higher exemption for long-service employees. Joe Coyle Financial Consultants ensures you claim the maximum available tax exemption on your redundancy package.
► Talk to Joe Coyle Financial Consultants About Your Redundancy, Free Consultation
Important Information
This article is for general information only and does not constitute financial advice. Statutory redundancy, SCSB and ex gratia tax rules information is correct at the date of publication. Joe Coyle Financial Consultants Ltd is regulated by the Central Bank of Ireland (C54725), part of Money Maximising Advisors (C154250). Always seek personalised advice from a Qualified Financial Advisor before making financial decisions.
