Voluntary redundancy in Ireland: statutory and ex gratia payments, tax

What is voluntary redundancy?

In a voluntary redundancy scheme, your employer needs fewer staff and invites people to volunteer to leave, usually for a package that is better than the legal minimum. The law does not define “voluntary redundancy”. The Redundancy Payments Act speaks only of a dismissal by reason of redundancy.

That covers a dismissal attributable wholly or mainly to reasons not related to you, such as the business closing, needing fewer people for a kind of work, or deciding to carry on with fewer employees RPA 1967, s.7(2). If you volunteer and your employer then ends your job for one of these reasons, the usual redundancy rules apply.

Is statutory redundancy part of a voluntary package?

Statutory redundancy depends on the legal conditions, not on whether you volunteered. You qualify if, among other conditions, you have 104 weeks’ continuous service, you are aged 16 or over, and you were in fully insurable employment RPA 1967, s.7(1); WRC, Redundancy.

The statutory amount is 2 weeks’ pay for each year of service, plus 1 week, with weekly pay counted up to €600 RPA 1967, Sch. 3, para. 1. For the full method and worked examples, see statutory redundancy in Ireland.

Anything above that is the employer’s choice. Citizens Information says your employer is not legally obliged to pay more than the statutory entitlement, unless your contract gives you a right to it. This extra amount is often called an ex gratia payment.

Ask for the package to show the statutory part separately. It is tax-free, and if it is ever unpaid it has its own claim procedure: see your employer won’t pay statutory redundancy.

What else is due on top of the package?

Your other final pay is separate from the redundancy lump sum:

• notice, worked or paid in lieu: see notice period in Ireland;
• annual leave not taken, and sometimes a public holiday: see annual leave and holiday pay when you leave;
• your final wages.

If you are under notice of redundancy and want to leave earlier, the WRC’s form RP6 is used to give counter-notice, and your employer’s agreement matters. Leaving early without it could put your redundancy payment at risk.

How is a voluntary redundancy package taxed?

Revenue taxes each part differently:

Part of the package	Tax
Statutory redundancy	Tax-free: no income tax, USC or PRSI
Ex gratia, up to your exemption	Tax-free
Ex gratia, the part above your exemption	Income tax and USC, not PRSI
Notice pay provided in your contract, holiday pay, final wages	Taxed as pay

For the ex gratia part, you get the higher of the basic exemption (€10,160 plus €765 for each full year of service), with the increased exemption of €10,000 if you qualify, or the SCSB. All three are explained in is redundancy pay taxed in Ireland?.

Your employer applies the exemption through payroll. If it did not apply one you think is due, you can claim it from Revenue through myEnquiries.

Worked example

Aoife started on 15 March 2019 and earns €850 a week. Her employer offers voluntary redundancy with a last day of 23 October 2026. The scheme pays 4 weeks’ pay per year of service, including statutory, and counts service like the statutory calculation (a fictional scheme).

Line	Calculation	Amount
Package	7.62 years × 4 weeks × €850	€25,908.00
Statutory part (tax-free)	16.24 weeks × €600	€9,744.00
Ex gratia part	€25,908.00 − €9,744.00	€16,164.00

Tax on the ex gratia part, depending on her exemption:

Exemption	Amount	Taxable part of €16,164
Basic: €10,160 + 7 × €765	€15,515.00	€649.00
Basic + increased	€25,515.00	€0.00
SCSB: €44,200 ÷ 15 × 7	€20,626.67	€0.00

She has 7 full years of service. If she qualifies for the increased exemption, or the SCSB is higher for her, the whole package is tax-free. Her notice, leave and final wages are paid on top and taxed as pay.

This example is fictional. Real schemes count service and pay in their own way: read yours.

Does voluntary redundancy affect Jobseeker’s Benefit?

Citizens Information treats voluntary redundancy like compulsory redundancy for jobseeker’s payments. Most people who lose a full-time job now apply for Jobseeker’s Pay-Related Benefit (JPRB). If you may qualify for it, the Department does not accept a Jobseeker’s Benefit application DSP, Jobseeker’s Benefit guidelines.

• Jobseeker’s Pay-Related Benefit: a redundancy payment, compulsory or voluntary, does not affect your eligibility.
• Jobseeker’s Benefit: if you are under 55 and your redundancy payments come to more than €50,000, you can be disqualified for up to 9 weeks, depending on the amount. The Department counts the gross total of all redundancy payments: the statutory part, any ex gratia or top-up payment, and other money paid under an agreement with your employer. Pay in lieu of notice and holiday pay are not counted.

Aoife’s package of €25,908 is below that threshold. For the payments, the conditions and what to do first, see social welfare after redundancy in Ireland.

Should you sign an agreement with the package?

Many employers ask people to sign an agreement before paying the ex gratia part, often saying you will not bring any claim about your employment. Read what you give up before you sign. Take independent advice, for example from your trade union, Citizens Information or a solicitor. This guide cannot tell you whether an offer is good for you.

What are the time limits?

Your statutory redundancy must be claimed in writing, paid, or referred to the WRC within 52 weeks of your last day RPA 1967, s.24(1). For Aoife, that is 21 October 2027. Missing notice, leave or wages must go to the WRC within 6 months: here, 22 April 2027 Workplace Relations Act 2015, s.41(6). Act early.

Your next steps

1. Check, free. Use the redundancy calculator to check the statutory part of your offer. The final pay check adds notice, leave and any public holiday.
2. Claim in writing. If the statutory part is unpaid or short, you can prepare a redundancy claim letter to your employer yourself (€9, or €19 with a dated follow-up letter and reminders). Neither letter covers the ex gratia part, which depends on your agreement.
3. The next step. If your employer still does not pay, you make a complaint to the WRC online yourself. A free preparation sheet, available from the calculator’s results without any purchase, lists what the online form asks for.