bonus

JC43

I am in the process of being made redundant. My salary was €50k and in my contract I was due to get an annual bonus of 10% payable in Dec. I was in company 5 years and always received this bonus. My question is when working out my weekly wages do I add the 10% to the annual wages.

IE 50,000 and 10% = 55,000 divided by 52 = 1057pw

Or

50,000 divided by 52 = 961pw

MadDog76

JC43 wrote: »

I am in the process of being made redundant. My salary was €50k and in my contract I was due to get an annual bonus of 10% payable in Dec. I was in company 5 years and always received this bonus. My question is when working out my weekly wages do I add the 10% to the annual wages.

IE 50,000 and 10% = 55,000 divided by 52 = 1057pw

Or

50,000 divided by 52 = 961pw

The amount of statutory redundancy is subject to a maximum earnings limit of €600 per week (€31,200 per year) so, as far as I know, it doesn't really matter how much you earn above €600 per week as that is the maximum amount you are entitled to in redundancy ......... what you need to find out is how many weeks per year (above the statutory 2 weeks) your employer is offering, bearing in mind that 2 weeks is the legal minimum to which you are entitled.

JC43

Thanks for your reply . This is for 2 weeks redundancy from the company. Statutory will be on top of this.

MadDog76

JC43 wrote: »

Thanks for your reply . This is for 2 weeks redundancy from the company. Statutory will be on top of this.

So you'll be getting 4 weeks per year ............. €2,400 for every year you've been employed with the company.

JC43

So is the 600 capped from the company also?
So will it work out as follows

Statutory 600 x2 1200
Company 600 x2 1200

Or

Statutory 600 x2 = 1200
Company (50k * 52 x2= 1922

Or
Statutory 600 x2 = 1200
Company (55 * 52 x2= 2115


Thanks for this I want by facts right before I'm called in

MadDog76

JC43 wrote: »

So is the 600 capped from the company also?
So will it work out as follows

Statutory 600 x2 1200
Company 600 x2 1200

Or

Statutory 600 x2 = 1200
Company (50k * 52 x2= 1922

Or
Statutory 600 x2 = 1200
Company (55 * 52 x2= 2115


Thanks for this I want by facts right before I'm called in

It is capped at €600 per week ....... the only thing you can negotiate with the Company is the amount of weeks (on top of the 2 weeks Statutory) they will give you but bear in mind that they are not legally required to offer you any more than the 2 weeks Statutory so, in your case, they are being generous in giving you 4 weeks total.

Tzardine

JC43 wrote: »

So is the 600 capped from the company also?
So will it work out as follows

Statutory 600 x2 1200
Company 600 x2 1200

Or

Statutory 600 x2 = 1200
Company (50k * 52 x2= 1922

Or
Statutory 600 x2 = 1200
Company (55 * 52 x2= 2115


Thanks for this I want by facts right before I'm called in

The one highlighted.

In a nutshell,

If you are just getting the two weeks statutory redundancy then you will get €6,000 total. Thats 2 weeks at €600 x 5 Years.

If you are getting two additional weeks per year from your employer then your total is €12,000. (€6,000 statutory & €6,000 additional from employer)

johnsparkexile

JC43 wrote: »

So is the 600 capped from the company also?


Not in any redundancy scenario that I 'm aware off or was involved in, can't see them including the bonus as wages, so option 2.

Statutory 600 x2 = 1200
Company (50k * 52 x2= 1922

Graham

As anything above the statutory redundancy is at the discretion of the company, they're the only ones that can answer this question.

If they're offering 4 weeks per year it could well be calculated at 50k / 52 * 4 per year or 55k / 52 * 4 per year. Many companies offering above statutory won't calculate 2 weeks at statutory then additional weeks at 1 x 52nd.

MadDog76

Graham wrote: »

As anything above the statutory redundancy is at the discretion of the company, they're the only ones that can answer this question.

If they're offering 4 weeks per year it could well be calculated at 50k / 52 * 4 per year or 55k / 52 * 4 per year. Many companies offering above statutory won't calculate 2 weeks at statutory then additional weeks at 1 x 52nd.

No company/employer can choose their own methods when it comes to calculating Redundancy ........... there is a specific calculation that must, by law, be adhered to for tax reasons.

Statutory Redundancy must be calculated accurately and separately to any Ex-Gratia Redundancy payments as Statutory Redundancy payments are tax-free whilst Ex-Gratia Redundancy payments are subject to tax.

In the Op's case, his Statutory Redundancy will be (and must be, by law) calculated as 5 years x 2 weeks plus 1 week bonus = 11 weeks.

His weekly salary is €961, however the maximum he can receive by way of Statutory Redundancy is limited to €600 per week. Therefore his Statutory Redundancy payment will be (11 weeks x €600) €6,600.
This figure (€6,600), and how it is calculated, is important because it is tax-free.

The Ex-Gratia Redundancy payment (2 weeks in the Op's case) is subject to tax.

Graham

MadDog76, it sounds like you are confusing statutory minimums with exemptions for redundancy payments. They are not the same thing.

If the OP has been offered 4 weeks per year of service, according to my approximate calculations (for a first redundancy):

5 years x 4 weeks x €961 = €19,220
of which (10 + 1) * €600 = €6,600 is statutory redundancy (ignored for tax purposes)
€12,620 is ex-gratia which is below the basic exemption for tax-free entitlements €10,160 + (5 x €765) = €13,985

The above total paid figures will be lower if the employers have offered statutory + 2 weeks per year (i.e. 2 x 600 and 2 x 961 per year)

It's up-to the company to decide how the ex-gratia elements are calculated or whether this includes the bonus figures.

What lump sum payments qualify for some relief from tax?
The following redundancy and retirement payments, although not exempt from tax, qualify for some relief from tax. These are:

Salary or wages in lieu of notice, on redundancy or retirement.
Non-statutory redundancy payment, i.e. the amount paid by your employer, which is over and above the statutory redundancy payment. The non-statutory redundancy payment is also known as a golden handshake or an ex-gratia payment. (E.g. a person receives a lump sum of €20,000, which includes statutory redundancy of €5,000. Of the €20,000, €15,000 is taken into account and the €5,000 is ignored for tax purposes).

---//---

Basic Exemption:

The basic exemption is €10,160 plus €765 for each full year of service with the employer making the redundancy payment.

Revenue.ie - IT21 - Lump Sum Payments (Redundancy/Retirement)

MadDog76

Graham wrote: »

MadDog76, it sounds like you are confusing statutory minimums with exemptions for redundancy payments. They are not the same thing.

I'm not confused at all, I know the Redundancy system very well.

I didn't say Ex-Gratia Redundancy payments will be taxed, I said Ex-Gratia Redundancy payments are subject to taxation depending on an individuals personal circumstances.

Graham wrote: »

If the OP has been offered 4 weeks per year of service, according to my approximate calculations (for a first redundancy):

5 years x 4 weeks x €961 = €19,220

This method of calculating Redundancy (bunching together Statutory Redundancy with Ex-Gratia payments) is not the correct, or legal, method and will not be used by any reputable Company/Employer.

Graham wrote: »

of which (10 + 1) * €600 = €6,600 is statutory redundancy (ignored for tax purposes)

This is the correct legal way to calculate Statutory Redundancy.

Graham wrote: »

€12,620 is ex-gratia which is below the basic exemption for tax-free entitlements €10,160 + (5 x €765) = €13,985

This may be true depending on each individuals personal circumstances tax-wise.

Graham wrote: »

The above total paid figures will be lower if the employers have offered statutory + 2 weeks per year (i.e. 2 x 600 and 2 x 961 per year)

It's up-to the company to decide how the ex-gratia elements are calculated or whether this includes the bonus figures.

The Company/Employer can pay almost any amount of money in Redundancy they wish (above Statutory) but they must be clear, concise and legal in their calculations whilst keeping Statutory Redundancy calculations and Ex-Gratia calculations transparently separate.

Graham

MadDog76 wrote: »

I'm not confused at all, I know the Redundancy system very well.

I didn't say Ex-Gratia Redundancy payments will be taxed, I said Ex-Gratia Redundancy payments are subject to taxation depending on an individuals personal circumstances.

You said "ex-gratia payments are subject to tax", I wasn't disagreeing. More clarifying that there may not be any tax payable on the figures being suggested.

MadDog76 wrote: »

This method of calculating Redundancy (bunching together Statutory Redundancy with Ex-Gratia payments) is not the correct, or legal, method and will not be used by any reputable Company/Employer.

I would be interested to know if the figures work out any different. I based my example on a similar one from IT21:

Non-statutory redundancy payment, i.e. the amount paid by your employer, which is over and above the statutory redundancy payment. The non-statutory redundancy payment is also known as a golden handshake or an ex-gratia payment. (E.g. a person receives a lump sum of €20,000, which includes statutory redundancy of €5,000. Of the €20,000, €15,000 is taken into account and the €5,000 is ignored for tax purposes).

for my example given earlier:

a person receives a lump sum of €19,220, which includes statutory redundancy of €6,600. Of the €19,220, €12,620 is taken into account and the €6,600 is ignored.

or

5 years x 4 weeks x €961 = €19,220
of which (10 + 1) * €600 = €6,600 is statutory redundancy (ignored for tax purposes)
€12,620 is ex-gratia

MadDog76 wrote: »

The Company/Employer can pay almost any amount of money in Redundancy they wish (above Statutory) but they must be clear, concise and legal in their calculations whilst keeping Statutory Redundancy calculations and Ex-Gratia calculations transparently separate.

That sounds like you're agreeing with my earlier post

Graham wrote: »

As anything above the statutory redundancy is at the discretion of the company, they're the only ones that can answer this question.

Getting back to the OPs original question, the gist of which is how is the ex-gratia part (above statutory redundancy) going to be calculated.

Nobody can answer that other than the company.