Another Redundancy query..

danoriordan1402

Looking for some advise here on a pending redundancy in the new year for myself - the offer is 6 weeks per year , capped at 2 years which is pretty generous I hear.

so for example would I be right in assuming the 2 weeks statutory would be tax free and so the remaining 4/weeks /year would be taxed at 52%?? I'm just trying to think of ball park figures and decide what to do in the new year but may engage a tax consultant if that was a better option.

For some rough figures and please tell me if I am way wide of the mark - I used the revenue site to work out the statutory portion and for 11 years capped @the 600Euro works out around 13,8840.

so ball park figures 11 years at 4 weeks =44 weeks

Lets say 100k OTE per year

/52

=1923 per week

so 4 weeks x 11 years is 4 x 1,923 x 11 = 84,612

so 13,8840 would be tax free and the 84,612 would be taxed at potentially 52%??

I have never had a lump sum in the past and have a work pension with the current employer, Would the best option to be to look at a superannuation benefit if I wasnt too fused about taking a lump sum out of pension down the road?

Cuddlesworth

If you were on circa 100k per year, you should be looking at a SCSB calculation for redundancy for sure. It would work out at around 65/70k tax free.

Is your offer 2 + 4, where its statutory and 4 weeks pay, or 6 weeks minus the statutory payment to the total?

I wouldn't be looking at taking money out of the pension unless you have to, if anything you should be looking at putting money into the pension to reduce the remaining tax bill unless your hurting for cash right now.

So if you had some remaining AVC percentage from the last 3 years I think, put that amount into the pension. So you don't have to pay the tax on it.

danoriordan1402

https://www.boards.ie/discussion/comment/121522753#Comment_121522753

Thanks, its 2 + 4 as part of the offer, I think I am close enough to the AVC max contribution for my age as I have been adding it in monthly for the past few years thankfully

edit - actually re-reading it again it states the 6 weeks is inclusive of statutory, if that makes more sense. Would the number's above so be approx correct ?

XsApollo

you will be using SCSB calculation.

if you are getting 2 weeks statutory which is capped at 600 + ex gratia 4 week pay then

If the average of your last 36 months wages was 100k you would be entitled to around 73k tax free on the 4 weeks pay.

you will also get the 2 weeks statutory tax free. So around 80k to 85k euro take home tax free if you were on a 100k is my quick calculation.

payment in lieu of notice is taxable also if it’s in your contract.

Cuddlesworth

I'm pretty sure that "6 weeks inclusive" means 4 + 2. So 4 weeks full pay + statutory. Some company's will pay 6 weeks full pay, meaning they won't cap the 2 weeks at 600.

For SCSB, I'm making a assumption that your last 3 years works out to 100k average a year. This is all taxable income, so bonus amounts are included.

(100,000/15)*11.07 = 73,800 Tax free.

Using your math's above.

84,612 + 13,880 = 98,492 Total payment

The following amount would be tax free, 73,800 + 13,880 = 87,680

Of the 10,812 that's taxable, it would usually be the best to just drop it on the pension assuming you hadn't already maxed out your AVC's. Since its in the new year, its also possible none of it gets taxed depending on your job situation. Or just get it and get taxed on it.

I'm not a expert, just went through something similar but I think the general advise is to not pull money out of the pension unless you really need it, like in the case of just being offered Statuary. Not sure if that makes less sense if your already close to retirement though.

Its also worth noting, your not entitled to JSB for 9 weeks. Its only about 2k but its still a stupid rule in my mind,

danoriordan1402

Thanks all - super helpful information above, food for thought when deciding what to do come the new year.