Guide
Is redundancy taxable in Ireland? Statutory, ex gratia and SCSB
Updated
The statutory lump sum is never taxed. Everything an employer adds on top follows its own rules, and they are worth understanding before you sign.
Statutory redundancy: tax free
The statutory lump sum, two weeks per year plus the bonus week at the €600 cap, is exempt from income tax, USC and PRSI in full (Citizens Information). It does not use up any of the exemptions below (Revenue: lump sum payments).
Ex gratia payments: the exemptions
- Basic exemption
- €10,160 plus €765 for each full year you worked for the employer. Fifteen years' service shelters €10,160 + €11,475 = €21,635 of an ex gratia payment from income tax (Revenue: basic exemption).
- Increased exemption
- A further €10,000 on top of the basic exemption, available where you have not received more than the basic exemption in the previous ten years and you are either not in an occupational pension scheme or give up your right to its tax-free lump sum. Any tax-free pension lump sum you are due is deducted from the €10,000, and the increase can be granted only once in ten years (Revenue: increased exemption).
- SCSB (Standard Capital Superannuation Benefit)
- An alternative relief: one fifteenth of your average annual pay over your last 36 months, multiplied by your full years of service, minus any tax-free pension lump sum received or receivable. Use whichever of SCSB or the basic exemption is higher (Revenue: SCSB).
- Lifetime ceiling
- Tax-free ex gratia termination amounts are subject to a €200,000 lifetime limit across all employments (Revenue: basic exemption).
A worked example
Ten years' service, average salary €50,000, employer offers €20,000 ex gratia on top of statutory. Basic exemption: €10,160 + (10 x €765) = €17,810, leaving €2,190 taxable. SCSB: €50,000 x 10 / 15 = €33,333 minus any tax-free pension lump sum; with no pension lump sum the SCSB relief exceeds the payment and the whole €20,000 is tax free. USC and PRSI generally follow the income tax treatment of the taxable portion.
The €10,160, €765, €10,000 and €200,000 figures were read from Revenue's lump sum payments pages at this page's updated date. Confirm your own position with Revenue or an accountant before agreeing a package. This is general information, not tax advice.