Termination pay

Termination pay is taxable in Ireland if you receive any part of it during the year. Ordinary salary and hourly rate employees are not liable to pay any tax on their termination pay. However, employees who receive severance pay (other than weekly or monthly excess pay) are severance pay taxable on their termination pay.

Taxation of termination pay depends on several factors such as notice period, statutory notice period, redundancy amount, and the location of employment. Irish statutory notice periods are measured from the date of issue of the payroll to the employer. Statutory notice period is typically three months but can be extended if the Council of Ireland satisfies the necessity criteria. A common law notice period begins from the day of issue of payroll to the employer and terminates on the last day of the same month.

An employer must give notice before deducting any penalty or additional deductions. In addition, an employee must have the right to make adjustments to his/her termination pay, subject to compliance with prescribed conditions. An employee must make a claim for adjustment of his/her termination pay no later than one year after the termination date specified in the notice. An employee may also adjust their termination pay prior to the expiry of the specified notice period if they meet certain requirements.

Termination pay – How Do Employers Retain Employees?

An employee must not make a claim for adjustment of their termination pay during a judicial review proceeding. If an employee subsequently requests that they be allowed to make an adjustment to their severance or termination pay, the employer must abide by the request. In addition, an employer cannot deduct an adjustment from the final salary until the review proceedings are complete and the employee has delivered a final report in respect of the review. If an employee resigns or is dismissed from their job, the employer must give notice of their intent to make a severance payment to the employee and must then comply with the applicable employment laws.

The main reason an employee may lose their right to receive severance pay is when an employer provides for unpaid leave and the employee does not request that their termination pay be extended. When an employee is offered unpaid leave to cover an illness or extended absence, the employer may provide for up to eight weeks of unpaid leave. If not, the employee may request that their termination pay be made available to them for the period of time they would have ordinarily been paid. If the employer provides for an unpaid leave of less than eight weeks, the employee will not receive any termination pay. Similarly, if the employer provides for more than eight weeks of unpaid leave but does not pay, the employee may ask for an extension.

The above details should assist you understand the process of how your employer may provide for an extension to your termination pay. It is important to remember, however, that the employer may not do so and you will need to take this up with your supervisor. Your supervisor should be able to give you the correct instructions as to how much time you should be allowed to continue working without receiving any termination pay. Extending your notice period can be particularly useful where you are having difficulty maintaining your current salary. You may find yourself unexpectedly being offered a pay rise and it would be appropriate for you to learn how you would be able to continue to work while receiving a pay rise to your previous position. Alternatively you could have a situation where you are unable to return to work due to ill health and as such would be entitled to receiving severance pay for the period you were out of work.