Redundancy in Ireland: What You Need to Know (2025/2026 Guide)
Being made redundant is stressful enough without also having to untangle Ireland's rules on entitlements and tax. This guide walks through statutory redundancy, how enhanced ("ex-gratia") payments are taxed, what happens to PILON and unused holiday pay, and how to claim Jobseeker's Benefit afterwards.
1. Statutory Redundancy
If you've worked for your employer continuously for at least 2 years (104 weeks), you're legally entitled to a statutory redundancy payment.
How it's calculated:
2 weeks' pay for every full year of service
Plus 1 additional week
Weekly pay is capped at €600, even if you earn more
So if your actual weekly pay is below €600, that lower figure is used; if it's above €600, only €600 counts.
Is it taxed? No. Statutory redundancy is entirely tax-free — no Income Tax, PRSI, or USC applies, regardless of the amount.
2. Enhanced (Ex-Gratia) Redundancy Payments
Many employers pay more than the statutory minimum. This top-up is usually called an ex-gratia or enhanced redundancy payment, and — unlike statutory redundancy — it's potentially taxable.
Revenue lets you shelter part of it from tax using whichever of the following three exemptions gives you the best result. You can only use one at a time, and there's a lifetime cap of €200,000 on tax-free ex-gratia payments across your career.
a) Basic Exemption
€10,160, plus €765 for each full year of service
Available to everyone; not reduced by any pension lump sum
b) Increased Exemption
The Basic Exemption plus up to an extra €10,000
Only available if you haven't received a tax-relieved redundancy payment in the last 10 years
Reduced euro-for-euro by any tax-free pension lump sum you've received or are entitled to receive
c) Standard Capital Superannuation Benefit (SCSB)
Usually the most generous option for long-serving, higher-paid employees
Formula: (average annual pay for the last 3 years × years of service ÷ 15) − any tax-free pension lump sum
This last point is where a lot of people trip up: if you're entitled to a tax-free lump sum from your pension, you can choose to waive that entitlement to boost your SCSB exemption today (Option B below uses the full formula with nothing deducted). This doesn't change the value of your pension — only whether you can still take a tax-free lump sum from it in future. Because that trade-off is permanent, it's worth getting advice before deciding.
3. PILON — Payment in Lieu of Notice
If your contract lets your employer pay you instead of having you work your notice, that's PILON. The tax treatment depends on whether it's contractual or non-contractual:
Contractual PILON (your contract specifically allows for it) is treated as normal employment income and taxed through payroll in the usual way — it doesn't qualify for any of the exemptions above.
Non-contractual (discretionary) PILON may be treated as part of the ex-gratia payment and can potentially benefit from the Basic, Increased, or SCSB exemption.
Check your contract, or ask your employer/adviser, to confirm which applies to you.
4. Unused Holiday Pay
Any accrued annual leave you haven't taken by your termination date must be paid out — and this payment is taxable in full as normal income. It doesn't qualify for the redundancy exemptions.
5. Claiming Jobseeker's Benefit After Redundancy
Once you're made redundant, you may be able to claim:
Jobseeker's Benefit, or
Jobseeker's Pay-Related Benefit (for people with higher previous earnings)
To qualify, you must:
Have sufficient PRSI contributions
Be available for work
Be actively seeking employment
If you took voluntary redundancy, you may face a waiting period of up to 9 weeks before payments start, depending on the redundancy payment you received. If you were made compulsorily redundant, you can generally apply straight away.
Apply via MyWelfare.ie or through your local Intreo office.
Worked Example 1: Statutory Redundancy
10 years of service
Weekly gross pay: €1,000 (capped at €600)
Calculation: (2 × 10 years) + 1 = 21 weeks 21 × €600 = €12,600, tax-free
Worked Example 2: Ex-Gratia Payment with SCSB
Annual salary (2025): €52,000
Service: 15 years
Ex-gratia redundancy payment: €45,000
Tax-free pension lump sum available: €20,000
Step 1 — Basic Exemption €10,160 + (€765 × 15) = €21,635
Step 2 — SCSB Average pay over the last 3 years: €49,000 + €50,000 + €51,000 = €150,000 ÷ 3 = €50,000
Option A — retain right to pension lump sum: (€50,000 × 15 ÷ 15) − €20,000 = €30,000
Option B — waive right to pension lump sum: (€50,000 × 15 ÷ 15) = €50,000
Step 3 — Compare SCSB beats the Basic Exemption under either option, so SCSB is used.
Step 4 — Tax on the remaining balance (using Option A, €30,000 exempt) €45,000 − €30,000 = €15,000 subject to tax
AmountIncome Tax (40% marginal rate)€6,000USC (illustrative 8% top rate)€1,200PRSIExemptTotal tax€7,200After-tax balance€7,800
Net payment received: €30,000 (tax-free SCSB exemption) + €7,800 (after-tax balance) = €37,800
Note: the exact USC rate depends on your total income for the year and which USC band the taxable portion falls into — this example assumes the top rate applies. A tax adviser or Revenue's own calculator can confirm your precise figure.
Key Takeaways
Statutory redundancy is a legal entitlement once you have 2+ years of service, and it's always tax-free.
Ex-gratia payments are taxable, but the Basic Exemption, Increased Exemption, or SCSB can shelter a meaningful chunk — use whichever gives the best result.
PILON is only tax-free-exemption-eligible if it's non-contractual; contractual PILON is taxed as normal income.
Holiday pay is always taxable in full.
Jobseeker's Benefit may be available afterwards, though voluntary redundancy can mean a short waiting period.
If you're weighing whether to waive your tax-free pension lump sum to boost your SCSB exemption, remember that decision is permanent — get advice before you commit.
This guide is for general information only and isn't a substitute for personalised tax or financial advice. Figures reflect the rates in force for the 2025/2026 tax year — speak to a qualified adviser about your specific situation.