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Ex-Gratia payments are payments made by the employer to the employee in addition to the statutory entitlements above. These Ex-Gratia payments are entirely at the discretion of the employer.

Ex-Gratia payments are not obligatory for the employer. Many employers contemplating redundancy programmes, will be doing so, based on economic criteria or functional restructure, wrongly aimed at securing the viability of the overall business or part of a business. Nevertheless, Ex-Gratia payment as a top-up to minimum statutory payments to employees are very common in Ireland, particularly if all employees are not leaving the business and the cooperation of the remaining work force is required for future productivity etc.

Quite often, additional Ex-Gratia payments are offered to employees as part of an additional voluntary redundancy package or incentive to employees to achieve a reorganisation of the business in tone with the growth or declare in business.

Where Ex-Gratia payments are offered, there is a recognition and concession by Revenue of certain exemption from the payment of PAYE, PRSI and USC as follows;

• Basic exemption (employee with over 2 years-service) = €10, 160 plus €765 for each year of service with the employer.
• SCSB An additional enhanced exemption may be available to be offset against Ex-Gratia payment, based on long service, allowing for an enhanced exemption to be added, giving the employee the option of taking a higher exemption on the Ex-Gratia payment in exchange fir waiving their right to a tax-free lump sum in their pension from that employment.

NB: This is different in every case and depends on the salary over the last 3 years, number of years in the employment and the already accrued tax-free lump sum within a member’s pension in the COS Occupational Pension scheme. Employers should insist that employees considering this enhanced option, evaluate the impact in their pensions in later life if options for this higher lump sum and waiver of future tax-free payments in their pension. Employers should insist on employees taking qualified financial Advice from a Regulated Financial Advisor or referring them to QFinancial.ie who will provide free consultations to all Employer clients employee referrals.

P.I.L.O.N: ‘Payment in lieu of notice’ are in effect, advance payment for the notice period which an employee is entitled to. It will normally be the same as the mutual notice period stated on the employee’s contract of employment or the frequency of payment, in the absence of a contract of employment (i.e. weekly or monthly while PILON payments are eligible for PAYE, PRSI and USC as normal. It is common for the employee to leave service as soon as a practical hand-over of the work function is to take place i.e. employers will usually not insist on an employee ‘working out’ the remainder of their notice.

Employees in Ireland who are more than 2 years in an employment are entitled to 2 weeks normal renumeration plus one bonus week. E.g: 14 years-service: 28 weeks +1 week

29 weeks +€600 = €17,400 nett.

A genuine redundancy can be on the basis of:
-Financial trouble
-Closure of your business
-Re-organising your business to maintain profitability

In order to legally make an employee redundant, an employer must be able to justify that the dismissal meets the conditions of a ‘genuine redundancy’.