# Question re date of redundancy



## cully (20 Jul 2009)

Hi,

Am expecting to be made redundant in the next few weeks. There is a reasonably fair package available for all staff who have been made redundant in the last few months. My question concerns the actual date of redundancy used to calculate:
1) years entitlements unders SCSB
2) years entitlement for service purposes for ex gratia payments
3) statutory payment due.

I have 3 months notice in my contract (with no mention that employer can pay me in lieu of notice period). Company has to date paid people in lieu of notice rather than make them work out their notice period.

My start date was 1st october 2000 and obviously if i could get to 2nd October 2009, I would be entitled to 9 full years for SCSB purposes and also 9 full years for the calculation of ex gratia payment.
However if i am made redundant prior to 2nd October and they pay me in lieu of notice, is my actual date of redundancy 3 months from when they inform me i am to be made redundant or the date i am informed?
Also am i obliged to accept pay in lieu of notice or can i ask to work out my notice period? 

I am fairly certain that for the purpose of calculating statutory redundancy, the date used is the date inclusive of norice period, i.e date of notice plus 3 months.

If anyone can help in this matter, I would greatly appreciate it,

Thanks,

Cully


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## Brendan Burgess (20 Jul 2009)

Statutory redundancy uses years and part of years, so there is very little difference between 8 years and 11 months and 9 years. 

Anyway, the relevant date is the date your notice expires, whether or not you are paid in lieu of notice. 

I am not sure about the SCSB. 

I think that the date your notice expires will be the relevant date for all purposes.

Brendan


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## cully (20 Jul 2009)

Thanks Brendan


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## dockingtrade (20 Jul 2009)

the date is the date you leave regardless of whats paid in lieu.
I have checked this out as I will be 6 weeks short for 15 full years when I get let go yet I'll be paid 6 weeks in lieu at that time, so Im stuck on 14 full years.
(might be kept on a another few months)

Are you correct in using SCSB after only 9 years?

the calc would be:

A= avg total earnings for the last 3 years

(A x 9/15 )   you'd be only getting 0.6 of your average earings from the last 3 years as you tax free amount. Unless its greater than the standard calc.


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## cully (20 Jul 2009)

Dockingtrade,

The reason i had posted was because i had received conflicting answers - seems i am getting them here also!


With regard to SCSB, it is certainly the best option for me - i will irrevocably give up my right to tax free pension lump sum as i am in early thirties and have only 8 years in db scheme - expect to be working for many years yet (though maybe not in the immediate future given the jobs market). Under SCSB should be able to take the first 50k of ex gratia tax free as opposed to approx 27k under the other 2 options

Do you mind me asking where you got the info that the day you leave is the date of termination

Cully


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## dockingtrade (20 Jul 2009)

cully said:


> Do you mind me asking where you got the info that the day you leave is the date of termination


 

Here and HR in my company. Its when you get your last payment which includes time in lieu. After that your off the books, no payslips , not paying prsi etc i.e. your finished work there.


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## cully (20 Jul 2009)

Dockingtrade

See below from page 20 of guide to redundancy; if the termination date on RP50 is the termination date used to calculate statutory redundancy then it would be reasonable to think this date also applies when calculating years service for ex gratia packages and SCSB purposes.

http://www.entemp.ie/publications/employment/2004/guideredscheme.pdf


*Where an employee accepts payment in lieu of notice, the date of termination is deemed to be the date on which notice, if it had been given, would have expired, and this date should be inserted as the termination date on RP50 (Part B).
​*


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## Jano (20 Jul 2009)

cully said:


> Dockingtrade,
> 
> 
> With regard to SCSB, it is certainly the best option for me - i will irrevocably give up my right to tax free pension lump sum as i am in early thirties and have only 8 years in db scheme - expect to be working for many years yet (though maybe not in the immediate future given the jobs market). Under SCSB should be able to take the first 50k of ex gratia tax free as opposed to approx 27k under the other 2 options
> ...



Are you sure about this? AFAIK the calculation for SCSB for you is: 

A= avg total earnings for the last 3 years

(A x 9/15 ) - value of tax free lump sum

You must deduct the amount of the tax free lump sum value on the date of termination of your employment (date you leave). Even if you are not entitled to claim the lump sum if you are too young etc, it still has a value on that particular date which is worked out as if you were going to get it


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## Jano (20 Jul 2009)

cully said:


> Hi,
> 
> 
> Also am i obliged to accept pay in lieu of notice or can i ask to work out my notice period?
> ...


  I think whether you get pay in lieu of notice (PILON) or have to work it out is your employer's call. However, you may be better off tax wise getting paid in lieu. All earned income is taxed under PAYE and you will pay up to your marginal rate. PILON may not be subject to any tax as it is unearned income and considered to be part of your redundancy payment. As such, depending on whether your redundancy payment is or is not subject to tax, it may be tax free, or if using the top slicing method, will most likely be taxed at a much lower rate.


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## JoeRoberts (20 Jul 2009)

Also note that if you are in a DB pension scheme, your pension is normally based on full years of service, hence check if you can get that confirmed.


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## cully (21 Jul 2009)

Jano,

I am fairly certain that once i irrevocably give up my right to take a future tax free lump sum from my current pension, i do not suffer any deduction under SCSB, however i am open to correction.


Joe,
With regard to years service for DB pensions, do you know if it is possible to make additional months contributions if you fall a few months short of an additional years pension contributions? My pension start date was 1st Jan 2001 so if i was made redundant end october could i make two additional months contributions to finish the year?


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## dockingtrade (21 Jul 2009)

Jano said:


> You must deduct the amount of the tax free lump sum value on the date of termination of your employment (date you leave). Even if you are not entitled to claim the lump sum if you are too young etc, it still has a value on that particular date which is worked out as if you were going to get it


 

Are you saying if your pension gives a 25% tax free lump sum on maturity and if  is worth 40K today,  C = 10K?

Then if you waiver this today, you pay tax on the 25% lump sum on maturity? ie if your pension was worth 400K on maturity your future lump sum is 100k and you pay tax on all of it becuse of the waiver now?


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## cully (21 Jul 2009)

Dockingtrade,

See attached tax briefing which may help:

*[7.1.1] Payments on Termination of an Office or Employment or on a change in its Functions, etc. *
*Sections 123 and 201 and Schedule 3, TCA 1997 *​_[FONT=Times New Roman,Times New Roman]*Last Updated December 07 *

*5. Schedule 3 *
[FONT=Times New Roman,Times New Roman]*Lump sums to be taken into account in calculations *
[/FONT]*5.1 *[FONT=Times New Roman,Times New Roman]The amount of the lump sum to be taken into account in the calculation of the addition to the basic exemption and the amount of the standard capital superannuation benefit shall be the aggregate of: 


*(a) the amount of any lump sum (not chargeable to tax) received, and *

*(b) the actuarial value, at the date of termination (or change) of any lump sum (not chargeable to tax) receivable, and *

*(c) the actuarial value, at the date of termination (or change), of any lump sum (not chargeable to tax) which may be received in the future upon the exercise of an option or right to commute part or all of future pension entitlements. *

*In regard to (c) the legislation provides that the actuarial value of the lump sum at the date of termination or change is taken into account in the calculations whether or not the option or right is exercised. *
[/FONT]*5.2 *[FONT=Times New Roman,Times New Roman]Where an individual is entitled [/FONT]*under the conditions or terms of the pension scheme or fund *[FONT=Times New Roman,Times New Roman]to surrender [/FONT]*irrevocably *[FONT=Times New Roman,Times New Roman]his/her option or right to [/FONT]
[FONT=Times New Roman,Times New Roman]commute the future pension entitlements *[FONT=Times New Roman,Times New Roman]and s/he has done so *[/FONT]at the date of termination or change, the amount equal to the value at that date of the lump sum will *[FONT=Times New Roman,Times New Roman]not *[/FONT]be taken into account in the calculations. 
[/FONT]_[/FONT]


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## Jano (21 Jul 2009)

Thanks for the reply Cully, I see you are right about the possibility of irrevocably giving up your right to the lump sum but am puzzled as to why you would exercise your right to do this. I must think some more about it!!


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## JoeRoberts (21 Jul 2009)

With regards to being short 2 mths for a full yrs service, check the definition of service in the trust deed. Pensionable Service may not be from the date you started paying into the pension, especially if you had a probation period at start of employment where you were not payiing into the scheme for say 6 mths. Often this probation period will be counted as pensionable service.

I don't know about buying 2 extra mths to make a full year, maybe try and get it as part of the negotiation of package. But Trustees of scheme will have to agree to this.


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## cully (22 Jul 2009)

Jano,

The reason i am going to waive the right to a future tax free lump sum is to increase my tax free allowance under SCSB. Once i waive the right to a future tax free lump sum i can take 9/15ths of my average salary over the last 3 years tax free - a sum at least double what i could take under basic or increased exemption.Given the increased health levies (4-5%) and income levies (2-6%) that now apply to the taxable element, i believe it makes sense to maximise the untaxable element.

I will just defer my pension and take a deferred annual payment whenever the time comes. I expect to work for another 32 years minimum and will use future pensions to give me a tax free lump sum at retirement (this option may not even exist if the government makes changes in the next budget)


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