Best way to receive pay off from work?

I was 'let go' from my job last week. At the meeting where they told me to leave they said they would pay me three months salary.

I received a letter today from my employer and they have paid me July's salary and given me the extra two months as a bonus! Thats what it says on my wage slip, which means I have paid 42% tax on it! surely this is not right? the letter states:

As Agreed, your payment is as follows:

Your salary to 31st July 2006.
Annual Leave Payments - holiday accrued to 31st July is 5 days.
Two months ex gratia payment of base salary.

Is there a better more tax efficient way to recieve this money? they won't pay me as normal for the next three months because it will bring me over the 12 month threshold and then I can claim unfair dismissal.

What are the implication for them if they pay it as redunancy? I am assuming there are some other wise they would do that for me. I don't trust them at all.

Can I claim the tax back? is there anyting I can do here?

Thanks

Emily

Emily,

This is not a redundancy situation - redundancy can only be "invoked" if the company can show that the job itself is no longer necessary. This is not the case in your situation so it is a severance payment which is classed as income and is taxed accordingly.

If you go straight into another job from this one and there are no gaps in your payments then you cannot reclaim any tax.

However, if there is a gap between getting your last paycheck with this company and receiving the next one you will be able to reclaim from the Revenue at year end or your new employer will tax you less so that you use up your full amount of tax allowances.

I probably haven't explained this very well so feel free to ask more questions.

This should be treated as a termination payment by the comp0any. You would be entitled to receive a basic of €10,000 + €765 for each year of service tax free - see www.revenue.ie. Look up leaflets, individuals income tax - leaflet IT21

Ned

I don't believe you are correct on this. Emily is not being made redundant she has been fired. She is being offered an additional two months salary as an ex-gratia payment as compensation for this.

See this link here for full discussion around circumstances of dismissal

Without going through the whole discussion in detail I see where you are coming from efm. However, surely some of the payment would relate to pay in lieu of notice - maybe not.

oops- continuation...

I have had cases before where the meployuee was "sacked" and the final salary etc was put through as a termination payment.