Redundancy and Holiday Pay

My wife is currently on paid maternity leave from her employer which ends early next month. She has now been given the option of taking voluntary redundancy from early January.

The redundancy scheme provides that she will be entitled to holiday pay in respect of her outstanding accrued holiday entitlement (about 20 days).

As her severance date is not until early January she would therefore be able to use up all of her outstanding leave before then if she returns to work from maternity leave next month.

My question is whether she would be better off:

(a)returning to work from maternity leave early next month and then immediately taking all of this leave during the coming month thereby getting paid and taxed in the normal PAYE way or

(b)commencing unpaid maternity from early next month until the severance date in early January thereby getting the holiday pay on top of her redundancy payment?

In essence I suppose my question is under which of these two options would she be paid more net?

Holiday is taxed as normal irrespective of redundancy. What you need to consider is what if any impact the budget will have on her tax situation when making your decision. Also, as it is near year end, has she hit the PRSI ceiling this year. If she has it will be more beneficial to use the leave now.

Thanks very much for that. This raises a further question.

For 2010 it is our intention that we will be taxed as a married couple and as the sole earner I will claim all allowances, reliefs etc. Therefore am I correct in assuming that she would be better off returning to work (and the payroll) from maternity leave early next month and then using up all of her outstanding leave (thereby getting the benefit of her 2009 allowances) rather than being paid in early 2010 for her holiday days not taken (seeing as in 2010 her holiday pay will be taxed without the benefit of any allowances)?

You say she's on paid maternity leave- if it's by the employer then she will already have been getting the 'benefits' due I think. In 2010 she can put in a P21 for the state maternity part if it was paid to her employer and taxed as normal (the state part should be untaxed).
She could take all her unpaid leave, parental leave at employers discretion and holidays for this year and whatever holidays she accrues in that period next year, making her 'employed' for another few months and having the benefits of all her leaves? Then she will have longer service and few more months PRSI records? (Not much admittedly).
When she becomes redundant in 2010 she will lose some of her tax allowances as not all are transferable between spouses. Best of luck.

Thanks Micheller.

During her maternity leave she has been paid in full by her employer who in turn directly claimed back whatever amount is payable from Social Welfare. Her paid maternity leave ends in the first week of December. The severance date for redundancy purposes will be first week in January.

Therefore, as she is due about 20 holiday days it seems to me that she should go back to work in early December and get back on the payroll and then immediately start using up her holidays between then and the severance date. (Her employer will seemingly allow her to go back offically for pay purposes even if she won't actually be there as she will be using up her holidays).

Am I correct in assuming that from a net pay point of view this would be better than having holiday pay added to her redundancy payment as this will be taxed in 2010 when she will have no allowances and reliefs.

Charlo said:

Thanks Micheller.

During her maternity leave she has been paid in full by her employer who in turn directly claimed back whatever amount is payable from Social Welfare. Her paid maternity leave ends in the first week of December. The severance date for redundancy purposes will be first week in January.

Therefore, as she is due about 20 holiday days it seems to me that she should go back to work in early December and get back on the payroll and then immediately start using up her holidays between then and the severance date. (Her employer will seemingly allow her to go back offically for pay purposes even if she won't actually be there as she will be using up her holidays).

Am I correct in assuming that from a net pay point of view this would be better than having holiday pay added to her redundancy payment as this will be taxed in 2010 when she will have no allowances and reliefs.

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She will have tax credits in 2010, she can't transfer all of these to you.

It's in her interest to move as much of this possible income into 2010 so that she can use some of her tax credits / PAYE credit for 2010 to minimise the total tax paid. So she should not return to paid employment (or take those holidays) until then.

I agree with Circle- much more succinct
If she can she should use unpaid leave- 16wks and not at employers discretion to be employed into 2010.

Thanks Circle and Micheller.