Tax treatment of "gratuity"

Hello Folks,

My sister is being given a gratuity (the companys description) by her employer of €13000. I am not familiar with tax treatment of such payments. At present she earns approx €590 gross pw, is single and pays €46 pw into a pension. She has the choice of putting some of the money into the pension or taking the full amount and paying tax on it.
What to do. She will shortly be taking out a mortgage so perhaps any cash in hand is useful now.

Dood.

If it is just a discretionary payment being made by the company, it will be treated as salary and PAYE operated on it.

If the company pays it into a pension fund for her the full amount will be paid in tax free.

She should at least maximise her 20% tax band to €36,400. Based on what you said she is on a gross salary of €30,680 (590x52wks) so your sister has the scope to be paid €5,720 on PAYE and not hit the margial rate of 41%. As the previous poster said she can decide how much she wants to contibute to her pension for 2009 and ask her employer to make that payment out of her lump sum. Based on what you said she contributes €2,392, she should increase that and let the employer pay the lump sum.

I don't understand the previous posters reluctance to earn up to the amount at which the excess is taxed at 41% ...