Timing of redundancy payment and regulatory leave requirement

H

HiroPro

New Member
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Hi all,

I am being made redundant on 31/12/2022. Independent tax advice will be arranged by the company but not until a few weeks before termination and I need to make some decisions in the next week based on tax impact.

I have two questions:
  1. In the following scenario, will I be paying more tax?
    • Assume that I do not work / pay no PAYE in 2023. It seems to me that I’ll pay PAYE on the full whack of my 2022 wages + redundancy package and then won’t get the tax benefit in 2023 (the taxable portion of my severance will all be at the higher marginal rate). Whereas if I was paid my redundancy in early 2023 (and didn’t work for the rest of the year) I’d save a lot of tax (taxable portion of severance will be on the lower marginal rate of tax)
  2. I work in financial services and there is a regulatory requirement that employees must take 10 continuous working days of leave in a calendar year (it is related to fraud prevention). I have not yet taken these 10 days and would prefer to be paid for them on termination rather than be forced to take them. Am I still required to take those 10 days even though I am being terminated? My employer says yes, but I am trying to do my own research rather than taking their word at face value.
Thanks
 
HiroPro said:
  1. I work in financial services and there is a regulatory requirement that employees must take 10 continuous working days of leave in a calendar year (it is related to fraud prevention). I have not yet taken these 10 days and would prefer to be paid for them on termination rather than be forced to take them. Am I still required to take those 10 days even though I am being terminated? My employer says yes, but I am trying to do my own research rather than taking their word at face value.
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I suspect you have answered your own question here.
 
T McGibney said:
I suspect you have answered your own question here.
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Sorry, I should rephrase that. I think there is a regulatory requirement but I haven't been able to find it yet. All I have is company policy now which may or may not be enforceable. Also the fact that I am being let go may / may not affect this requirement
 
The timing is unfortunate if you don't intend to work for the following year alright but one slight bonus is that your *Dole which you are entitled to 9 months of will be tax free.

*or whatever ya call it nowadays
 
@HiroPro , is there any room to negotiate with the company on the effective date. Depending on the size & the amount of Folks impacted you might be able to appeal to the Company's better judgement on pushing it a week or so.
 
The redundancy document outlines the termination date, and I was verbally informed there is no wiggle room, so I don't know if there is room for negotiation (I could ask but my instinct says they'll say no). Based on my calculations I'd be losing out on about €10-13k net by receiving it in 2022, rather than 2023. Seems a bit crazy to me that I lose out on that because of the timing of the payment, so I was hoping I was wrong on that.

I was only given a week to sign the agreement so it's a bit of a rush to try and make sense of it all. It says if I don't sign by the deadline then I only get statutory.

By the way I discovered that the 10 continuous working days for leave requirement is a company policy and not a regulatory requirement, so I was hoping for some wiggle room on that too seeing as though it would equate to an extra €3k or so if I can take the leave as pay instead. I'm wondering if they can force me to take the 10 days if I don't want to? They say I have to but if it comes down to it I wonder if they can enforce it?

Seems like a lot for me to figure out in a short amount of time!
 
HiroPro said:
it would equate to an extra €3k or so if I can take the leave as pay instead
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Net of tax ? If you're on the higher rate you'd be mad in my opinion not to take the hoildays. Also take them immediately so you can take time to get advice on all this. The tax savings are only if you don't work in the following year so unless you plan on retiring or taking a long break it's not that useful. Either way take a weeks holiday now and think about it. Also consider putting some of it into your pension to avoid the tax.
 
elcato said:
Net of tax ? If you're on the higher rate you'd be mad in my opinion not to take the hoildays. Also take them immediately so you can take time to get advice on all this. The tax savings are only if you don't work in the following year so unless you plan on retiring or taking a long break it's not that useful. Either way take a weeks holiday now and think about it. Also consider putting some of it into your pension to avoid the tax.
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€3k net of tax if I take the holidays as pay instead of taking the time off work, so I don't want to take the time off and take the money instead. I've already maxed out my pension contributions. And I plan on starting my own business so I could be earning very little or nothing next year which is why I want the package to be paid in 2023.
 
I may be made redundant on 31st December 2023 but have been informed that redundancy payment would be made in mid January 2024.

Based on latest Tax Manual, Part 05-05-19, Section 4, Amount Chargeable to Tax The balance of any lump sum taxable under section 123, which exceeds the available exemptions, is chargeable to tax as income in the year of assessment in which the termination of the employment occurs. However, for 2018 and subsequent years, any income tax to be charged in respect of these payments is chargeable at the time the payment is made.

Does this confirm that lump sum would be part of 2024 tax year, in this case?
 
I think so, as 2018/2019 is when the Revenue and PAYE system changed to Real Time Ie you’re taxed at the time of payment.
it is important to know your actual termination date, as the next day is when you can start any social welfare claim for JSB etc
 
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