Statutory Redundancy and Termination Lump Sum Payments

A new predefined Ireland Statutory Redundancy payroll element is delivered to record and pay redundancy as a direct payment that is exempt from income tax, Universal Social Charge, and PRSI, with inputs captured manually and reflected on the payslip. Details entered onto the payroll element before processing includes average periodic amount, frequency, years of service, weeks to pay and redundancy date.

For Termination Lump Sum processing, new elements must be created which include the processor, calculator and taxable non taxable elements. Assign the element to an employee via the CIR fields to be populated (including years of service, exemption eligibility, prior tax free amounts and average pay where required) or use manual overrides.

To facilitate the calculation, payment and reporting of statutory redundancy pay and termination lump sum payments.

Steps to enable and configure

Add element eligibility for Statutory Redundancy payroll element.

Create a non recurring element (classified as Standard or Supplemental Earnings) for termination lump sum processing and amend balance feeds and add element eligibility.

Tips and considerations

Statutory Redundancy Considerations:

  • Eligibility checks in the system will warn where employee age is under 16, continuous employment is less than 104 weeks, or PRSI class is not the expected class. These are advisory and require payroll or HR review.
  • If the calculated statutory redundancy run amount is zero or negative, the amount is set to 0 and a warning message is produced; adjust inputs if appropriate.
  • Weekly rate is capped at €600 per week. The formula multiplies the capped weekly amount by the number of weeks payable.
  • Statutory Redundancy is not reported as a separate item on the Payroll Submission (it is a non taxable direct payment).
  • Standard rounding calculations are performed to a minimum of 4 decimal places and rounded to 2 decimal places for pay values.

Termination Lump Sum Considerations:

  • The default lifetime non taxable limit is €200,000. The system considers prior termination lump sums paid to the employee when calculating remaining tax free entitlement. Employers should ensure historical amounts are recorded.
  • The calculation chooses the most beneficial of Basic, Increased or SCSB exemptions. Customers can override computed amounts or select a different exemption type via the employee CIR data where needed.
  • Non taxable and taxable lump sum amounts must be included on the next payroll submission following the date of payment (Data Items 48 and 49).
  • PRSI and USC treatment follows Irish legislation (taxable amount is liable for USC, not reckonable for PRSI. PRSI Class M handling is supported).