The tech layoffs in companies such as Twitter and Facebook have made people in the job market feel more anxious. Even people who still have their jobs are starting to feel uneasy.
You may hear in the news that there have been layoffs or redundancies and though they are used interchangeably, there is a difference between layoffs vs redundancy. Let’s explore the differences…
Layoffs and redundancy are similar in that they both involve the termination of employment, but there are some key differences between the two terms.
Layoffs typically refer to the temporary suspension or termination of employment, often due to economic factors such as a decrease in demand for a company’s products or services. In a layoff situation, employees are typically notified that their employment will be terminated, but they may be eligible for rehire at a later date if business conditions improve.
Redundancy, on the other hand, typically refers to the permanent termination of employment due to changes in a company’s operations or structure. In a redundancy situation, employees are not eligible for rehire, as their positions have been eliminated due to factors such as changes in technology or the company’s business model.
Overall, the main difference between layoffs and redundancy is the permanency of the employment termination. Layoffs are typically temporary, while redundancies are permanent.
If you have been recently laid off or you feel like your industry may be affected by the layoffs in Ireland and worldwide, this guide is for you. Learn more about redundancy packages, benefits, and what you can do next.
What is Redundancy?
There are several different types of redundancy, each of which refers to a specific situation in which an employee’s position is permanently eliminated due to changes in a company’s operations or structure.
One type of redundancy is known as “economic redundancy,” which occurs when an employee’s position is eliminated due to factors such as a decrease in demand for the company’s products or services, the closure of a company, or the relocation of a company to another location.
Another type of redundancy is known as “structural redundancy,” which occurs when an employee’s position is eliminated due to changes in the company’s organizational structure, such as the consolidation of departments or the introduction of new technologies.
A third type of redundancy is known as “functional redundancy,” which occurs when an employee’s skills and expertise are no longer required by the company due to changes in the nature of the work or the introduction of new technologies.
Aside from the words layoffs and redundancy, another term being used by the media is severance. So what is the difference between severance and redundancy?
Severance and redundancy are similar in that they both involve the termination of employment, but there are some key differences between the two terms.
Severance refers to the payment or benefits that an employer provides to an employee when their employment is terminated. Severance payments may include a lump sum payment, continuation of health insurance benefits, or outplacement services to help the employee find a new job. Severance is typically offered to employees who have been with the company for a long time or who have been laid off due to factors such as a reduction in workforce or the closure of a company.
Redundancy, on the other hand, refers to the permanent termination of employment due to changes in a company’s operations or structure. In a redundancy situation, employees are not eligible for rehire, as their positions have been eliminated due to factors such as changes in technology or the company’s business model. Redundancy is typically not associated with severance, as the employment termination is permanent and there is no expectation of future employment with the company.
Overall, the main difference between severance and redundancy is the reason for the employment termination. Severance is typically offered in situations where the employment termination is temporary or due to external factors, while redundancy is associated with the permanent elimination of a position due to changes within the company. Something you may be asking is: if I’m made redundant in Ireland, what am I entitled to?
That is something we’ll calculate in the next section.
Average Redundancy Package in Ireland
The average redundancy package in Ireland depends on the number of years you spent with the company and your gross weekly pay.
You are entitled to get a minimum redundancy payment after you have 2 years’ (104 weeks) service in your job. This is known as a statutory redundancy. The statutory redundancy payment is based on a calculation using your pay and your length of service.
The statutory redundancy payment is tax-free. If you get a lump sum as compensation for losing your job, part of it may be tax-free.
Here’s how to calculate a redundancy payment with an example:
Tom served 20 years in his company and his weekly wage was €800. Under this scheme, the gross weekly wage is capped at €600.
Weeks entitled: 41 (2 weeks per year plus 1 bonus week)
Calculation 41x€600 = €24,600
Tax On Redundancy in Ireland
If you receive a statutory redundancy payment, the amount you receive is not subject to taxation, meaning it is completely tax-free. To be eligible for this payment, you must have worked for the company for at least two years after turning 16 and have paid Irish PRSI at a qualifying class.
The statutory redundancy lump sum is calculated based on your years of service and income. Income above €31,200 per year (€600 per week) is not considered in the calculation.
Pension lump sums and refunds may also be eligible for tax-free treatment, with certain limits and conditions applying.
Ex gratia payments from employers may also be tax-free, up to certain limits, depending on the specific circumstances.
What benefits can I claim after redundancy?
If made redundant in Ireland, what else are you entitled to? You may have heard of things such as social welfare payment or job seekers payment after redundancy. Let’s explore those terms and see what they mean…
According to the Citizens Information website, if you have lost your job, you may be eligible for unemployment social welfare benefits. If you have sufficient social insurance contributions, you may be able to receive Jobseeker’s Benefit. If you do not have enough PRSI contributions, you may be eligible for Jobseeker’s Allowance, which is a means-tested benefit. Depending on your circumstances, you may also be eligible for a medical card, GP visit card, and other secondary benefits such as Rent Supplement under the Supplementary Welfare Allowance Scheme.
You can apply for Jobseeker’s Allowance if you are currently receiving Jobseeker’s Benefit and your payment has ended, or if you are only entitled to a reduced rate of Jobseeker’s Benefit and would be better off receiving
Jobseeker’s Allowance (also known as Optional JA). Jobseeker’s Allowance is a means-tested payment, so your income must be below a certain threshold to be eligible. If you are a single parent, you can also apply for Jobseeker’s Transitional payment, which provides support to lone parents with children aged between 7 and 13.
Does income protection cover redundancy?
Income protection is a type of insurance that provides a regular income to individuals who are unable to work due to sickness or disability. The insurance will continue to pay out until the individual is able to return to work, retires, or passes away. Income protection does not cover situations where an individual loses their job due to redundancy.
What happens if a company cannot afford to pay redundancy?
Companies who are laying off employees may do it for various reasons but the most common one is that they may not have enough financial resources to keep the business afloat. So, what happens if your company cannot afford to give you the redundancy pay?
If your company becomes insolvent or they cannot afford to pay redundancy, you are eligible to get payment from the government under the Social Insurance Fund.
Here are the steps you can take:
1. Familiarise yourself with the Welfare Partners service and create an account if you don’t have one yet. To access the service, the employer will need a Department of Social Protection Sub-Cert from Revenue (pdf).
2. For the employer:
a. Complete and submit the online application form.
b. After this, download the completed Employee Declaration Form and send it to the employee by either email or post.
c. Upload confirmation from the employee that the Employee Declaration Form is correct. This should be a physical or digital signature or an email from the employee confirming the information is correct.
d. Upload the ‘Required’ documents and ‘Optional’ documents.
e. Review the declaration in the ‘Application summary’ and ‘Submit application’.
3. For the employee:
a. Coordinate with your employer in getting that form submitted.
b. Provide the necessary signature and documents.
c. Follow up with the employer or on the website if you haven’t gotten a response once all forms have been submitted.
Being laid off is extremely difficult not just financially but also emotionally. Give yourself time to get over the initial shock and assess the situation before you plan your next move. It might be a while since you’ve interviewed, so maybe consider taking an interview course to ensure you are fully prepped. Then, when you’re ready to start applying for new jobs, Recruit Ireland is here for you. Get your cover letter and CV ready, then browse through our list of jobs here on the website and take the next step forward: