Being made redundant is two things at once: a job ending, and a set of financial decisions with deadlines attached. Most of those decisions are made in the first few weeks, often while you are still processing the news — and several of them cannot be undone once you sign. This guide walks through both halves of it in plain English: what you are entitled to, how the tax on a redundancy payment actually works in Ireland in 2026, and what to do with the pension you built up in the job you are leaving.
Reviewed by the advisory team at Greenway Financial Advisors Ltd. · Dublin · Updated August 2026
The short version
Your statutory redundancy payment is completely tax-free — no income tax, no USC, no PRSI — and it does not use up any of your other reliefs.
Anything your employer pays on top of that (an ex-gratia or severance payment) is taxable in principle, but three reliefs can shelter a large slice of it. You get the most valuable one, not all three.
The size of the biggest relief — the Standard Capital Superannuation Benefit — depends on your pension. That is why the payment and the pension have to be looked at together, before you sign the severance agreement.
Your pension does not disappear when the job does. You have up to five options, and doing nothing is one of them — but it is rarely the best one.
First, is it actually a redundancy?
This sounds like a technicality. It is not — it decides whether you are owed a statutory payment at all.
A genuine redundancy is where the job goes, not the person. Your employer is closing down, moving location, cutting headcount, restructuring so your role no longer exists, or replacing your role with something requiring different skills. If your employer fills your old job with somebody else three weeks later, that is not a redundancy — that is a dismissal wearing a redundancy label, and it is worth taking employment law advice on.
Do you qualify for statutory redundancy?
Under the Redundancy Payments Acts, you qualify if you:
- are aged 16 or over;
- have at least 104 weeks (two years) of continuous service with that employer; and
- are in fully insurable employment (paying Class A PRSI, in most cases).
If you have less than two years’ service, there is no statutory entitlement. Your employer may still choose to pay something — and if they do, the tax rules below still apply to it.
How statutory redundancy is calculated
The formula is fixed by law and every employer in the country uses the same one:
Two weeks’ gross pay for every year of service, plus one extra week’s pay — with weekly pay capped at €600.
That €600 ceiling is the part that surprises people. It applies to both the “two weeks per year” element and the bonus week. If you earn €1,200 a week, your statutory redundancy is still calculated as if you earned €600. The ceiling is not indexed and has sat at €600 a week for many years — it is the figure on all current Government guidance as of August 2026.
A worked example. Aoife is 44, has 14 full years’ service and earns €70,000 (about €1,346 a week):
| Step | Calculation | Result |
| Weekly pay used | €1,346 capped at €600 | €600 |
| Two weeks per year | 14 years × 2 weeks | 28 weeks |
| Plus the bonus week | 28 + 1 | 29 weeks |
| Statutory redundancy | 29 × €600 | €17,400 — tax-free |
You are also entitled to notice (or pay in lieu of it) and payment for any untaken annual leave. Those are separate from the redundancy lump sum and, importantly, they are taxed differently — see below.
What if your employer cannot afford to pay?
If your employer is insolvent or genuinely unable to pay, the statutory payment can be made from the Social Insurance Fund through the Department of Social Protection’s Redundancy Payment Scheme. In practice the application needs either your employer’s signature along with evidence of inability to pay, or a Workplace Relations Commission decision confirming the redundancy. Do not let this slide — a WRC claim generally has to be brought within a year of dismissal.
Redundancy payment Ireland tax: what is taxed and what is not
Here is the single most useful thing to understand. A redundancy package is usually made up of several different payments, and Revenue treats them very differently.
| Payment | Income tax | USC | PRSI |
| Statutory redundancy lump sum | Exempt | Exempt | Exempt |
| Ex-gratia / severance above statutory | Taxable, after reliefs | Yes, on the taxable part | No |
| Pay in lieu of notice — contractual | Taxable in full, no relief | Yes | Yes |
| Arrears of salary, bonus, untaken holidays | Taxable in full | Yes | Yes |
Two details worth pausing on. First, the taxable part of an ex-gratia payment does not attract PRSI — Revenue does not treat it as reckonable income for PRSI purposes — but it does attract USC. Second, if your contract of employment promises a payment on termination, that payment is taxable in full and gets none of the reliefs below. A discretionary payment your employer chooses to make is a different animal. The wording in your severance agreement genuinely matters.
The three reliefs on an ex-gratia payment
An ex-gratia payment is taxable in principle, but three exemptions can reduce it. You do not stack them — you get the higher of the Basic Exemption (possibly increased) and the SCSB.
1. The Basic Exemption
€10,160, plus €765 for each complete year you worked for that employer.
For Aoife with 14 full years: €10,160 + (€765 × 14) = €20,870.
Only complete years count. Part-time service counts, and time either side of a career break counts — the break itself does not.
2. The Increased Exemption — a further €10,000
You may add €10,000 to the Basic Exemption, but only if both of the following hold:
- you have not received a termination payment above the Basic Exemption in the previous ten years; and
- you are either not a member of an occupational pension scheme, or you give up your right to the tax-free lump sum from that scheme.
There is a further catch. Any tax-free pension lump sum you have received, or are entitled to receive, is deducted from the €10,000. So if your pension tax-free lump sum is worth €6,000, the increase is only €4,000 — and if it is worth more than €10,000, you get no increase at all. The Increased Exemption can also only be granted once in any ten-year period.
In practice, this relief is most useful to people early in their careers or with very small pension entitlements.
3. The Standard Capital Superannuation Benefit (SCSB)
This is usually the big one for anyone with long service and a decent salary. The formula:
SCSB = (A × B) ÷ 15 − C
A — your average annual pay over the last 36 months of employment (salary, bonus, commission, overtime, benefit-in-kind — everything taxable).
B — the number of complete years of service.
C — the tax-free lump sum you have received, or are entitled to receive, from the pension scheme attached to that employment.
Notice what C does. It is a straight subtraction from your relief. The bigger your pension tax-free lump sum entitlement, the smaller your SCSB, and the more tax you pay on the severance payment. This is the connection almost nobody spots on their own, and it is the reason the payment and the pension have to be modelled together.
Aoife’s numbers
Aoife’s average pay over her last 36 months was €66,000, with 14 complete years of service. Her employer is offering a €50,000 ex-gratia payment on top of the €17,400 statutory redundancy.
Her SCSB before deducting C is (€66,000 × 14) ÷ 15 = €61,600. Here is what happens as C changes:
| Pension lump sum counted (C) | SCSB | Basic Exemption | Relief actually used | Taxable part of the €50,000 |
| €0 | €61,600 | €20,870 | €61,600 (SCSB) | €0 |
| €25,000 | €36,600 | €20,870 | €36,600 (SCSB) | €13,400 |
| €50,000 | €11,600 | €20,870 | €20,870 (Basic) | €29,130 |
Same job, same service, same offer — and a difference of nearly €30,000 in the taxable amount, driven entirely by the pension side. On the middle row, Aoife’s €13,400 taxable slice would cost her roughly €6,400 in income tax at 40% plus USC, assuming her salary for the year has already used up her standard rate band. No PRSI applies.
Can you just give up the pension lump sum to boost the SCSB?
Sometimes — and this is exactly the trade-off to model rather than guess at. Giving up a right to a tax-free pension lump sum in order to enlarge a relief only makes sense if the tax you save is worth more than the lump sum you surrender. Where the pension entitlement is large, it usually is not. Where it is small, it can be. It is an irreversible decision, normally taken at the severance-agreement stage, and it is worth getting the arithmetic done properly before anyone signs anything.
The €200,000 lifetime cap
There is a ceiling on how much of these reliefs you can claim over a lifetime. The Basic Exemption, the Increased Exemption and the SCSB together are capped at €200,000 of relief across all termination payments you ever receive. If you were made redundant before and claimed relief then, that counts against the cap now.
Statutory redundancy does not count towards the €200,000. It sits outside the cap entirely, because it is exempt under a separate provision.
And one relief that no longer exists
You may still see top slicing relief mentioned in older articles and forum posts. It is gone. It was withdrawn for payments of €200,000 or more from 1 January 2013 and abolished entirely for all ex-gratia termination payments from 1 January 2014. If someone is quoting it to you, their information is more than a decade out of date.
Your pension: five options when you leave
Our recommendation for most people leaving an occupational pension scheme on redundancy is to transfer the fund to a Personal Retirement Bond in your own name — ideally with a provider you will still be using in twenty years. It takes the money out of a former employer’s administration, puts you in control of the investment choice, and means one login and one point of contact rather than a scheme you have to chase for a statement every few years.
That said, it is not the right answer for everyone, and a fair comparison of all the options is the only way to know. Here they are.
1. Leave the benefits where they are (a preserved benefit)
If you have at least two years’ qualifying service in the scheme, you are legally entitled to leave your benefits in it. They stay invested and are paid to you at the scheme’s normal retirement age.
For: nothing to do, no charges to renegotiate, and if the scheme has an unusually good investment line-up or low charges, you keep them. Defined benefit members should think very hard before giving up a promised income.
Against: you are a former employee in someone else’s administration. Address changes get missed, statements stop arriving, and schemes get wound up or merged. Every extra pot is another thing to keep track of.
2. Transfer to your new employer’s scheme
Perfectly viable, if the new scheme accepts transfers in — not all do.
For: genuine consolidation, one scheme, one statement. Against: you are moving control from one employer to another. If you change job again in three years you are back where you started. And you are tied to the new scheme’s fund range and charges.
3. Transfer to a Personal Retirement Bond (PRB)
A PRB — also called a buy-out bond — is a policy in your own name, funded by a transfer from an occupational scheme. It is the option we most often recommend on redundancy.
For: it is yours. Full choice of fund, no former-employer dependency, and if you have pots from three old jobs you can hold them all with one provider.
Against — and this matters: one provider is not the same thing as one policy. Each transfer carries its own record of service, salary and lump sum entitlement, so benefits from two different former employers cannot be blended into a single PRB. Three old jobs usually means three bonds. Still better, but not perfect — and worth knowing before the paperwork arrives.
Also against: a PRB is written on the rules of the scheme it came from. It inherits that scheme’s normal retirement age and its early retirement provisions. Transferring does not, by itself, create an earlier retirement date. We cover this in more detail in our guide to transferring and consolidating old pensions in Ireland.
4. Transfer to a PRSA
Possible — but there is a practical blocker. Where an occupational scheme transfers to a PRSA and the scheme is not winding up, a transfer value of €10,000 or more requires an actuary to produce a Certificate of Benefit Comparison. There is no discretion to waive it. It costs money, it takes time, and actuaries will not always sign one.
The realistic summary: PRSA for small pots, PRB for anything larger. If you want the detail on how the product itself works, see our explainer on PRSAs in Ireland.
5. Take a refund of your own contributions
This is only available if you have less than two years’ qualifying service. And it is almost always the worst option on the list.
You get back your own contributions only — the employer’s contributions stay with the scheme — and the refund is taxed at the standard rate of 20% before it reaches you. You are handing back free money and paying tax for the privilege. If you have under two years’ service, transferring the value to a PRSA is usually the better route, and can be done without that tax charge.
Can you just retire now instead?
Sometimes. If you are over 50 and have left the employment, early retirement may be possible — but this depends on the rules of the scheme you have left, not on your age alone and not on which product your money ends up in. Age 50 is the earliest Revenue will permit early retirement benefits; it is not an entitlement, and plenty of scheme rules do not allow it.
If early access is part of your plan, get the applicable retirement age confirmed in writing by the scheme trustees or administrator before you make any decisions that depend on it. Our guide to retiring early in Ireland goes through what that actually costs in giving-up-growth terms.
And if you do draw benefits: the first €200,000 of retirement lump sums across your lifetime is tax-free, the slice from €200,001 to €500,000 is taxed at the standard rate of 20% with no USC, and anything above €500,000 is taxed at your marginal rate. The rest of the fund typically goes to an Approved Retirement Fund or buys an annuity.
Where the payment and the pension collide
Three connections to be aware of, all of which are decided in the same few weeks.
The C in the SCSB. Covered above, and it is the big one. Your pension tax-free lump sum reduces your severance relief euro for euro.
The Increased Exemption gate. A pension tax-free lump sum worth more than €10,000 wipes out the €10,000 increase completely. Below that, it reduces it.
Pension contributions in a redundancy year. If part of your package is taxable, a pension contribution made before you leave — or an AVC — attracts tax relief at your marginal rate, within the age-related limits: 15% of earnings under 30, 20% at 30–39, 25% at 40–49, 30% at 50–54, 35% at 55–59 and 40% at 60 or over, on earnings up to a €115,000 cap. A contribution made after the year end can still be backdated against the previous tax year if it is paid and elected for by 31 October of the following year, with an extended date for ROS filers. Our guide to pension tax relief in Ireland sets out how to claim it.
Careful, though: relief is given against your earnings, and a redundancy year is usually a year with less earnings than normal. This is worth checking rather than assuming.
The cover you lose on the day you leave
This is the most commonly overlooked part of a redundancy, and it is a gap that opens immediately.
- Death in service benefit — typically two to four times salary, paid to your family if you die. It stops when the employment stops. If you have a mortgage and children, this can be the single biggest hole in the household plan.
- Group income protection — the cover that pays a percentage of your salary if illness or injury stops you working long term. Also gone. Replacing it individually is entirely possible, but the premium depends on your age and health on the day you apply, and health changes.
- Group life and serious illness cover — same story.
Worth being clear on one thing: income protection does not cover redundancy. It covers illness and injury. There is no Irish product that pays your salary because you lost your job.
If you take one action from this section, it is this: price replacement cover while you are still employed and in good health, not six months later.
Redundancy and social welfare
This part of the system changed in 2025, and a lot of the advice still circulating online is out of date. If you are losing a full-time job, the payment that matters to you is almost certainly Jobseeker’s Pay-Related Benefit, not the older Jobseeker’s Benefit.
Jobseeker’s Pay-Related Benefit applies to people who became fully unemployed on or after 31 March 2025. Instead of a flat weekly rate, it pays a percentage of what you were actually earning — which for most people made redundant from a reasonably paid job is a materially better outcome.
The bit that matters if you are getting a severance package
A redundancy payment does not reduce, delay or disqualify your Jobseeker’s Pay-Related Benefit. The Department of Social Protection’s operational guidelines state directly that a person who has received a redundancy payment is not disqualified from receiving Jobseeker’s Pay-Related Benefit. There is no lump sum threshold and no waiting period attached to the size of your package.
What Jobseeker’s Pay-Related Benefit pays
If you have at least 260 paid PRSI contributions (broadly five years’ work), the rate steps down over 39 weeks:
| Period | Rate | Weekly maximum |
| Weeks 1–13 (roughly months 1–3) | 60% of gross average weekly earnings | €450 |
| Weeks 14–26 (months 4–6) | 55% of gross average weekly earnings | €375 |
| Weeks 27–39 (months 7–9) | 50% of gross average weekly earnings | €300 |
With 104 to 259 paid contributions the payment is 50% of earnings, capped at €300 a week, for up to 26 weeks. There is a minimum rate of €125 a week in either case.
Your rate is worked out from your average gross weekly earnings over the 12 months up to the 8 weeks before you lost your job, taken directly from Revenue records — so it reflects what you were genuinely earning, including a normal bonus pattern.
Two practical consequences. First, the payment is front-loaded, so the first three months are the most valuable ones and there is no reason to delay claiming. Second, it steps down on a known schedule — which makes it something you can actually plan a household budget around for the nine months after redundancy.
Where the old €50,000 rule still applies
You may come across a rule that a redundancy payment over €50,000 disqualifies you for up to nine weeks. That belongs to the older Jobseeker’s Benefit, which still exists for part-time, casual, seasonal and short-time workers, and for people who do not meet the Jobseeker’s Pay-Related Benefit conditions. If you are in that category and you are under 55, the sliding scale runs from one week at €50,000.01 to nine weeks at €90,000.01 and over, and any disqualification is subtracted from your total entitlement.
If you were already receiving Jobseeker’s Benefit when Jobseeker’s Pay-Related Benefit started, you stay on it until that entitlement ends. You cannot pick between the two schemes — which one applies is determined by your circumstances.
Either way, claim as soon as you finish work, and keep an eye on your PRSI record, because contribution gaps eventually show up in your State Pension. The maximum State Pension (Contributory) personal rate in 2026 is €299.30 a week at age 66.
A sensible order of operations
- Get the offer in writing and read it properly. Ask for the statutory element, the ex-gratia element and the notice element to be set out separately. If everything is bundled into one figure, you cannot check the tax.
- Ask HR one specific question: is any part of this payment provided for in my contract? Contractual payments get no reliefs.
- Get your leaving service options letter from the pension scheme. You are entitled to it. It should set out your fund value, your options and your normal retirement age under the scheme rules.
- Model the tax before you sign — Basic Exemption, Increased Exemption and SCSB, with the pension lump sum figure plugged in. This is the step that changes the number in your bank account.
- Deal with the protection gap while you are still employed and healthy.
- Only then decide on the pension. There is no deadline forcing you to choose in week one, and a rushed transfer is harder to undo than a slow one.
Five mistakes we see
1. Signing the severance agreement before doing the tax arithmetic. The reliefs are calculated on figures that are partly within your control. Once signed, they are not.
2. Taking a refund of contributions because it is the fastest option. You forfeit the employer contributions and pay 20% tax on what is left. It is the most expensive convenience on this list.
3. Assuming the pension can be accessed at 50. It depends on the rules of the scheme you left. Get it in writing.
4. Leaving the protection gap open. Death in service and group income protection end with the employment, and health does not wait for your next job.
5. Spending the lump sum before the tax is settled. If your employer has operated PAYE on the taxable element correctly you should be fine, but errors happen, and an underpayment surfacing the following year is a nasty surprise.
Frequently asked questions
Is my redundancy payment tax-free in Ireland?
The statutory element is completely tax-free — no income tax, USC or PRSI. Anything paid above the statutory amount is taxable in principle, but the Basic Exemption, Increased Exemption or SCSB can shelter a substantial part or all of it.
Does statutory redundancy use up my €200,000 lifetime relief cap?
No. Statutory redundancy is exempt under a separate provision and sits outside the €200,000 cap. Only the Basic Exemption, Increased Exemption and SCSB count towards it.
Do I pay PRSI on a redundancy payment?
No. The taxable part of an ex-gratia termination payment is not reckonable income for PRSI. It is liable to income tax and USC. Pay in lieu of notice and holiday pay are different — they are ordinary pay and attract PRSI in the normal way.
How long do I have to decide what to do with my pension?
There is no universal deadline, and if you have two years’ qualifying service your benefits are preserved until you act. But schemes do get wound up, and short-service refunds have their own time limits — so do not leave it indefinitely.
Can I put my redundancy payment straight into a pension?
Not as a transfer — but you can make a pension contribution or AVC and claim tax relief on it within the age-related limits, which can reduce the tax on the taxable portion. Whether it works in your case depends on your earnings for that year.
Will a redundancy payment affect my jobseeker’s payment?
Not if you are on Jobseeker’s Pay-Related Benefit, which is the scheme that applies to most people losing a full-time job since 31 March 2025 — a redundancy payment does not disqualify you or reduce the rate, whatever its size. The old rule about payments over €50,000 causing a disqualification of up to nine weeks applies to the older Jobseeker’s Benefit, which still covers part-time, casual and short-time workers. Claim as soon as you finish work either way.
What if my employer will not pay?
You can apply to the Department of Social Protection for payment from the Social Insurance Fund. You will generally need either your employer’s signed application with evidence of inability to pay, or a WRC decision confirming the redundancy.
Facing redundancy? Let’s look at the numbers before you sign.
A free initial meeting with Greenway Financial Advisors covers your severance tax position, your pension options and the cover you are about to lose — so you make the decisions once, with the arithmetic in front of you.
We advise employees and professionals across Ireland — see how we help employees and professionals, or, if this redundancy is arriving in your fifties or sixties, how we help people approaching retirement. Greenway is a whole-of-market firm dealing with Royal London, New Ireland, Standard Life, Zurich, Aviva and Irish Life.
This article is general information for the 2026 tax year and is not personal advice. Tax treatment depends on individual circumstances and may change. Figures quoted are correct at the time of writing, August 2026. You should take advice on your own situation before acting. Greenway Financial Advisors Limited. Regulated by the Central Bank of Ireland. Registered No. C168372.