Assuming they meet certain conditions, employees qualifying for redundancy benefits are entitled to notice from their employer and a lump-sum payment, writes Fiona Reddan

THE NUMBER OF redundancies is continuing to increase in Ireland, as worsening economic conditions mean companies cut costs by letting staff go. So far this year, more than 20,000 people have been made redundant in the State - a rise of over one-third on the same period last year. In July, the level of redundancies was up 70 per cent on July 2007.

And there is no sign of any imminent slowdown in the rate of job losses. Halfway through August, major employers such as Pfizer, Rationel and GE Money have all announced redundancy schemes and it seems that there are more in the pipeline.

Only yesterday, workers at motor parts manufacturer Iralco accepted significant job losses as part of a rescue package for the company.

However, for those people who have been made redundant, there are a number of financial incentives on offer.

In Ireland, the entitlements of redundancy are set out in the Redundancy Payments Acts 1967-2007, which determine firstly whether or not you are entitled to redundancy benefits, and secondly how much of a lump sum and what notice period you should be granted.

Not all employees are entitled to statutory redundancy benefits. To be eligible, they must:

Be aged 16 or over;

Be in employment that is insurable under the Social Welfare Acts at any time during the four years prior to the date of redundancy;

Have worked continuously for the same employer for at least two years.

Assuming they meet these conditions, employees qualifying for redundancy benefits are entitled both to notice from their employer and a lump-sum payment.

When it comes to calculating exactly how much notice and payment an employee is entitled to, "continuity of service" - ie, how long you have worked for your employer without a break - is the central factor. Events such as maternity leave or a transfer of business to a new owner do not effect an employee's continuity of service.

Once the length of an employee's service has been ascertained, the notice and lump-sum payment can then be calculated.

For employees with two to five years' service, two weeks' notice will be offered; those with five to 10 years' service will qualify for four weeks' notice. Six weeks' notice is granted to employees with 10 to 15 years service, while those employees with over 15 years will get eight weeks' notice.

In some cases, the employer may agree to make a payment in lieu of this notice.

On the crucial issue of redundancy payments, qualifying employees are entitled to two weeks' statutory redundancy payment for every year of service, as well as one further week's pay.

Payments are based on gross pay, subject to the ceiling of €600 per week, so for statutory purposes, any income higher than that level is disregarded for redundancy calculation purposes. The major benefit of this lump-sum payment is that it is entirely tax-free.

However, many employers offer packages in excess of the statutory requirements, which include ex-gratia payments. These payments can go above and beyond the statutory payment, and usually range from two to six weeks' pay per year of service.

Such payments are taxable, but there are a number of exemptions. The basic exemption is that the first €10,160, plus €765 for each year of service, is tax-free.

Exemptions for ex-gratia payments can also be calculated in another two ways, with the Standard Capital Superannuation Benefit (SCSB) particularly beneficial for those on higher incomes with long periods of service.

Payments in excess of the aforementioned exemptions are taxed at the employee's marginal rate of tax.

David Long, a director with Acumen Trust, recommends that those facing redundancy should get both tax and pension advice. He says that, in the short-term, people should consider putting their lump-sum payment on deposit at a good rate, while those who may be facing unemployment in the medium-term, should look at paying a chunk off their mortgage.

In addition to the lump-sum payment, employees who have lost their jobs may be eligible for social welfare benefits, provided that they fulfil a number of conditions such as being available for full-time work.

The two main types of benefit on offer are Jobseeker's Benefit (JB) and Jobseeker's Allowance (JA).

Employees who will receive a lump-sum payment of less than €50,000 and who have 39 PRSI contributions in the relevant tax year (which is 2006 if you are made redundant in 2008) will be entitled to JB of up to €197.80 a week.

This payment is currently taking over two weeks to process, so you should contact your local social welfare office as soon as you hear you are being made redundant to ensure you receive this payment.

For those who receive more than €50,000 in a lump-sum payment, there is a waiting period of up to nine weeks for JB, depending on the size of the payment. JB is normally paid for 15 months.

The other main benefit is JA, which unlike JB is means tested. This allowance, which is again up to a maximum of €197.80 a week, is normally paid to people who are unemployed but do not have enough PRSI contributions or "stamps" to qualify for JB.

In addition to JB and JA, depending on circumstances, you may be entitled to other social welfare benefits such as a medical card and a fuel allowance.

Homeowners should also check whether they have a mortgage repayment protection insurance policy and whether this will cover their mortgage payments once they have been made redundant.

This insurance, which is not compulsory, meets mortgage repayments for a certain time, usually a year, if the holder experiences circumstances such as sickness or redundancy.

For those interested in calculating how much they might be entitled to in statutory redundancy payments, the Department of Enterprise, Trade and Employment provides a calculator on its website, www.entemp.ie