The Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar today published the Redundancy Payments (Amendment) Bill, which gives employees who have lost out on reckonable service while they were on lay-off due to Covid-19 restrictions, and have subsequently been made redundant, a special payment of up to a maximum payment of €1860 tax-free to bridge the gap in their redundancy entitlements.
A worker does not have to have been in receipt of any form of State payment, such as the PUP or jobseekers, during the lay-off period, although they could have been. The criteria are simply that the person qualifies for redundancy in the usual way and was laid off because of Covid restrictions during the emergency period.
Under the existing Redundancy Payments Acts, periods of lay-off in the final three years of service do not count as reckonable service. This means that in the case of redundancies now arising, where the qualified employee may have been on Covid-19 related lay-off for protracted periods, through no fault of their own or of their employer’s, their redundancy entitlement will not factor in those periods.
The provisions of the Redundancy Payments (Amendment) Bill will plug that gap, through a direct payment from the Social Insurance Fund. The payment will ensure that the employee being made redundant will receive the same total redundancy payment as though they had not been laid off during the pandemic.
The amount an eligible worker will receive will depend on the length of time they were placed on lay-off due to Covid-19 before the date they were made redundant. The calculation for the payment is based on existing statutory redundancy provisions. The maximum to which any employee will be entitled is €1,860 if they earned in €600 or more a week and were laid off for the full emergency period.
The Department of Social Protection is working on the necessary administrative systems to provide for the application and payment processes. It is expected payments will become operational in the first half of this year.
In the normal course of events, employers are liable for the cost of lump sums on statutory redundancy, and this continues to be the case. However, the cost of this additional payment covering Covid-19 related lay-off periods will not be imposed on employers, because the pandemic-related restrictions were outside of their control. Furthermore, if the cost were imposed on them, that could endanger the viability of some businesses which would otherwise be able to recover.
What is Reckonable Service – Employees
“Reckonable service” is the service that is taken into account when calculating a redundancy lump sum payment. In general, a qualifying employee is entitled to 2 weeks’ pay per year of service, plus an additional week, capped at €600 weekly pay. As it stands, a period of lay-off within the final three years of service before redundancy is not allowable as reckonable for the purposes of the calculation of this payment. It is the employers’ responsibility to pay statutory redundancy payments in the first instance.
Reckonable service is a separate and distinct matter from the qualification threshold. An individual must meet statutory qualification criteria to be eligible to receive a lump sum.
In light of the extensive periods of lay-off some people will have experienced during the pandemic emergency period, this may have a significant impact on their redundancy entitlement if they are made redundant within the next three years. This Bill will enable an exceptional additional payment to be made from the Social Insurance Fund to employees to cover lay-off periods which were due to Covid-19 restrictions, with no cost imposed on the employer.