1. Introduction
The statutory redundancy lump sum under Section 7(2A) of the Redundancy Payments Act 1967 is the principal financial protection for employees dismissed by reason of genuine redundancy. The calculation is mechanical but operates within a complex framework of qualifying conditions, service calculation, and pay calculation.
This article addresses the framework for the calculation of the statutory lump sum, the qualifying conditions, and the practical operation of the weekly pay cap.
2. Legislation and Case Law
Section 7(2) of the Redundancy Payments Act 1967 defines redundancy. The provision identifies five circumstances in which a dismissal is by reason of redundancy: where the employer has ceased or intends to cease to carry on the business; where the employer’s requirements for employees to carry out work of a particular kind have ceased or diminished or are expected to cease or diminish; where the employer has decided to carry on the business with fewer employees; where the employer has decided that the work shall henceforth be done in a different manner for which the employee is not sufficiently qualified or trained; or where the employer has decided that the work shall henceforth be done by a person who is also capable of doing other work for which the employee is not qualified or trained.
Section 7(2A) of the 1967 Act provides the calculation formula for the statutory lump sum. The entitlement is two weeks’ pay per year of continuous service, plus one bonus week. Service is reckonable from the age of 16. The weekly pay used in the calculation is subject to a cap (currently €600 per week).
The qualifying conditions are set out in Section 7(1). The employee must have been continuously employed for at least 104 weeks (two years); must be aged 16 or over; and must have been dismissed by reason of redundancy within the meaning of Section 7(2).
Continuous service is calculated by reference to Schedule 3 of the 1967 Act (and Schedule 1 of the Minimum Notice Act 1973). Periods of leave (maternity, parental, adoptive, etc.) generally count towards continuous service. Periods of lay-off may, in certain circumstances, count.
The weekly pay cap is set by Ministerial Order under Section 4 of the Redundancy Payments Act 2003. The cap has been revised periodically. The cap applies to weekly pay used in the calculation; pay above the cap is disregarded for the purposes of the statutory lump sum, though it may be relevant for any contractual or ex gratia element.
3. Decision
WRC decisions on redundancy payment claims typically focus on whether the qualifying conditions have been satisfied. The continuous service calculation, the existence of a genuine redundancy situation, and the proper calculation of weekly pay are the most common areas of dispute.
On continuous service, the Adjudication Officer will apply the Schedule 3 framework. Periods of leave generally count; periods of dismissal followed by re-employment may, in certain circumstances, be aggregated. The total service is calculated to the date of dismissal.
On weekly pay, the Adjudication Officer will examine the actual pay during the relevant reference period. The standard reference period is the 13 weeks preceding dismissal, but a different period may be appropriate in cases of variable remuneration.
The statutory cap operates as a hard limit on the weekly pay figure used in the calculation. Where actual weekly pay exceeds the cap, the cap is applied and the excess is disregarded for the statutory lump sum. Practitioners should consider whether any contractual or ex gratia top-up is available to reflect the actual pay.
4. Takeaway
For employers, the calculation of the statutory lump sum is mechanical but requires care. The continuous service calculation, the proper application of the weekly pay cap, and the timing of payment should all be observed. The payment should be made at or before the date of dismissal.
Where the employee’s actual pay exceeds the cap, the employer may consider whether a contractual or ex gratia top-up is appropriate. Many employers operate enhanced redundancy schemes that provide more than the statutory minimum.
For employees, the statutory lump sum is the floor of the redundancy entitlement. Practitioners should verify the calculation by reference to continuous service, weekly pay, and the operative cap. Errors in the calculation are not uncommon and may produce material under-payments.
Practitioners should also consider any contractual or collective entitlements that provide for enhanced redundancy payments. The combination of statutory and contractual entitlements is the operative figure for the overall redundancy payment.
5. Further information
This article was prepared for informational purposes only. For further advice, please email enquiries@crushell.ie or contact the offices of Crushell & Co Solicitors.
6. About Crushell & Co
Crushell & Co is a specialist law firm focused on protecting and advancing the rights of employees in Ireland. We offer a nationwide service, advising individuals on a wide range of legal and regulatory issues arising at work, including employment law, employment immigration and workplace accidents and injuries.
We help employees understand their position and options by translating complex legal issues into clear, practical advice. Our approach is tailored to each client, ensuring that our strategy is aligned with their personal and professional circumstances.
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