Special payment for Covid redundancies

State payment of up to €1,860 for workers laid off due to Covid restrictions will help businesses deal with redundancy costs.

The Irish Government has published the Redundancy Payments (Amendment) Bill, which gives a special payment to employees of businesses who have lost out on reckonable service while they were laid off to Covid-19 restriction.

It said the payment, for workers subsequently made redundant, is capped at a maximum of €1,860 tax-free to bridge the gap in their redundancy entitlements.

“We want to make sure workers don’t lose out on payments and on the other hand, business owners aren’t faced with a flood of additional redundancy cost”

Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar, TD, said 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.

Criteria for special redundancy payment

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.

“This Bill will make sure that people made redundant are not out of pocket because of the period during which they were placed on lay-off due to Covid-19 restrictions,” Varadkar said.

“The Government will step in and provide a special payment of up to a maximum of €1,860 tax-free to compensate for a person’s break in service due to necessary closures to protect public health.

““Throughout the pandemic, we have aimed to save as many jobs and businesses as possible. Part of that was suspending an employee’s right to trigger redundancy, to ensure already struggling businesses weren’t overwhelmed with costs. That provision has now been lifted, and employees can if they wish, seek redundancy if they have been laid off.

“We want to make sure workers don’t lose out on payments and on the other hand, business owners aren’t faced with a flood of additional redundancy costs, just when they’re trying to get back on their feet. This Bill provides the best outcome for both employers and their employees.”

What is reckonable service?

“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.

John Kennedy
Award-winning ThinkBusiness.ie editor John Kennedy is one of Ireland's most experienced business and technology journalists.