Redundancy – Legal and Tax Advice on your Settlement Agreement
Many employees in Kildare and Dublin are currently facing the prospect of redundancy. It is a distressing time and the last thing you want to think about is getting legal advice and tax advice. However, it is important to ensure you are legally protected and that any settlement payment is made in the most tax efficient manner.
At Patrick J Farrell and Company LLP, we offer a one stop shop for employment law advice and tax advice. Our employment lawyer Helen Coughlan and tax advisor Emma Farrell work together to help you achieve the best settlement possible. We review the settlement agreement from a legal and tax perspective and represent you during the settlement negotiations. To set up a remote appointment, email firstname.lastname@example.org or email@example.com.
We have represented many employees who have been made redundant, particularly in the finance and tech sectors. At the moment we are seeing redundancies arising the tech sector in particular, with employments being terminated in Meta, Google, Twitter, Intel and Stripe.
Redundancy tax advice
Often, a redundancy will result in a termination payment or a settlement payment to be made under a Termination Agreement. It is very important that the agreement is worded correctly in order to maximise the available tax reliefs for redundancy payments and other types of settlement payments.
A ‘statutory redundancy’ payment is generally exempt from tax. Many employers make an additional ex-gratia payment to an employee in excess of this amount and there are other reliefs that can apply in that instance – the basic exemption, increased basic exemption and Standard Capital Superannuation Benefit (known as SCSB). It is also possible for an employer to pay the legal fees and re-training fees of their former employees in a tax efficient manner.
It is important for your tax advisor to review and consider the tax calculations to ensure that you are getting the benefits of the best possible tax relief. It is also crucial for your tax advisor to review and update the draft severance agreement to ensure that it is consistent with the tax legislation.
Redundancy legal advice
In most cases, it will be a requirement of your employer that you take independent legal advice before signing a compromise agreement on your redundancy, and with good reason. You will be signing up to legal obligations and it is important to understand these and take them seriously. For example, you will often be required to waive any right you have to make a claim against your employer in future. Sometimes your employer will want you to sign up to a ‘non-compete’ clause whereby you agree not to work for a competitor. For tech sector employees in Ireland, this is often unworkable. The agreement could also include clauses about employment references, payment in lieu of notice and clauses prohibiting you from making disparaging remarks about your employer (particularly on social media).