Redundancy Tax Calculator Ireland: Cut Your Tax Bill

If you’re facing redundancy in Ireland, your statutory lump sum is completely tax-free — but the ex-gratia portion can be taxed up to 40% unless you use the right exemptions. This guide breaks down the three official tax relief methods and shows you how to calculate exactly what you’ll owe, so you can keep more of your payout.

Statutory redundancy tax treatment: Fully tax-free ·
Basic Exemption formula: €10,160 + €765 per year of service ·
SCSB formula: (Average annual pay × years of service) / 15 – Capital value of pension ·
Increased Exemption lifetime cap: €200,000 ·
Maximum weekly pay for statutory calculation: €600 ·
Tax rate on excess ex-gratia: Marginal income tax (up to 40%) + USC + PRSI

Six key figures define how your redundancy tax is calculated, from the weekly pay cap to the lifetime exemption limit. Here is the breakdown in a single table.

What this means: the biggest leverage in your tax bill comes from picking the right exemption — not just relying on the statutory cap.

How much tax will I pay on a redundancy payout?

How statutory redundancy is taxed

Statutory redundancy — the legal minimum your employer must pay — is completely exempt from income tax, USC, and PRSI. According to the Workplace Relations Commission (Ireland’s employment rights body), the payment is based on two weeks’ gross pay per year of service (capped at €600 per week) plus one extra week. Because it’s tax-free, you don’t need to declare it on your tax return.

How ex-gratia payments are taxed

Any amount paid above the statutory minimum — known as an ex-gratia or enhanced redundancy payment — is taxable in principle. However, Revenue (Irish tax authority) confirms that termination lump sums may qualify for tax relief through one of three exemption methods. The portion that exceeds the applicable exemption is taxed as income at your marginal rate (up to 40%), plus USC and PRSI.

Example: tax on a €30,000 redundancy payout

Take an employee with 10 years of service and a gross weekly pay of €700. Statutory redundancy = (2 × €600 × 10) + (1 × €600) = €12,600 — all tax-free. If the employer offers a total package of €30,000, the ex-gratia portion is €30,000 – €12,600 = €17,400. Using the Basic Exemption (€10,160 + €765 × 10 = €17,810), the entire ex-gratia is covered, so no tax is due. This example follows the Revenue basic exemption guidance.

How do you calculate redundancy pay in Ireland?

Statutory redundancy calculation formula

The Workplace Relations Commission sets the formula: 2 weeks’ pay for each full year of service (from age 16 to 66) plus 1 additional week’s pay. The weekly pay used in the calculation is capped at €600, even if your actual weekly wage is higher. Periods of voluntary absence (e.g., career breaks) do not count toward service.

Enhanced redundancy and ex-gratia payments

Many employers offer enhanced redundancy packages that exceed the statutory minimum. This ex-gratia amount is negotiated individually and is not subject to the €600 cap. According to Citizens Information (official public service information), the terms of enhanced redundancy are a matter of contract between employer and employee.

Using the MyWelfare redundancy calculator

The MyWelfare (Department of Social Protection) redundancy calculator provides an estimated statutory redundancy amount based on your service and weekly pay. It does not calculate tax on ex-gratia payments or apply any of the exemption methods.

If you’re comparing different Irish tax tools, also check the Free VRT Calculator by Reg which follows a similar principle for vehicle registration tax — understanding one Irish tax tool helps with another.

How do I calculate tax on redundancy?

Step 1: Determine taxable ex-gratia amount

Ex-gratia = total redundancy payment minus statutory lump sum. For example, if your total package is €50,000 and statutory is €12,600, the ex-gratia is €37,400. Only this portion is potentially taxable. The statutory part remains tax-free regardless (Workplace Relations Commission).

Step 2: Apply the most beneficial exemption

Revenue’s basic exemption is €10,160 plus €765 for each full year of service. The SCSB (Standard Capital Superannuation Benefit) formula is: (average annual remuneration × years of service) ÷ 15 minus the capital value of any pension lump sum taken. The Increased Exemption (KPMG International) adds up to €10,000 to the basic exemption, subject to a €200,000 lifetime cap and certain conditions (no tax-free lump sum in previous 10 years, no pension lump sum exceeding the extra amount). You can choose the method that gives the highest exemption.

Step 3: Compute tax on remaining balance

Any ex-gratia amount that exceeds the chosen exemption is taxed as ordinary income: PAYE at your marginal rate (up to 40%), plus USC (up to 8%) and PRSI (4%). Revenue’s PAYE and PRSI guidance explains how these deductions apply to termination payments.

The implication: getting the exemption right is critical — amounts above the exempt portion are fully taxable, as noted by KPMG (global tax advisory firm).

How to reduce tax on redundancy payments?

Choosing the right exemption method

The three methods — Basic, SCSB, and Increased Exemption — can produce very different results. For a long-serving employee with a high salary, SCSB often yields the largest exemption. For most others, the Basic or Increased Exemption is simpler. IrishTaxHub (specialist Irish tax calculator) lets you compare all three methods side by side.

Using pension contributions to lower tax

Contributing part of your ex-gratia to a pension can reduce your taxable income. Revenue allows certain pension contributions to be deducted from your total income in the tax year. This strategy is particularly effective if you are close to retirement and can use the money to top up your pension fund without immediate tax.

Timing your redundancy for two tax years

If you are made redundant near the end of a tax year (October to December), you may be able to split the payment so that part falls in the current year and part in the next. This allows you to claim the Basic Exemption in each year, effectively doubling it. According to Citizens Information, careful timing can significantly reduce your overall tax liability.

The pattern: each tax-saving strategy trades immediate relief against long-term flexibility — align your choice with your expected career path.

Is statutory redundancy capped in Ireland?

The €600 weekly pay cap

The weekly pay used in the statutory calculation is capped at €600, as confirmed by the Workplace Relations Commission. Even if your actual weekly wage is €1,200, the formula uses €600. This cap applies to the statutory minimum only — enhanced redundancy payments are not limited by it.

Maximum statutory redundancy amount

For 40 years of service (the maximum considered), the statutory redundancy is (2 × €600 × 40) + (1 × €600) = €48,600. This is the most you can receive as a tax-free statutory lump sum. The Citizens Information page confirms that service is counted from age 16 up to 66.

What happens to pay above the cap

If your actual weekly pay exceeds €600, the difference is not lost — it simply does not factor into the statutory calculation. However, if your employer offers an enhanced package, they may choose to use your actual salary to calculate the ex-gratia element. That ex-gratia is then subject to tax relief via the exemption methods (Revenue).

The implication: even with a high salary, your statutory entitlement remains capped. But the ex-gratia can be structured to maximize tax relief, often resulting in a better net outcome than taking a simple uncapped payment.

“The statutory redundancy payment is calculated as two weeks’ gross pay per year of service plus one additional week, subject to a weekly pay ceiling of €600.”

Workplace Relations Commission (Ireland’s employment rights body)

“This calculator will show an estimated statutory redundancy amount that may be due.”

MyWelfare / Department of Social Protection (official government calculator)

“Free Irish redundancy and termination payment tax calculator. Calculate statutory redundancy, compare all three tax exemptions, and get your net take-home.”

IrishTaxHub (specialist Irish tax calculator site)

“Statutory redundancy is fully tax-free and ex-gratia can qualify for exemption up to €200,000.”

Fairstone (Irish insurance and financial advisory)

For anyone facing redundancy in Ireland, the choice is clear: understand your exemptions before you accept a severance package, or risk paying more tax than necessary. Whether you use the Basic Exemption, SCSB, or Increased Exemption, running the numbers with a calculator — or a professional — can save you thousands. The worker who plans ahead keeps more of their redundancy in their pocket.

While this calculator handles Irish redundancy tax, you can also compare UK redundancy pay tax rules to see how exemptions differ across jurisdictions.

Frequently asked questions

Related reading: Minimum Wage Ireland 2026 Rates — understand the pay floor that underpins redundancy calculations.