Understanding Termination Payments
People leave their jobs every day for various reasons; some because of Redundancy, but others because of personal reasons.
Termination payments can be paid when an employee leaves employment. It does not have to be a redundancy situation. It’s important to understand the most efficient way of paying employees a Termination Payment.
The tax free exemption limits for employee’s receiving termination payments are €10,160 plus an additional €765 for each complete year of service. Any termination payment received since January 1st 2011 is subject to a total life-time tax free limit of €200,000. This exemption can be applied over an employee’s lifetime from different employer’s on a number of different occasions provided the employers in question are not connected or associated with each other.
Where an employee receives termination payments from the same or associated employers, they are treated as a termination payment from a single employer. An employee can receive the additional tax free payment on top of their statutory redundancy payment up to the limits outlined above.
Understanding the conditions affecting the taxable elements of payroll makes for a more efficient business. Why pay more tax than necessary? In addition, your employees will benefit by ensuring their net take home pay reflects their personal circumstances. If you would like to discuss your payroll requirement with our team of payroll professionals, contact us for a consultation on how Paycheck Plus can manage these areas of payroll for your organisation.
Chelsea is an Irish Payroll Association accredited payroll processor. She was nominated for Payroll Student of the Year at the 2021 Global Payroll Awards. Since joining Paycheck Plus’ graduate programme in 2020 she has gone from strength to strength and is now a vital part of our payroll team providing services for client’s who have Irish payroll outsourcing requirements.