RTE report this morning that the Revenue are reviewing 715 redundancies in Aer Lingus 2 years ago. According to the article, the staff made redundant were re-employed a matter of weeks later, so they are questioning the validity of the redundancy.
Why do Revenue Care?
The Employer Impact
Well firstly, The Statutory redundancy payment part of the staff payment is part paid by the state – so while Aer Lingus pay this amount to the employees, they are looking for a rebate of 60% of this from the government. This happens with all statutory Redundancies.
This is what the rte article has focused on, and they reckon there could be millions of euro of a rebate due to Aer Lingus for this – if they can satisfy Revenue that it is a legitimate redundancy.
The Employee Impact
There is also a second implication that affects the employee directly. In this redundancy, staff received not just Statutory redundancy (limited to 2 weeks per year of service, maxed at €600 per week), but received a reported 9 weeks per year of service. If it is not deemed a redundancy, then the employees would need to have paid tax in full on this, as well as PRSI and Health Levy – that adds up to roughly 50% of the deal taken up in tax.
But it is was deemed a redundancy, then you get a good chunk of it declared by Revenue as exempt from tax, which also removes the PRSI and Health Levy charges. On top of that, they would also receive Top Slicing relief, which reduces your tax bill on the taxable portion of the payment.
This would help reduce the tax bill from 50% by at least half, depending on personal circumstances, such as years service.
In Summary
I’m not aware how these redundancies were treated from an employees tax perspective at the time, but if the Statutory redundancy overall cost is estimated at millions for the company, you can be sure that the cost to employees will be greater again.