Benefits - Severance
To qualify for severance pay you must have been working for at least 104 continuous weeks (2years)
To qualify for severance the employee must:
a. be working for at least 104 continuous weeks with the same employer
b. be contracted to work for no less than 21 hours a week
c. be over age 16 and under pensionable age at the time of termination
d. be terminated for redundancy.
The Act requires an employer to make a compensation payment called a severance payment to an employee who is dismissed because of redundancy and who fulfills the other prescribed conditions. It also requires an employer to make such a payment to an employee who has been laid off or kept on short time within the terms of the Act.
Redundancy as defined in the Act arises if:
1. the employer has ceased or intends to cease to carry on the business
2. the employer has ceased or intends to cease to carry on the business in the place at which the employee was contracted to work
3. the requirements of the business for the employee to carry out work of a particular kind has ceased or diminished or are expected to cease or diminish
4. the requirements of the business for the employee to carry out work of a particular kind, in the place at which he was contracted to work ,have ceased or diminished or are expected to cease or diminish.
COMPUTATION OF A SEVERANCE PAYMENT
ONLY the insurable earnings for the last 104 weeks are used to calculate severance.
DEFINITION OF INSURABLE EARNINGS
Insurable earnings refer to the payments on which national insurance contributions are made and they include but are not limited to the following:
Commission on sales or profits on sales
Holiday pay (3/52 parts)
CALCULATION OF SEVERANCE PAYMENT
Date of commencement: August 1st, 1990
Date of termination: September 30th, 2015
Total number of completed years: 25
104 week period: Week commencing September 28th, 2015 to week commencing October 7th, 2013
YEAR WEEKS EARNINGS
2015……39 7, 800.00
2014……52 10, 400.00
2013……13 2, 600.00
TOTAL 20, 800.00
Basic Average Pay – 20, 800/104 = $200
Basic pay or average is $200.00 and the employee worked for 25 years
200.00 x 2.5weeks x 10 years = $5,000.00
200.00 x 3 weeks x 10 years = $6,000.00
200.00 x 3.5 weeks x 5 years = $5, 000.00
Severance due = $14, 500.00
MAXIMUM NUMBER OF YEARS FOR WHICH EMPLOYEE IS PAID
The number of years should not exceed 33 complete years.
EXPLANATION OF TERMS
LAY OFF—a temporary stoppage to work; when things are slow
SHORT TIME—when an employee receives less than half of his normal pay
DISMISSAL—when work of the type for which employee was contracted to do ceases to exist on a permanent basis
LENGTH OF LAY OFF AND /SHORT TIME
After a period of 13 consecutive weeks or a series of 16 weeks within a 26 week period (i.e. weeks off and weeks on) an employee can claim a severance payment.
An employee has 1 year from the date of termination to claim the severance.
In instances of lay –off, short-time and dismissal, employees are advised to visit either the Severance Payments Section of National Insurance Office or their representative.
SEVERANCE PAYMENTS TRIBUNALS
These tribunals have been provided so that employees and employers can have their matters heard.
CLAIMS MADE BY EMPLOYEES TO THE SEVERANCE FUND
After a matter has been decided by the Tribunal in favour of the employee, and the awarded amount is not paid by the employer, the employee can apply to the Severance Fund for the award.
After a severance payment is made to an employee, he/she is entitled to claim a 25 % rebate from the Severance Fund.
The employer has 6 months after the date on which the payment has been made to claim this rebate by completing the form “Claim for Rebate from the Severance Fund.
The necessary documents that must be submitted are listed on the form.