Redundancies are part of a working life these days. Tech, pharma, finance and consulting workers can go from being indispensable to unemployed in a matter of weeks when shareholders pressure companies to respond to ever-shifting forces. One minute you’re leading a critical project, collecting bonuses and enjoying workplace perks, the next you’re sitting in a meeting with HR discussing your exit.Instagram owner Meta announced it was cutting 350 roles, or 20 per cent of its Irish operations, in May. That followed 150 job losses at tech giant Oracle in April. There were between 300 and 325 cuts at Amazon’s Irish operations in January. Industry sources say they are seeing a steady flow of “silent” redundancies – a company isn’t required to notify the Government of its plans where under 30 staff are let go. You can’t control whether your role is cut, but you can be prepared. Having a plan can cushion the blow, strengthen your negotiating position and ensure you walk away with the best possible package.Severance packageA severance package can usually be broken down into three elements. The first includes things like holidays you haven’t been paid for, or pay in lieu of a notice period. “It’s the only time you must be paid for holidays you have not taken. Normally you are obliged to take them and can’t be paid in lieu,” says Caroline Reidy, head of HR solutions at NFP.Maybe you have a bonus due, too. All of these payments go through as a normal salary payment. If you are earning over €44,000, this is going to be taxed at the top rate.The second element is the statutory redundancy payment – this is the minimum an employer must pay, but it only applies to staff who have been working for the company for two years or more. This part is tax-free. It equates to two weeks’ gross pay for each year of your service, plus another one week gross pay. The weekly pay, however, is capped at €600. So even if you have a big salary, this will equate to €1,200 multiplied by your number of years of service, plus €600. [ ‘I got a €10,000 bonus. What’s the smartest thing to do with it?’Opens in new window ]The third element is an ex gratia redundancy payment. This bit isn’t a given – it’s paid at your employer’s discretion. An ex gratia payment of a number of weeks’ pay per year of service as a lump sum would be typical, but companies do various things.Meta is reported to be offering departing employees 16 weeks, or four months of pay, health insurance coverage for 18 months, immigration assistance and access to three months of assistance in finding a new job. There can sometimes be wiggle room to negotiate a higher ex gratia payment, says Reidy.“Some people will have contributed a huge amount to the organisation, they might have significant length of service, or have had quite a unique role meaning it will take them longer to find a commensurate job. They might be in a position to make a case for why they should be getting an enhanced package,” she says.“Worst-case scenario, they are going to say no, but they might say yes. And if they do say no, then ask them to pay for financial advice for you. I would try to negotiate an outplacement support with CV and interview assistance too.”Ex gratia payment and taxPart of an ex gratia payment is tax-free and part can be taxable at your marginal tax rate. There are three ways to determine the tax-free part under Revenue rules.The first is the “basic exemption” – this is where you are entitled to €10,160, plus €765 tax-free for each year of service. The second is the “increased exemption”, where an extra €10,000 may be claimed if you haven’t received any redundancy payments in the past 10 years, you’re not a member of an occupational pension scheme, or you waive your right to a tax-free lump sum from your pension scheme relating to that employment.Finally, there’s the Standard Capital Superannuation Benefit (SCSB) – this is a tax relief that is best suited to workers with longer service or higher earnings. Your employer will typically crunch the numbers for you and the highest answer will determine how much of the ex gratia payment is tax-free.If when calculating the tax-free part of your ex gratia payment the increased exemption or the SCSB is giving the highest tax-free payment, going this route can mean waiving your right to any future tax-free pension lump sum associated with the specific employment that is paying the redundancy. [ ‘I am witness to a will and worried something could spark dispute. Do I get involved?’Opens in new window ]So, the employee has to tick either option A to waive their right and take more of their redundancy payment tax-free now, or else tick option B and retain the right to take a tax-free lump sum from their pension on retirement and, in turn, take less of their redundancy payment tax-free now.It’s a case of deciding, do I want more tax-free now or later?You might think you should take as much as you can tax-free now, but you can end up shooting yourself in the foot down the line, particularly if you have a decent pension.Where the pension amount with your employer is small, however, it might make sense to waive the right to the retirement lump sum for that part of your pension and to take more tax-free now as it won’t have a big bearing on your pension.“It’s hugely important, particularly for older workers, to get individual advice on the tax-free cash exemptions for redundancy and how they interact with your tax-free cash options when it comes to your pension,” says Tom McLoughlin, a financial planner with Imperius Wealth.We are definitely finding redundancy isn’t as generous as it used to be— Caroline Reidy“There tends to be just a blanket, don’t waive your right to future tax-free cash from your pension, but we believe it’s a bit more nuanced than that. Especially if you are at a certain age.“Before signing it, get someone to evaluate the two circumstances as they relate to you. People invariably don’t get individualised advice and it’s a pity in a lot of circumstances is all I would say.”It can come down to cash flow, too. If you don’t have savings and are concerned about being out of work for a long time, you may need to prioritise other things.“We are definitely finding redundancy isn’t as generous as it used to be. Now two weeks, plus two weeks is more typical,” says Reidy.Redundancies are affecting a younger cohort, says Nick Charalambous, managing director of Alpha Wealth. “It used to be people with longer service, in their 50s typically, but recently its people in their 30s and 40s and payments are smaller,” he says. For those earning salaries north of €70,000 or €80,000, it’s not uncommon to see payouts of over €100,000, says Charalambous.“Once you take into account a possible lesser future salary, and six to 12 months looking for a new job, that money can quickly go, so it’s important to get advice,” he says. When you come into a big lump sum, there will be plenty to spend it on. Projects like doing up the house can seem possible. “I always say to people, be conservative in your estimates of how long it will take you to get that new job,” says Charalambous. A new role could mean less flexibility to work remotely too, which can impact on other household overheads. Pension boostIf your role is being made redundant, try to make pension contributions before you go, says Charalambous.“You can’t do it when you leave the company, and you could find yourself in a period of six to 12 months where you have no contributions,” he says.He encourages departing staff to max out their tax-free thresholds for the current and previous year with additional voluntary contributions before they leave. Unless you use the generous tax relief on contributions for those years, you will lose them.If you’re on €50,000 and are in your 40s, you can pay 25 per cent, or €12,500 into a pension. The €12,500 goes into your pension where it can grow tax-free, but it only costs you €7,500 as you get €5,000 back in tax relief.“Most people wouldn’t have contributed anywhere near that, so if you have the capacity, use some of your redundancy money for your pension to give you that 40 per cent tax relief and make up for the pension shortfall over the coming months,” he says. Financial advice can help you strike the right balance between cash flow, pension or paying down debt, says Charalambous. Bear in mind, your potential to borrow when you are not working will be compromised.McLoughlin says: “Optimise the amount you are getting and once you get it, be careful in evaluating your options for how to use it. Don’t do anything rash.”