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Severance & Settlement (Compromise) Agreements

Our Employment Team has extensive experience advising both employers and employees on all aspects of severance packages and settlement agreements (previously known as compromise agreements).

Within Ireland, only employees with two or more years of continuous service are entitled to redundancy or severance pay. In addition, if you are considering asking for employees to volunteer to take redundancy, voluntary severance pay may be owed.

It is important to ensure any severance package offered in writing is accurate and reflects the legal rights of the employee as per the Redundancy Payments Act 1967. Procedural errors made during this process can lead to claims of unfair dismissal.

Our Redundancy & Severance Pay Expertise

Whether you’re an employer exploring your legal obligations or an employee facing redundancy or invited to consider a voluntary exit, Lavelle Partners can provide clear, practical advice at every stage of the process.

For Employers: We guide you through the correct legal and procedural steps for offering severance or redundancy packages.
For Employees: We’ll review the terms of any severance agreement, explain the implications, and negotiate on your behalf if needed to ensure your best interests are protected.

We’re here to help you make confident, informed decisions about your future — or your business.

Cross-Team Legal Expertise for Severance Agreements

As a full-service law firm, Lavelle Partners brings together legal specialists across multiple practice areas to support the drafting and negotiation of severance and settlement agreements. These agreements often involve more than just employment law — especially where shareholdings, bonuses, restrictive covenants or ongoing commercial relationships are involved.

Our Employment Solicitors work closely with colleagues in Corporate & Commercial, Litigation & Dispute Resolution and Property to ensure your agreement is watertight, compliant and aligned with your broader legal and business interests.

Our Partnership with Talbot Pierce

To provide a fully integrated service, Lavelle Partners works closely with Talbot Pierce, a team of specialist HR professionals. Together, we support employers with:

Conflict resolution and workplace investigations
HR strategy, policy development, and change management
Best-practice support in managing voluntary and compulsory redundancies

A Severance Package is a compensation bundle awarded to an employee upon being laid off from a company. The value of the severance package is usually based on the length of employment prior to termination. The receipt of a severance package is contingent upon signing a severance agreement.

Severance Payment Requirements

As a minimum, employees must, provided they have completed at least two years’ service, be paid a statutory severance payment, which is calculated as two week’s pay for every year of service, and one further week’s pay. This is paid tax-free but is capped at €600 per week.

An employer may, however, agree to pay more than the statutory amount, perhaps in the form of a lump sum, or ex-gratis payment which may in part be free of taxation.

Calculating a Severance Payment

When calculating an employees total length of service, there may be an adjustment made for absences from work, but this only applies to time off work in the last three years and should only reflect non-reckonable service, including:

Any period over 52 consecutive weeks where an employee was off work due to an injury at work
Any period over 26 consecutive weeks where an employee was off work due to illness
Any period on strike
Any period of lay off from work

No other absences can be included to reduce an employees length of tenure, and hence an employees redundancy payment.

Voluntary Severance pay differs from redundancy pay, in that it reflects compensation for voluntarily leaving your position – i.e. it is mutually agreed between you and your employer.

Some employers, rather than impose redundancy on some members of staff, will ask for volunteers to leave the organisation given a financial incentive.

Unlike redundancy payments, voluntary severance pay is taxable and you may not be entitled to Jobseeker’s allowance – as in essence, you chose to leave your paid position.

For staff members with two or more years of continuous service, as a minimum, employers must pay a statutory severance payment; calculated as two week’s pay for every year of service, and one further week’s pay. This is paid tax-free but is capped at €600 per week.

At an employer's own discretion, an employer may agree to pay more than the statutory amount, perhaps in the form of a lump sum; this is referred to as an ex-gratia payment.

When calculating each employee’s total length of continuous service, an employer may make adjustments for absences from work. It is important to understand and apply the rules precisely for reckonable and non-reckonable service. Failure to do so may lead to an incorrect calculation of severance pay, and a claim of procedural error. Non-reckonable service (which does not contribute to the period of service) includes:

Any period over 52 consecutive weeks where the employee was off work due to an injury at work
Any period over 26 consecutive weeks where the employee was off work due to illness
Any period on strike
Any period of ‘lay off’ from work

Voluntary severance pay differs from redundancy pay as outlined above, in that it reflects compensation if an employee voluntarily leaves their position – i.e. it is mutually agreed between you and the employee.

If you do offer the option of voluntary redundancy, it is important that any employee who accepts the financial incentive understands that it will be taxable and they may not be entitled to Jobseeker’s allowance.

Need Advice on a Severance or Settlement Agreement?

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Why Choose Lavelle Partners for Severance & Settlement Agreement Advice?

Our Employment Law Team, led by Partner Marc Fitzgibbon — ranked Band 2 in Chambers and Partners Europe 2024 Guide for Employment: Mainly Plaintiff— has over 35 years of experience advising both employers and employees in complex employment matters.
We are specialists in reviewing and negotiating settlement and severance agreements, ensuring our clients understand exactly what they’re agreeing to and what rights they may be waiving. Whether you’re exiting your role voluntarily or through redundancy, we’ll help you secure the best possible outcome.
Our employment solicitors are known for being pragmatic, proactive and business-focused — always combining legal precision with commercial awareness.
We also understand the personal and financial stress that often accompanies redundancy or a negotiated exit. You can expect empathy, confidentiality, and determined advocacy throughout the process.
As a full-service law firm, our clients benefit from a multi-disciplinary offering. We regularly collaborate with colleagues in Corporate & Commercial, Litigation & Dispute Resolution, and Property to ensure that every aspect of your agreement — from share options to non-compete clauses — is considered and properly protected.