Severance pay deals usually capped at two years, says expert

Negotiations over severance pay are typically capped at two years’ remuneration, an Irish employment law expert has said.

Patrick Walshe, a partner with commercial law firm Philip Lee, said the ceiling reflected the maximum award the Employment Appeals Tribunal can make in the case of an unfair dismissal.

He was speaking in the wake of the controversy over the €2 million severance package agreed with former Irish Farmers' Association (IFA) general secretary Pat Smith. In Mr Smith's case, two years' remuneration would have amounted to just under €900,000.

Service

Former IFA president Eddie Downey, who brokered the deal, gave the impression in an interview on Tuesday that his hands were tied by the State's strict employment law and the entitlements due to Mr Smith after 25 years of service.

“We don’t know if the employee in this case had some additional claims he brought against the company, which might have upped the ante,” said Mr Walshe.

He noted that in the case of a resignation, unless there is a clause in the contract specifying certain terms, the employee has no automatic entitlement to a package.

On whether the deal would stand in the wake of the IFA’s decision to disown it, he said: “If I was an employee and I believed firmly that my employer had entered into a contract with me in good faith – and we had both signed it – I would certainly be looking to the courts to enforce that.”