The government recently refused to implement a number of identified public sector redundancies,apparently because of the high cost of lump sum payments of six weeks pay for each year of unemployment. As well,many long service employees are close to retirement,so maybe a financial inducement to take an early retirement would be more economical.
In the case of long serving employees,these high redundancy costs are a major barrier to public sector reform that requires rationalisation of the public sector workforce . Even if everyone agrees on the need for rationalisation,the redundancy costs will largely preclude it.
The solution is to tax redundancy payments at marginal income tax rates that capture a substantial portion of the payments. Maybe the first €20,000 or so could be tax free or taxed at standard rates as a concession for the loss of employment. To those who will say that this is unfair,it is more unfair to tax low and moderate income people to support highly paid public sector jobs that shouldn't exist. And why should redundancy payments be uniquely untaxed in Ireland? Most countries apply taxes to redundancies as far as I know.