Whether payments under a transaction agreement are taxable or not depends on what the payment relates to. A set of layoffs in a settlement agreement typically includes various contractual and non-contractual elements, some of which may be subject to income tax and others exempt from tax. The tax position of termination packages is complex, so this answer offers only a summary. The nature of the event that leads to the termination of the employment relationship is another factor that can further complicate the tax situation. The employer should first accurately identify any payments made as part of the redundancy package and then take into account the tax provisions that would apply to it.