Dáil Éireann debate -
Wednesday, 13 Mar 1974

Vol. 271 No. 2

Redundancy Payments (Weekly Payments and Lump Sums) Order, 1974: Motion.

Minister for Labour (Mr. M. O'Leary):

I move:

That Dáil Éireann approves the following Order in draft:—

Redundancy Payments (Weekly Payments and Lump Sum) Order, 1974,

a copy of which Order in draft was laid before Dáil Éireann on 11th March, 1974.

My authority to make this order, following approval of the draft by each House, is contained in sections 19 (3) and 30 (3) of that Act. The order I am putting before the House contains three proposals. The first of these provides for an extension of weekly payments in the case of older workers and the second and third are relevant to certain provisions in the Social Welfare Act, 1973 and the Social Welfare (Pay-Related Benefit) Act, 1973.

My first proposal deals with the case of workers who become redundant after the age of 51 years, especially those who have given long service with the same employer and who often find it more difficult to obtain new employment than a younger person whom employers might regard as more adaptable, more easily trained and even less susceptible to illness. To these practical difficulties may be added the adverse psychological effects of redundancy on the morale of the somewhat older worker.

In order to help these workers who so often find it difficult to obtain alternative employment, I propose, as from 1st April, 1974, to extend the duration of weekly payments by adding one extra weekly payment for each year of service over the age of 51 years. From that date a redundant worker will receive one weekly payment for each year of service between the ages of 16 and 41 years, a rate of two weekly payments for each year of service between the ages of 41 and 51 years and three weekly payments for each year of service after that age. I estimate that this improvement will increase the overall cost of weekly payments by about 8 per cent. Deputies will appreciate of course that these payments are made from the Redundancy Fund which is sustained by statutory contributions from employers and workers.

My second proposal contained in this order arises from the forthcoming operation of the Social Welfare (Pay-Related Benefit) Act, 1973. Under the present arrangements a redundant worker is paid weekly payments from the Redundancy Fund equivalent to 50 per cent of his pre-redundancy pay, the length of such payments depending on his years of service. These weekly payments are made in addition to unemployment benefit or other Social Welfare benefits. The law provides however that the total of all such payments must not exceed 90 per cent of the worker's pre-redundancy pay and the weekly redundancy payment element is reduced where necessary in order to keep the overall total payment within the 90 per cent limit.

As from 6th April next a weekly pay related supplement will be paid by the Department of Social Welfare in addition to unemployment benefit, and in these circumstances the retention of the limit of total weekly payments from all sources to 90 per cent of pre-redundancy pay would in many cases further decrease the redundancy element, especially in the case of lower paid workers with many dependants. As a counterbalance to this I propose to abolish the 90 per cent limit and to substitute a 100 per cent limit, in other words to get away from the previous limit of 90 per cent of wages before redundancy. Deputies will appreciate that this proposal, in conjunction with the new Social Welfare pay-related scheme, will take us into entirely new territory and I cannot at present estimate accurately what increased cost, if indeed any at all, will fall on the Redundancy Fund over, say, the next 12 months.

My third proposal arises from the effects of an order under section 12 of the Social Welfare Act, 1973, abolishing the £1,600 a year income limit for insurability for non-manual workers as from 1st April. The basic situation is that the persons eligible for redundancy payments are those who are insured for all benefits under the Social Welfare Acts. This means that the abolition of the non-manual income limit for social welfare purposes will bring into the redundancy payments scheme a large number of persons hitherto outside the scope of the scheme. The figure is estimated at around 35,000. Many of these will be higher paid workers, possibly with long service, who will only now start to contribute to the redundancy fund, the rate being three pence a week for men and two pence a week for women.

The contribution is a flat rate one, irrespective of income and the persons in question will be in benefit immediately they start contributing. It could happen, therefore, that numbers of higher paid workers, if they become redundant, would cause a heavy drain on the redundancy fund by reason of their entitlement to large redundancy payments following very modest or almost token contributions to the fund. It is relevant to mention here, that early last year it was necessary to borrow £295,000 from the Exchequer to keep the fund solvent.

I am glad to be able to say that this loan has been repaid as a result of increased contribution rates introduced last July and a downward trend in the number of redundancies in 1973, namely 7,504 in 1973 as compared with 10,159 in 1972 and 8,556 in 1971. During the coming year, despite external economic difficulties, it is possible and I believe it will be achievable, that we will keep the rate of employment advancing and the rate of unemployment at a low level. Accordingly, I am proposing that that part of a worker's income exceeding £2,500 a year should be disregarded in calculating redundancy entitlements as from April 1st next. This cut-off point of £2,500 a year, is the same as the ceiling set for benefits under the social welfare pay-related scheme.

I recommend the resolution approving the proposed Order to the House.

Mr. Moore:

Could we have a copy of the Minister's speech? We have not got the details.

Mr. M. O'Leary:

I would not call what I have just said here a speech. This is becoming an obsession with members of the Opposition. These are just the proposals.

Mr. Haughey:

The Minister is a bad-tempered little fellow. He is not very courteous.

Mr. Brennan:

I welcome some of the proposals. The Minister did not say to what extent the fund is in credit at present or whether any addition to the staff will be necessary as a result of the change in the payments which are being made. He will no doubt tell us when replying if any increase is necessary. The 1967 Redundancy Payments Act, which the first Minister for Labour, my predecessor, Dr. Hillery, brought in provided for a 50 per cent limit. In the 1971 Amendment Act I raised that to 90 per cent. The Minister, now, in order not to belittle the benefits of the pay-related benefits scheme, which I brought in when I was Minister for Labour, is arranging that 100 per cent will be payable under the various schemes. If I remember rightly the Act provides where any reduction was made in relation to the payments which brought one up to 90 per cent at that time, and now to 100 per cent, the social welfare payments were not to be reduced. Therefore, it must be the redundancy payments that are reduced to keep within the 100 per cent.

Will the 100 per cent limit that is now imposed only apply for the duration of the redundancy pay ments? That may be a superfluous question to ask because when the redundancy payments stop the other payments must necessarily go on. They will not be reduced in any event in order to keep the person in question down to the 100 per cent.

This can hardly be called a social welfare payment because it is administered by the Department of Labour under the Redundancy Acts 1967 and 1971. Previously Ministers tried to avoid the 100 per cent payment because it was always thought that an unemployed person should not be as well off as he could be if he was employed. There was a very strong disincentive there for somebody drawing weekly redundancy payments, if he was receiving 100 per cent of his previous income, to accept employment if he was offered it. It is not likely that a redundant worker would worry too much about securing alternative employment if he was drawing benefit of 100 per cent of what his previous payments were.

Mr. M. O'Leary:

The Deputy has a pessimistic view of human nature.

Mr. Brennan:

These are things which require certain checks which would ordinarily be applied. I was frequently reminded that the Government do not pay this money out of their own pocket, that they take it from the people paying taxes. In this case they take it from the people who are contributing to the social insurance fund and the redundancy fund. The 100 per cent payment for the duration of the redundancy weekly payment, which is not very long because it is governed by the number of years for which the person was employed prior to becoming redundant, is something which nobody will begrudge workers. When I brought the limit of 50 per cent to 90 per cent it was considered very welcome. The only reason why we did not bring it to the 100 per cent was that it was not regarded as socially desirable to pay in benefit 100 per cent of one's prior total income.

The Minister has taken quick action to ensure that all the people who are now insurable will not be entitled to redundancy payments. He has set a ceiling of £2,500. I do not know if that is a realistic ceiling. I am sure many people, who realised they would become insurable when the £1,600 limit went, felt that one of the greatest benefits available to them was the redundancy payments. There will, unquestionably, be more people disappointed to find there is a limit set and that they will not be in a position to secure anything. Will those people over £2,500 income have to pay the redundancy element of the stamp which is paid in respect of the redundancy scheme? It would not be fair to ask them to contribute to the stamp if they do not benefit from the scheme. They would be paying into a scheme out of which they were not qualified to receive anything. The Minister has not stated when one reaches that limit if the redundancy payment element in the stamp will discontinue. The redundancy figure of 10,159 in 1972 was reduced to 7,504 in 1973. It was very near to our estimate. The Minister will find that our estimate was a bit better. He did not give an estimate for 1974 but he was hopeful that the redundancy figure would not be greater than the 7,000 for last year.

When I brought the amendment to the 1967 Act before the House there was a surplus of approximately £1 million in the fund at the time. Deputies on both sides urged me to do much more with regard to improvements in the scheme. We doubled the benefits available under the 1967 Act in that we reduced the qualifying period and extended the time for payment and the amount, particularly for those over the age of 41 years. The Minister has now made special provision for those over 51 years. I think I am correct in saying a redundant worker is entitled to two weeks' payment for every three years worked in respect of a lump sum, and a person over 41 years is entitled to two weeks for each year which he worked over the age of 41. The Minister proposes extending that to three weeks for each year worked over 51 years. If a worker is rendered redundant when he is over the age of 51 years he is entitled to that extra payment and I welcome any improvements made in this matter. At this point workers are rapidly moving towards superannuation benefits.

One of the principal weaknesses in the Redundancy Act that was evident when we brought it in was that in certain cases it could be used to the benefit of the worker. Many workers nearing the age of 65 would like to be made redundant when they are 64 years. In this way they are able to draw redundancy payment and to get a pension in the following year. If they work for the last year they are retired in the normal way with no redundancy money. If the Minister checks on this matter he will see that a large number of workers become redundant at this point, thereby qualifying for both payments.

Some of the workers I have in mind are those engaged in forestry work where there is considerable redundancy because less money is being devoted to forestry. The Minister will find that much of the redundancy money paid at the moment is paid to forestry workers in rural Ireland, particularly round the western seaboard where employment is most needed. In such cases, workers who have given long service and who are nearing the age of retirement are made redundant and can qualify for superannuation and redundancy payments. When redundancies are inevitable consideration is given to young men with families who need to build up their contributions in order to qualify for payments later. I am not deprecating the fact that the redundancy scheme may be "abused" in this respect; it is only fair that those who will suffer the least hardship should be selected for redundancy. However, it might be considered that the scheme is not being used for its original purpose and that the spirit of the Act is not being considered.

The improvements for those over the age of 51 are welcome. As the Minister pointed out, it will not involve much payment out of the fund. The fact that the pay-related benefit scheme is being added to the Principal Act is a necessary technical change and is to be welcomed.

The fact that a limit of £2,500 has been set will be a disappointment to many who thought they would benefit under one of the best schemes we brought in. I do not know if the Minister examined the position before he set the limit of £2,500. I am sure he has done some costings on it but there are many people at that scale of salary whose family circumstances are such that they would not be very well off it rendered redundant. To take part in the pay-related benefit scheme might be of great assistance to them but not to qualify for the lump sum under redundancy must be a big disappointment. It is true these people have not been paying into the fund. I did ask the Minister if they would be excused the contribution necessary to qualify for payment out of the fund. Apart from the £2,500 limit the other two changes are beneficial and an improvement on existing legislation, legislation of which I have always been very proud because I have seen the benefits of it in so many cases.

As a result of our entry into the European Economic Community there are bound to be changes in industrial employment. Industry will change and there will be a good deal of movement. Those concerned will be entitled to some benefit when they find themselves in a less suitable type of employment perhaps. Under the Act they qualify for redundancy in most cases and that is the greatest protection any worker could have.

I am sorry this is not being extended to those in the higher income bracket because if inflation goes on at the rate at which it has been moving over the last year or so £2,500 will not be a very big income for a man with a family. For that reason the Minister might review the position in a year—he or whoever replaces him—and, as the Act empowers him to do, extend the limit. There is a vast difference between a single man with £2,500 and a married man with the same income and six or seven children. The circumstances are very different. There could be very grave hardship in the case of a married man with a large family.

This is not a controversial matter. These improvements can be made under existing legislation. There could even be disimprovements from time to time for that matter. When the income limit was raised for insurability I was wondering what the Minister would do in this particular connection. He has nailed the income at £2,500. I hope he will have a look at that figure in the near future to see whether or not it is too low.

Mr. Moore:

I welcome the improvements. May I say the Minister has been too modest in not making available to us a copy of his opening statement? It is very often easier to interpret the written statement and I hope that on the next occasion we will be treated with a little more courtesy.

The limit is 51 years. I am sure the Minister has good reasons for this limit but I suggest he might have another look at it because there is a kind of compulsory redundancy now at 40 years of age. Many employers and most local authorities will not employ a man over 40. Could the Minister give us an estimate of the cost of an extension? We will not cavil at the money. He should be honest with the people whom we intend to benefit and not just say to workers that here are certain improvements and then let them discover they have to pay for them. We should spell it out that we are giving new benefits and their fellow workers may have to pay for them.

Is this in line with EC policy? Does our legislation measure up to that of Germany, France, Britain and the others? I do not think it is right that the person on the £2,500 income should have to pay the full redundancy contribution each week but be denied the full benefit of the scheme. This should be amended forthwith. As a result of the recent agreement many workers will now be over the £2,500. These will pay the same contribution as those under the £2,500 limit and they will be paying for something they will not get. Because inflation is so rampant—I do not blame the Minister for that— the limit should be very elastic. I look forward to the time when there will be no limit. Inflation makes a mockery of limits.

How does the fund stand at the moment? Is it being drained because of redundancies or is it in a healthy financial condition? I hope the Minister will be able to tell us that redundancies are not increasing and that the fund is in a sound position.

Minister for Labour (Mr. M. O'Leary):

Deputy Moore and, I think, Deputy Brennan raised a question about the solvency or creditworthiness of the fund at present. One could say that the fund at present is something like £129,000 in credit; current account £54,000; investment fund £75,000. Obviously, one cannot give any absolutely accurate prediction about the state of the fund over the next 12 months in terms of the proposals made today in this order because the finances available to the fund and its general creditworthiness depend on factors outside the control of the fund. It depends on the rate of employment, the rate of unemployment in the economy as a whole. But, as I remarked in my opening brief, there is an improvement in the unemployment position as between this year and last year. In 1973 we had 7,504 redundancies notified as compared with 10,159 in 1972 and, in 1971, we had 8,556. Therefore, one could say there has been a downward turn but there are irregularities in that general trend.

In the coming year there are external difficulties which we face as an economy related to increased commodity prices and the general crisis in fuel and oil. Many commentators remark on the fact that this year our rate of growth cannot keep pace with that recorded last year. Obviously, this will have certain adverse effects on the employment potential of the economy. Certainly it will decrease the rate of growth in employment this year. We must do everything possible in our power to ensure that even though these external factors may militate against increased employment we do whatever we can here at home to keep our rate of expansion proceeding satisfactorily even if it cannot be maintained at the same rate as last year. There are these overall, global features relating to the world economy which will affect the employment capacity at home and which will in turn affect the solvency of the fund. It is not possible for me— as it has not been possible for my predecessors—to answer accurately what will be the state of the fund over any future year.

I would say to Deputies opposite that this was a short three-proposal speech of mine. I regret that they should feel they were in any way excluded from information I had for the House by not passing on a copy of the speech but there was no decision on my part to keep any information from them. I had merely three simple proposals and these I put before them. But, in future, I certainly will ensure that copies of proposals are put before the relevant spokesman opposite before I make the speech. Having been in Opposition for many years myself, I do appreciate that it makes for a better informed debate that Deputies opposite should be in possession of all information necessary for them to make a responsible contribution.

I think it was Deputy Brennan who mentioned that what the order I put before the House attempts to do is to improve the facilities in the fund. We improve the aims of the redundancy fund. First of all, we improve the rate of financial help available to the worker over 51 years of age. I think it was Deputy Moore asked: "Why 51?" The problem one is faced with in any arbitrary age figure is that somebody can always say: "Why not another figure?" There is no particular reason why we choose 51 other than that we felt, in general, the worker in his 50s finds it more difficult to secure employment when declared redundant. I think most Deputies will agree that this is in accord with their own experience. Therefore, we cushion the financial loss of his job to such a worker.

There is, then, the provision of the 100 per cent grant. The provision up to now was that payments to redundant workers must not exceed 90 per cent of the worker's pre-redundancy pay. There have been changes in the social welfare pay-related scheme. Therefore, to keep pace with that scheme, we have arranged that workers in future will be entitled to 100 per cent of their pre-redundancy wage. I do not agree with Deputy Brennan that a person being paid 100 per cent of his pre-redundancy wage would, therefore, be dissuaded from looking for alternative work. It is really two different views of human nature. The vast majority of mankind prefer to be in gainful employment. In legislating for the vast majority of mankind, I think it is wrong to think of a minority of malingerers who, in the minds of certain Deputies here, are reluctant to work. We should not let that minority situation govern our attitude in legislating for the majority. The majority of mankind when losing one job are simply anxious to secure another satisfactory one where they may be gainfully employed. In this interim when he is looking for alternative employment we believe that the maximum financial aid should be made available to him. He may be innocent of any dereliction of duty. The firm for which he worked may have decided to close down for reasons of extra profitability. The shareholders may have decided that it was more profitable to go into another form of economic activity. They may have closed down that business operation. Therefore, through no fault of his own, he finds himself, in the prime of life, without a job. Our conception is that the redundancy fund be made available to such a worker to the maximum effect over this period of financial embarrassment for him and, more so, for his family. He may have a school-going family—those who are not in gainful employment. Why should that family be penalised over this period because the breadwinner is not in work? We believe that the positive use of the fund is to see him over this lean period, to ensure that through the other agencies of the State—the retraining programme and so on—he is helped. The whole purpose behind this legislation is to help the worker back to gainful employment with as little embarrassment and dislocation to his family life as is possible. Knowing the mentality of the Irish worker, I have sufficient confidence that he will be anxious to return to gainful employment in the shortest period possible.

Deputy Brennan mentioned a point about the £2,500 a year ceiling. We have increased the area of help to redundant workers from a ceiling of £1,600 to £2,500. It is not true to say that those earning in excess of £2,500 will not benefit from this fund. Of course they will benefit but only up to a point of £2,500.

Mr. Moore:

The Minister did not say that.

Mr. M. O'Leary:

I am sorry if I misunderstood. What I am saying is that over £2,500 he will not benefit but the worker who would be in receipt of a salary over £2,500 will gain from this fund. He will gain up to the level of £2,500. In the future, depending on wage patterns in the economy, we can look again at this and ascertain whether the ceiling of £2,500 is a just cut-off point for benefits. Certainly, it is a vast improvement on the present closed point of £1,600. It means that we can now move into areas of clerical employment which, up to now, have been closed off from any benefits from this fund. I think most Deputies will agree that an increase of almost £1,000 in applicability, from £1,600 to £2,500, is a marked advantage to those who may be declared redundant in the future.

It is impossible at this stage to give any answers to the whole question of the solvency of the fund because that depends on the general employment potential in the economy in the coming year. What we propose here is in line with what we brought into being early last summer when we changed the rate of contribution. We made the increases sought last summer fall completely on the shoulders of the employer. We did not place those increases on the shoulders of the worker. This is in accord with EEC practice where the employer has to pay a much greater amount in discharging his social obligations than the employer customarily pays in this country.

Deputies opposite asked whether this was up to the mark and whether our proposals were up to the EEC practice. Often we say of our legislation that it is almost as good as that of others or that it has certain features that appear to be an improvement on similar legislation elsewhere. I am glad to say in this case that our redundancy legislation is superior to most comparable legislation in EEC countries. We have a great advantage over the comparable British legislation in that our payment schemes are divided between lump sums and weekly payments. There are solid social advantages in our system of payment.

Finally, I should like to say that our redundancy payment is not seen to be another form of welfare payment. It is not seen to be any kind of adjunct to doling out cash to people in an everlasting flow. We see the redundancy payment being given to people who are losing their employment because of technological changes in the economy and who are anxious to return to the work force. In these circumstances nothing except the best financial aids available and a fund which meets those needs of the worker are good enough for the worker and his family in the interim period.

I commend the Bill to the House.

Mr. Brennan:

Would the Minister agree that the pay-related benefit scheme considerably eases the demand on the fund? Even with the raise to 100 per cent, the extent to which the redundancy fund will come in for weekly payments will be very small, since the pay-related scheme has come into effect?

Mr. M. O'Leary:

This is the eternal argument about which takes from which, but we have been trying to keep them at a comparable level.

Mr. Brennan:

The legislation requires that the other payments must not be reduced. In arriving at the 100 per cent other payments are paid in full, so redundancy comes in to fill the gap. It does ease the position in the redundancy fund.

Mr. M. O'Leary:

It is a matter of argument.

Question put and agreed to.