At present people paying social welfare contributions by way of stamp pay them on a weekly basis so that both the employer and employees contribution is spread evenly over the 52 weeks of the year. Even in the case where an employee is paid on a monthly or even on a six monthly basis the employer and employee are obliged to stamp cards on a weekly basis. Therefore, the income to the State comes in over 52 weeks and the contributions of the employee and employer are stopped over 52 weeks.
In the proposed change over to a pay-related system, assuming for the moment that the Minister does not change the upper ceiling of £5,000 which I am quite certain he intends to change, the employee and employer will have to pay at certain rates until that rate, multiplied by whatever the upper ceiling is, is reached. Consequently in certain cases employees and employers will have to pay in periods of far less than a year what should be the total twelve months' contribution into the social insurance fund. That does not appear to be fair or equitable.
I understand there is a provision in Britain whereby a person in these circumstances is allowed to have his contribution spread evenly over the entire contribution year. I accept that the effect could be relatively marginal on the individual. Generally speaking we are talking about individuals who are on a higher income, so that the effect of having to contribute their 12 months social contribution in less than 12 months would not be a marked one for the employee, and I am not suggesting that. What I do want to point out is that this could have a very marked effect on employers who have a high number of employees are earning above the upper income limit contained in the Minister's proposals, which is £5,000. Certain large employers who have a high content of highly paid employees could discover their cash flow being interfered with because of the fact that in respect of any employee earning over £10,000 a year the employer would be required to pay the social welfare contribution over the first six months of the income tax year instead of over the 12 months of the contribution year as at present. That is patently blatantly unfair to employers. I am not suggesting that employers should be given any reduction in the amount they have to contribute but I am suggesting that in fairness to employers, and especially large employers who have a high content of highly paid employees, they should have the opportunity, if they so desire, of paying the employer's contribution evenly over the 12 month period.
I suggested in one amendment, which was ruled out of order, that if an employee earning over £5,000 were to die during the year the full effect of the rate, multiplied by the sum, might not have been paid and so there would be a conceivable academic loss to the State in that regard. Strictly speaking, that argument is correct, but it is a rather harsh interpretation of the situation. I am making that same point now to the Minister and I hope he will deal with it in his reply. It is not that the State should be deprived of any money but in the case of highly paid employees the contributions should be, as they are at present, spread over the 12 months, not particularly from the employees point of view, because he is in the high income earning bracket, but from the employers point of view because there may be employers who have a large number of highly paid operatives.
The next point I want to make is that it is not at all clear in the definition of reckonable earnings what the effect of the rates charged will be. There is a situation where certain enlightened employers who, although their employees by virtue of insurance cover are entitled to claim sickness benefit when their employees become ill still continue to pay them the same amount of wages or salary as normally would have been paid. There appears to be a danger that, when this Bill becomes law, that payment which the employer would make to his employee would be interpreted as reckonable earnings even though the employee was not working at the time. Even though the employer pays his employee his weekly wages while he is sick the employer will still be expected to pay the social welfare contribution at whatever rate it is at the time on the money he pays to the employee in lieu of wages while that employee is ill.
That is the purpose of amendment No. 2, which I accept can be described as having a potential charge on the Exchequer. I believe it is unfair to firms who pay their employees while they are ill if those firms are also expected to pay social welfare contributions in respect of the money they pay to their employees. I hope the Minister will be able to tell the House that it is his intention to exclude, by regulation, any money so paid during the period when the employee is not actually in employment but is still receiving payment from his employer. In relation to the amended section 6 of the 1952 Act, paragraphs (i), (ii) and (iii) set out the varying rates which are to be collected from voluntary contributors. Would the Minister please explain what the different voluntary contributors will be covered for in return for the individual rates specified in those three paragraphs?