Joint Committee on Social Protection, Community and Rural Development and the Islands debate -
Wednesday, 31 Jan 2024

General Scheme of the Social Welfare (Pay-Related Social Insurance and Jobseeker’s Pay-Related Benefit Provisions) Bill 2024: Department of Social Protection

An Cathaoirleach

Members are required to participate in the meeting remotely from within the Leinster House complex only. I remind those in attendance to make sure their mobile phones are switched off or on silent mode.

I welcome the witnesses. They are protected by absolute privilege in respect of the presentation they make to the committee. This means they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty, as Cathaoirleach, to ensure this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction. Witnesses are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against any person or entity either by name or in such a way as to make him or her identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity.

Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person or entity outside the Houses or an official either by name or in such a way as to make him or her identifiable.

The committee will now consider the general scheme of the Social Welfare (Pay-Related Social Insurance and Jobseeker’s Pay-Related Benefit Provisions) Bill 2024 as part of its pre-legislative scrutiny. The main rationale for pay-related benefits is that people becoming unemployed often do so with established financial commitments or other commitments and often face a sudden drop in their income in the immediate aftermath of the job loss. The Department presented to this committee on 18 April 2023 on a strawman proposal for jobseeker's pay-related benefit. Today, we are looking at the general scheme of this legislation. The legislation seeks to address the cliff edge and will also provide for increases to PRSI, further implementing the committee's recommendations in our report to the Minister on the Commission on Pensions. The committee is encouraged by the fact that the Minister and the Government have adopted our recommendations and are now implementing them.

I welcome to today's meeting the following witnesses from the Department of Social Protection: Ms Jackie Harrington, principal officer for jobseekers policy; Mr. Brian Duff, principal officer for PRSI policy; Mr. Colin O'Neill, assistant principal officer; and Ms Karen Byrne, assistant principal officer. They are all very welcome. I will now invite Ms Harrington to make her opening statement.

Ms Jackie Harrington

I am the principal officer with responsibility for jobseekers policy in the Department I am joined by Brian Duff, who is the principal officer with responsibility for PRSI policy, Karen Byrne, on my left, and Colin O’Neill, to my far right, who are assistant principals in these areas. I thank the committee for the opportunity to attend today.

On the background to pay-related benefit for jobseekers, the Department presented to the committee on this new scheme last April as part of an extensive consultation process undertaken on this proposal. This included the publication of a strawman paper in December 2022 and a series of meetings with stakeholders. The proposal had a strong public response, following which we received more than 110 submissions, which included very constructive feedback. The responses were overwhelmingly positive to the principle of linking benefit payment to previous earnings when a person becomes unemployed. It was also acknowledged that the measure will bring Ireland in line with our EU counterparts.

One of the key issues identified was the duration of the payment, which, at that time, was proposed to be a maximum of six months. This issue was also raised in the discussion with the committee, as was a proposal to taper the payment and to review the proposed minimum payment. These proposals have been taken on board and are reflected in the general scheme, as approved by Government earlier this month.

The general scheme provides that the benefit will be payable for nine months for those with more than five years of employment, in line with jobseeker’s benefit. Tapering of the nine-month payment is also included at three-monthly intervals, which will minimise the cliff-edge effect as benefit expires. The minimum rate of payment has increased to €125 per week, which is higher than the minimum under jobseeker’s benefit. The weekly rate of payment for people who have at least five years of paid PRSI contributions will be set at 60% of previous gross earnings, subject to a maximum of €450 for the first three months. After that, the rate will reduce to 55% of earnings, subject to a maximum of €375 for the following three months. The final three months will be paid at the rate of 50%, up to a maximum of a €300 payment. For persons who have between two and five years of paid contributions, the rate will be set at 50% of previous gross earnings, subject to a maximum of €300 per week for up to six months. The Department has commenced work on the necessary arrangements to introduce this scheme towards the end of this year, for which Government provided €5 million as part of budget 2024.

The Bill will also provide for the range of PRSI increases agreed by Government in the context of the actuarial review of the Social Insurance Fund and the Commission on Pensions.

As well as covering the cost of the pay-related benefit, these gradual and incremental increases will support the sustainability of pensions, including the retention of the State pension age at 66 years. All classes of PRSI will increase by 0.1% from October 2024, and by a further 0.1%, 0.15%, 0.15% and 0.2% in 2025, 2026, 2027 and 2028, respectively. This means a total increase in PRSI rates of 0.7 percentage points over the next five years. These increases are in line with that proposed by the Commission on Pensions and with the analysis presented in the actuarial review of the Social Insurance Fund with some additional headroom to cover the pay-related benefit, the full-year cost of which is estimated at €130 million. An increase of 0.1% works out at approximately 90 cent per week for a person on average wages and the same for the employer. The annual minimum contribution payment for self-employed class S contributors and the voluntary contribution for former class S contributors will both increase by €150 from €500 to €650 from 1 October 2024.

I will briefly outline the main provisions of the heads, which we forwarded to the joint committee and which will amend the Social Welfare Consolidation Act 2005, and which I will refer to as the Act. Heads 1 to 4, inclusive, provide for the PRSI increases as agreed by the Government. Heads 5 to 15, inclusive, cover the pay-related benefits scheme and are modelled on the lines of existing legislation for benefit schemes. They cover key conditions of entitlement relating to the requirement to be fully unemployed, capable of and available for work and to be genuinely seeking work. The concept of the governing contribution year, which is two years prior to the year of the claim and which applied to jobseeker's benefit, will not apply to this benefit. Instead, a person will be required to demonstrate a strong and more recent attachment to the work force. Head 16 provides for the closure of the jobseeker's benefit scheme to new applications, as the new pay-related benefit is introduced. To conclude, we look forward to hearing the committee's views on the heads of the Bill and we are happy to assist with whatever questions members may have this morning.

An Cathaoirleach

I thank Ms Harrington.

Deputy Marc Ó Cathasaigh

I will keep it relatively brief and tight. First, I welcome this legislation. We discussed it well at this committee. I welcome the straw man approach, which is very good and gives us something to respond to. People are increasingly beginning to understand that the straw man approach is not necessarily the fixed item but it gives you something to respond to. In a perfect case in point here, we made the case for the tapering over the nine months and that was taken on board. It is good to see that positive response coming back when the committee gives time over to an issue. As I said, it is a good idea in principle. It was proven during the time of the pandemic unemployment payment that the basic rate of social welfare was not sufficient for people's needs, which was why we increased it to €350. It will give people a chance to change their finances over that nine-month period. I think it is described as a strong attachment to the labour market but we do know that in normal circumstances, certainly in the current economy, a lot of people who leave their job will quickly move into another employment. I do not think we anticipate many people in the current environment getting to the end of that nine-month period without re-entering employment. That is one question I am going to put, because this is fine legislation in the current economy. I have one main concern which is the possibility of seeing an employment shock like we got around 2008 for example, where a large number of people became unemployed in a short space of time. Ms Harrington has given an estimate of a full-year cost of this scheme running to €130 million but has the Department stress-tested that against larger economic shocks? A government of the day will make choices in terms of social welfare provision but also in respect of the provision of services X, Y and Z. We saw that during the downturn. One of my concerns here is that we build a system that cannot withstand that level of economic shock. You might ask what system could withstand the level of shock that we saw in 2008 and so on.

The other issue I want to raise is around the PRSI increase. I am sure the Chairperson and other members of the committee are hearing about this as well, particularly from small businesses. What I am hearing is not about the PRSI increase in particular but that there is a PRSI increase, an energy price increase and an input increase, as well as the effects of auto enrolment and sick pay. Leaving inflation to one side, those extra benefits for employees are all good things and are all things I would advocate for. When the Department had that public consultation, what level of feedback did it receive from employers around the PRSI increase in particular? Do they think this is fair? We have the solidarity principle, which is one of the things that underpins our social protection system and we have the contributory principle. This legislation goes towards that feeling that as I have made a contribution, if I hit on bad times there is something that I can draw on. I want to make sure, however, that we are not putting small businesses in a more difficult situation by virtue of the legislation we are looking at here.

Ms Jackie Harrington

I thank the Deputy for his comments. On his first question about the cost of the scheme over the longer term, he is absolutely right that we are currently in a very low period of unemployment and the €130 million refers to costs in the current period. The Department did stress-test. We looked back at patterns over the last 23-odd years in terms of the ups and downs in the economy and there has been a lot more buoyancy in the economy then there were shocks. To work out the appropriate costs and the appropriate impacts for the PRSI increase, we analysed that period. The €130 million covers the costs as they are at the moment but in terms of the 0.7% increase in PRSI provided for, 0.2% of that is in respect of the pay-related jobseeker's benefit. That is an average payment that provides headroom to cover recessionary periods and periods of buoyancy. That is there to provide a buffer as such, to cover when we move into more difficult positions.

Deputy Marc Ó Cathasaigh

It is a difficult question to answer of course but whether that will be enough is the issue. The Department has costed this at €130 million in the present environment. I acknowledge that Ms Harrington said that on average, if you look over 23 years, buoyancy is more present than shocks but the current period is unusual. In terms of labour force participation, we are practically at 0% unemployment as we understand it. The people who are currently not employed are those with whom it traditionally has been very difficult to make an attachment to the labour market. If the Department has done that stress-testing and has run those scenarios, is there a figure in terms of what a bad year looks like? Does Ms Harrington have a figure of the total cost of this type of scheme in a bad year?

Ms Jackie Harrington

Well, what the Department looked at was the percentage of jobseeker's benefit in relation to the adult population because it is quite difficult and it is complex in the Irish situation. The scheme has changed a number of times throughout the period and we have a growing population against this as a backdrop. We could see that it could increase by up to four times or four and a half times that cost during a period of recession. In terms of actual costs, the intention is to introduce pay-related benefit, PRB, towards the end of this year. As I said in my statement, we have provided €5 million for that towards the end of this year. The first year in which we would actually see full-year costs is 2026, as the intention would be that people on existing jobseeker's benefit would continue on their payment until it expired.

People who are fully unemployed and on jobseeker's benefit at the end of this year will continue on it for nine months into 2025. Therefore, a full-year cost will not be seen until 2026. That is something we have factored into the costs and the subsequent PRSI increases.

Deputy Marc Ó Cathasaigh

Tell me this-----

Ms Jackie Harrington

We are satisfied that the 0.2% will cover it in recessionary periods. In some years, savings are made to the fund and obviously, in periods of recession it is heavily drawn from.

Deputy Marc Ó Cathasaigh

Is this still being paid into the Social Insurance Fund, SIF?

Ms Jackie Harrington

Yes.

Deputy Marc Ó Cathasaigh

While the SIF is looking fairly healthy right now, the actuarial reviews and forecasts for it are not as ebullient. Was any wider analysis done? This scheme is front-loaded in that the first three months will be the most expensive because of the tapered nature of it. One of the things that interests me about the scheme, if implemented, is the counter-cyclical nature and response within the economy. I am referring to one of those larger-scale shocks within the economy. One of the issues is that it becomes a vicious circle where people have less money and therefore, they spend less within the economy and so on. I am interested to know if any wider analysis was done, between the Department and the likes of the Department of Finance or any other relevant body as to whether this scheme would have the effect of cushioning a crash as it gives people a little bit more spending power within the economy.

Ms Jackie Harrington

We have been working closely with the Department of public expenditure and the CSO on our figures. It is important to note that these payments, the higher rates of payments in particular, can support the economy by providing a stabiliser. This was evident after the Covid-19 pandemic unemployment payment, PUP, scenario where the country bounced back quite quickly and where Ireland did not see the high levels of unemployment and difficulties that may have been anticipated. We are working closely with these bodies on our figures and costings and we have stress-tested a number of different scenarios. The Department is confident that the 0.2 percentage points that we are providing for in the increased PRSI rate will support us over the period.

Deputy Marc Ó Cathasaigh

I hope Ms Harrington is correct.

I have nothing further to add. I thank the Chair.

An Cathaoirleach

I have a couple of questions and Deputy Ó Cuív has questions as well.

First, I wish to say to the Department, as well as to echo what the Leas-Chathaoirleach, Deputy Ó Cathasaigh, has said, that using the straw man model is an effective tool in promoting engagement on an issue. Issues such as the one before the committee today are abstract until they are developed or drafted out and it has been an effective tool for the committee to be able to understand this issue. The model promotes engagement and public consultation on a complex area that will have significant implications into the future. I wish to commend the Department on its approach to this.

Second, Deputy Ó Cathasaigh raised a point on small businesses and there is huge concern out there at the moment. In the evidence Ms Harrington gave this morning, she made the point that a 0.1% increase works out at approximatively 90 cent per week for a worker on average wages. What is the typical average cost of this 0.1% increase on small and micro-businesses? What will it work out at? I acknowledge that Ms Harrington may not have that answer at hand. If she does that is great but if she does not, she might come back to the committee on this matter because the committee is hearing concerns from those on the employers' side rather than on the employees' side.

Third, Ms Harrington stated that heads 5 to 15 cover the key conditions of entitlement on the requirement to be fully employed. To clarify, what is the position then for someone who has the opportunity to gain part-time employment and to work one or two days per week? Does that person, similar to the current situation, get a pro rata payment based on the number of days they work or is it an all-or-nothing scenario? Can Ms Harrington clarify that? Also, the Department is moving away from the condition that people must have a full two-year record of employment prior to becoming unemployed and I think that is a positive development, given the way in which employment has changed and is changing in recent years. However, Ms Harrington talked about employees having to demonstrate a stronger, more recent attachment to the workforce. What type of test is envisaged in that regard?

My final question is on the tapering of the scheme. Ms Harrington may have to stay with me for a minute while I explain. While I welcome the fact that the Department listened to the concerns the committee raised regarding this, the tapering in this scheme has a hidden clawback in it and committee members are concerned in this regard. As it is set out, people will receive 60% of their gross earnings, subject to a maximum of €450 for the first three months. That means that anyone earning up to €750 will get 60% of their earnings for the first three months. However, as it tapers off, people will get 55% of their earnings in the next three months, up to a maximum of €682. If someone earns more than that, they will not get 55% of their earnings because there is a cap of €375, which is actually a 17% reduction on the cap that is in place for the first three months. For someone who remains unemployed for the final three months of this scheme, they will get 50% of their original earnings, up to a maximum of €300. Of course, that means they will only get a full 50% if they earn €600. Therefore, for a person earning up to €750, they will get 60% of their salary in the first three months, whereas in the final three months, that figure of 50% of a salary is only for people who earn up to €600. People will lose out significantly; it is actually a 20% reduction between the second three-month period and the third three-month period. Despite the impression being given that there is a 5% reduction on the salaries every three months to the support income people will receive, it is actually a reduction of 17% and then of 20% for those in receipt of it . The way this is presented is a misrepresentation of the impact this will have on people who, sadly, have fixed commitments. Their mortgage payments will not reduce and nor will their outgoings in terms of running costs for their homes but yet there will be dramatic reductions on the base level income they will receive under this scheme. I appreciate if Ms Harrington can comment on that.

Ms Jackie Harrington

Okay. I thank the Chair and will answer the questions in the order he raised them.

As for part-time workers, he will notice from the heads of the Bill that they have been developed in such a way that we can introduce them for part-time workers, as required and as approved by the Government. The heads are flexible, in that we can apply that measure going forward.

As for the options for people who are fully unemployed and are on the PRB initially, they would have the option to go back to existing jobseeker's benefit for days of part-time employment or, as we develop this scheme and because that flexibility is built into pay-related benefit, the intention would be to provide for pay-related benefit over time.

The option would be there, quite possibly at the initial stage, for jobseeker's benefit. A person will not be left without benefits should they take up part-time employment.

The governing contribution year, GCY, to which we referred, is two years prior to the contributions and is covered in head 7 of our general scheme. The first requirement is that you must have 104 contributions. That already exists for jobseeker's benefit. You must have at least two years' PRSI before you can qualify for jobseeker's benefit. That has not changed. That is the minimum requirement. Once you pass that test we will then look to see if, before you were made unemployed, you worked for six of the previous 12 months before the date you were made unemployed, and that you have four contribution weeks in the previous ten weeks from when you make your claim. If you make your claim today, we would check that you have four contributions back ten weeks, and check the date you were made unemployed. Sometimes people may not apply for a couple of weeks or one month. It may not be the highest thing on their agenda. However, back from the date of unemployment you must have six months unemployment. It is a recent attachment we are looking for in that context.

An Cathaoirleach

Will Ms Harrington speak about the tiered payments?

Ms Jackie Harrington

For the tapering of payments, the calculation is obviously not in line with the calculation the Chair has proposed in terms of working a percentage of the higher cap. What we did was look at the various inputs and consultations. There were a lot of factors for us to consider, in the context of the overall costs, the competing concerns, impact on the labour market and comparison with our existing jobseeker's benefit scheme. As the previous Deputy stated, the tapering works well as we outlined with the PUP where we reduced it in €50 segments. We looked at some of the different situations across Europe, and in fact some of those taper right down to the basic assistance rate. It is also important to bear in mind that this will provide much stronger support to an individual than existing jobseeker's benefit. For those who are on the payment for nine months, it is again worth noting that the average payment is for three months. Most people will be on the scheme for three months and get the €450, and 70% of people have gone within six months. The majority of people are not on the scheme when it reduces to the final €300. Over the lifetime of the claim the monetary value of the pay-related benefit at the maximum rate works out at more than €14,600, which is more than €5,500 in excess of that for the standard jobseeker's benefit payment. Even with moving down and tapering, that will benefit individuals in the context of the cliff edge and, as I said, when we withdrew the pandemic unemployment payment that worked very well for individuals. Taking heed of the different comments from various inputs into our consultation they were the figures proposed to Government and ultimately accepted. It was on that basis.

An Cathaoirleach

I accept the point Ms Harrington makes. The point I am making is that in the way is it presented it is misrepresenting the situation. It would be far clearer to leave it at 60% up to maximum thresholds of €450, €375 and €300. The costs involved would be minimal, but it would at least be easier to communicate rather than introducing three percentages with three different caps at different periods of time. That causes confusion. This is something we will reflect in our recommendation and ask the Department to consider. I know the Department is conscious that it is not just the costs, but it is important it can be clearly communicated to the public and that people know what they are looking at once they go onto this, rather than having to do a mathematical calculation on each occasion. The Department might consider that in advance of our making that recommendation. I think it would be clearer and more transparent than the approach being proposed. Will she take note of that?

Ms Jackie Harrington

I will. There will be significant communication of this new scheme as it is being launched. We will also shortly be communicating with individuals because we hope to kick off a campaign about this scheme. My colleague, Mr. Duff, will answer the Deputy's final question about PRSI and small businesses.

Mr. Brian Duff

Both the Chair and Deputy Ó Cathasaigh raised the issue of costs to employers due to a range of new measures that have come in through various means in recent times. Part of the picture now are the envisaged PRSI increases over the coming five years. The first point is that the PRSI increases are described as gradual and incremental over the five-year period, and are to be modest in effect. It is accepted, with all of the other things happening, that there is a potential cumulative effect. There was a recommendation from the National Competitiveness and Productivity Council that Government would look at the joint impact of all of these developments on employment and employers. This is being led by the Department of Enterprise, Trade and Employment with regard to living wage, statutory sick pay, the new public holiday on St. Brigid's Day and the right to request remote work. In the Department of Social Protection the input is coming from parents' leave and benefit and automatic pension enrolment. Added to that now are the PRSI increases over the coming five years. Work is going on at the moment between the two Departments to look at how Ireland compares internationally in this regard, and what the overall impact is on business and the economic environment. There have been meetings with various stakeholders, including union and business representatives. Work is well advanced and the outputs will hopefully be available in the near term.

In the EU context employer PRSI is lower than average. There can be difficulties comparing like with like between different jurisdictions when it comes to PRSI, whether on the employee or employer side because of differences between what is covered under social insurance schemes, etc. However, the average EU rate for employer PRSI is 19.5%, compared with the two rates of 8.8% and 11.05% in Ireland.

The final question was specifically about the cumulative cost of these increases for employers over the five years. The cost for the first 0.1% in October this year, included in the opening statement, is approximately 90 cent per week for the employer on the average wage. The total of the five increases will be an €6.30 for the employer by the time we reach 2028. That is a total of €327 annually compared with the weekly rate.

Deputy Éamon Ó Cuív

Are the figures quoted for the PRSI increases just to cover pay-related jobseeker's benefit, or are they general increases to fund the Social Insurance Fund, SIF?

My understanding is that there were general increases taking place. It goes into a big maw and then you pay all the benefits.

I also note that there is no pay-related element: that the self-employed are the poor relation. If one's income disappears when one is self-employed, one does not get any pay-related benefit, even though it is easy enough nowadays to ascertain information from previous years, such as income tax returns and how much income a person is getting. Ms Harrington might go into that.

Does the Department get access in real time to pay records from Revenue? Every time an employer makes a payment to an employee there must be a return to Revenue in real time. It is not like the old days when you put in a P35 at the end of the year and that was the first inkling they had of the individual pay rates. Now they get it every week, fortnight, or month, according to whatever pay regime a person is on. Will the Department have access to that so that quick decisions can be made?

The next question is one I think the Chair will be equally interested in, given that, like me, he represents a rural constituency with a lot of small farmers. I recently had an application for jobseeker's benefit. It related to jobseeker's benefit for someone aged between 65 and 66, but the rules are the same. In my experience we always had the situation that if you had a job and you were earning €30,000, €40,000 or €50,000 a year and you had a farm that was earning anywhere between nought and a few thousand euro, as you became unemployed you got jobseeker's benefit because they knew you could not live off the farm, and that it was totally subsidiary. Recently, I had a case of a farmer who in three years made €900 out of his farm. He has accounts done up professionally to prove that. The answer I got to a general question asked on foot of the fact that the 65-year old person was refused jobseeker's benefit was that it was on the basis that the person was farming. The answer was quite startling, as this would affect a mega amount of small farmers, particularly in the west.

I asked:

the Minister for Social Protection whether people who were employed for many years and were farming in a very small way at the same time [In this case the person got an illness benefit but that relates to another question.] and then went on illness benefit for a year and a half, are entitled to job seeker's benefit on recovery from the illness affecting them, subject to the normal conditions; and if not the reason they are not entitled to it; and if she will make a statement on the matter.

The reply stated:

A person is not regarded as being unemployed for Jobseeker's Benefit purposes, for any day that they are actively engaged in farming.

If the person is still engaged in farming, they may be entitled to receive Farm Assist [but this person had a working spouse] subject to satisfying the normal conditions for the payment.

I trust this clarifies the position for the Deputy.

This was news to me because I have been dealing with this not for 30 years but 50 years, since I effectively became an employer at 23 years of age, as a manager of a small co-operative. We had people in and out because the work could be quite seasonal. The small farmers always got jobseeker's benefit, as long as farming was not the main income. I think we need clarification on that. It is a fairly serious issue and one that is relevant to this Bill.

The next question I have is whether the normal rates of adult and child dependant allowances are paid on the pay-related jobseeker's benefit? Is it an enhanced rate or at the standard rate or what is the arrangement? I totally support the Chair. I think the rates should be the same. In other words, when it is 55% or whatever it is, it is not really 55%.

Could Ms Harrington give us the percentage of people on unemployment benefit whose income exceeds the maximum threshold income? In other words, if they are getting the maximum rate on the first round and therefore on the second round, and so on. She might tell us what percentage of people going on jobseeker's benefit will qualify for the maximum rate and will not get the full pay-related benefit because they are going to be over the maximum? I think that figure would be very relevant to us because it would give us some sense of how many people will be caught by the point the Chair raised.

If somebody was on illness benefit, which can happen, and the employer then decided to make the person redundant, I presume the fact that the person was not working in the previous weeks because they were on illness benefit will not preclude them from going on the pay-related jobseeker's benefit. Ms Harrington might clarify that. Otherwise, it would be a lucky dip. One could be out with any form of an illness. I am not talking about invalidity, I am talking about illness benefit.

I have a bit of a hang-up with the emphasis on activation. I think forced activation results in people just going through the motions. I believe you can bring the horse to water but you cannot make the horse drink. Officialdom and the media have always suspected that there are a whole lot of people out there who do not want to be engaged. My experience of life is that if the engagement is real, the vast majority of people who become unemployed, who are anxious to get back into employment, become engaged with activation in a positive sense. My view is that there is some issue with those who might not do so and it would be better to investigate it rather than taking a penal attitude to it.

I am sorry for all the questions but this is an important subject. These are Bills and the arrangements will become permanent. If we take an employer who works five days a week and he puts his workforce on a three-day week or a two-day week or whatever else, will the employees get pay-related jobseeker's benefit and how is it going to be calculated or would they just go on the flat rate of unemployment benefit for the days they are off? It is important to clarify that. They are my questions.

Ms Jackie Harrington

I will go through the questions. I hope I have captured them all. The Department does have access to real-time Revenue data for employees. In the provision for the scheme, in the head that covers the rate of payment, what we are proposing is that when we calculate someone's gross earnings we will go back eight weeks from the date that they were made unemployed, so we will be taking very recent earnings there. We are providing a period of eight weeks, as it allows for people that are maybe paid monthly or the payroll may not have reflected their current payments. We do have that real-time information.

In regard to the self-employed, the scheme is available for employees. Deputy Ó Cuív points out that the self-employed would continue to be eligible for the jobseeker's benefit for the self-employed, which is a relatively new scheme and was introduced in 2019. When we look across Europe, we see a number of countries do not provide support for the self-employed.

In terms of pay-related jobseeker's benefit for the self-employed, the difficulty is that we do not have that real-time information like we do for employees. They have until November of the following year to file their returns so we do not have that information on a real-time basis. It is also reflective as well of the PRSI rates of the self-employed.

On the jobseeker's benefit case, I am aware that a parliamentary question was raised this week as well on the policy in relation to that-----

Deputy Éamon Ó Cuív

It was about the law. I raised the question. I asked under what section of the law had this change come in. I think the Chair might just comment on this. My experience up to now is-----

An Cathaoirleach

My experience is the same. I call on Ms Harrington to respond.

Ms Jackie Harrington

I can confirm there has been no change to the law in this regard. As the Deputy mentioned, if people apply for a scheme and they have worked what we refer to as subsidiary employment outside their normal work and their earnings are up to €7,500 per year, I think, that reflects a subsidiary employment period that a person is entitled to jobseeker's benefit. I will review the specific case. I was not aware the Deputy had a specific case in mind so I will review that and we can see what the circumstances were. There has been no change to subsidiary employment.

Deputy Éamon Ó Cuív

I will tell Ms Harrington the circumstances and we might as well call it here. The person got somebody to fill in the form and they exaggerated the hours the farming was taking. The proper accounts showed that there was no income from the farm. It was €900 in one year and €0 and €0 for the other two years. There is a €7,500 limit to start with. This person worked for years and years and had the farm at the same time. We made that case and what we were told is - and what surprised me was what the parliamentary question response says - they did not say anything about €7,500 but a person is not regarded as being unemployed for jobseeker's' benefit for any day they are actively engaged in farming. This is really useful and I thank Ms Harrington for being so open. It did not say anything about limits. Parliamentary questions are parliamentary questions. They are checked, as Ms Harrington knows, up the line and, therefore, I always expect I might get a more detailed, accurate answer to a parliamentary question than I would to correspondence, even.

Ms Jackie Harrington

I cannot comment on an individual case but maybe after this meeting if the Deputy wants to give me that individual's details, I will certainly have it reviewed.

An Cathaoirleach

Will Ms Harrington come back to the committee on the broader issue of the content of that correspondence because that is the issue the committee will be concerned about?

Deputy Éamon Ó Cuív

And of the parliamentary question.

An Cathaoirleach

In terms of the response, separately to the individual case.

Ms Jackie Harrington

Yes.

Deputy Éamon Ó Cuív

What I would like to see is if Ms Harrington could outline-----

An Cathaoirleach

In fairness-----

Deputy Éamon Ó Cuív

It would be useful because this parliamentary question response is on the Official Report of the House. I take that very seriously. If it is as Ms Harrington outlined and I have no doubt it is, the record would be corrected and the House would be informed.

Ms Jackie Harrington

As I said, I will review the details of the case. I am not familiar with the details of this specific case.

Deputy Éamon Ó Cuív

I am not talking about the case here.

Ms Jackie Harrington

If there was an exaggeration of the employment hours so that it looked like full-time employment or that it was more than subsidiary employment that could have been done in addition to a person's normal work, that possibly is then reflected in the response that is referring to a specific case.

Deputy Éamon Ó Cuív

The question was generic.

An Cathaoirleach

Ms Harrington has committed to come back to the committee separately on the policy issue and on the response the Deputy received separate to the individual case.

Ms Jackie Harrington

With regard to the qualified adult and dependant child allowance, pay-related benefit is based on a person's prior income. Along the lines of that is the Covid pandemic unemployment payment rather than household composition similar to earnings that does not impact or take into account the household composition. The rate is based entirely on a person's previous earnings.

As for jobseeker's' benefit, the number of recipients who have adult dependants is approximately 5%. More than 95% of people do not have an adult dependant on their jobseeker's claim and are in receipt of the personal rate. The rate of €450 more or less equates to the current rate of jobseeker's, plus that for a qualified adult, plus that for a child. If an individual does have a real income support, the means-tested scheme will also be available to people if the income need arises but the pay-related benefit is structured differently from the existing schemes.

Deputy Éamon Ó Cuív

This is important because a person with adult and child dependants in that employment would suffer a huge loss of income because he or she will lose the family income support as well. That going to finish presumably. People cannot get family income support if they are on jobseeker's benefit. They will lose the wages and they will go to flat rate jobseeker's benefit. The committee will have to look at that issue.

An Cathaoirleach

Yes.

Ms Jackie Harrington

I would point out that it was the same situation for the Covid pandemic unemployment payment. It was a flat rate payment of a maximum of €350 per week and the alternative jobseeker's allowance was available to individuals. The actual number that applied for jobseeker's allowance were very low. It was minimal. As I said, 95% of individuals do not have a qualified adult so the vast majority of people on our schemes are claiming the personal rate on the jobseeker's benefit payment.

Deputy Éamon Ó Cuív

I used to have this argument in Departments. The average size of a farm and the average size of a person. If I had a very tall Minister and took the average size of a person and if we both could only get the size that fitted the other person, the clothes would not fit us. If it is only 5%, it is not much of a cost to sustain their incomes for families which is very important, particularly in view of all of these referendums we are having. It is very important we sustain families.

An Cathaoirleach

That is something the committee will have to consider in its recommendations. Will Ms Harrington come back on the other questions?

Ms Jackie Harrington

On the other questions, someone who becomes unemployed and is on illness benefit, under the current circumstances they are eligible and can qualify for jobseeker's benefit through what we call a process of linking claims. We will make provision for people as well under pay-related benefits and under head 7, we provide for the conditions of the scheme, which is head 7. This allows the Minister to amend the contribution conditions that I outlined earlier. A person coming from illness benefit or maternity benefit could not meet that condition of six months in the previous ten months and, therefore, we will make provision for those individuals within the regulations. They will absolutely be covered and be eligible for pay-related benefits, in the same way as they are at the moment, to get jobseeker's benefit.

The Deputy asked for the numbers of people who got the maximum rate in terms of the analysis we did. I do not have that figure to hand. If I get it before the end of the session ,I will come back to him and if not I will advise the committee. A significant number qualify for the higher rate of payment based on the analysis of data of recipients that we undertook. As the Cathaoirleach outlined, the rate of payment to quality for the maximum rate is €750, which is actually 20% lower than the average earnings figure. Average earnings at this point in time is €910 so at the €750 rate, a significant proportion of people qualified for the maximum rate. If I do not have the figure before the end of the session, I will forward it to the committee.

As for activation, the experience of the Department is that individuals on jobseeker's benefit absolutely want to work and they do go back to work. This is demonstrated by the fact that the average duration on jobseeker's benefit is only 13 weeks or so and also that 70% of people are gone from jobseeker's benefit at six months. The reality is that individuals on pay-related benefits will find work and will move off social welfare because that is not where they want to be. The online service, digital pathways to work, for example, will be an important tool to support these individuals who are very much anxious to get back to work. That is supported by research that has been carried out that shows people do go back to work. Research carried out some time back and referenced by the ESRI found that nine out of ten people who are on replacement rates do actually work.

That was also evidenced with regard to the PUP. People went back to work and went back to work very quickly. The high earners went back very quickly. We also had evidence of people who went at higher replacement rates of up 100% and returned to work very quickly.

Regarding the Deputy's question about people who are made short-time workers by their employers, it involves where an individual is employed by their company and then put on a two or three-day working week. They are covered under the existing jobseeker's benefit scheme under short-term work support. This legislation for the pay-related benefit is being done in such a way that it will be able to support part-time work. It is flexible enough to be able to provide that. This is something we are working through and considering. We will also work with the Department of Finance because there is a pathways to work commitment regarding this group of this individuals in terms of assessing the best approach we should take. Should we pay them through a social welfare payment or through the employer along the employee wage subsidy scheme that was done during Covid? There is work to be done in that area examining those groups specifically. As I said, the heads of Bill are flexible enough that they will, should that position be approved. My colleague, Mr. Brian Duff, will answer the Deputy's questions about the Social Insurance Fund.

Mr. Brian Duff

Regarding the Deputy's question about the 0.7% PRSI increase, the cumulative increases between 2024 and 2028 are to provide for pension sustainability, including the retention of the State pension age at 66, and to cover the introduction of the jobseeker's pay-related scheme so the 0.7% is an envelope to encompass all of that.

Deputy Éamon Ó Cuív

I know it is not the purpose of this but this increase in pensions was mentioned in the briefing we got. One point I cannot get my head around is the fact that from an actuarial point of view, the best value is the self-employed at 4% compared to the 14% for employees. It is by far the best even when it was purely pensions because pensions are the most expensive contingency the Department is paying. It is a very good insurance policy. There is a proposal to increase PRSI for the self-employed except for the people at the bottom of the pile.

Mr. Brian Duff

Regarding Class S for PRSI, they are included in the five successive PRSI increases each October as envisaged in the heads of the Bill.

Deputy Éamon Ó Cuív

That is the rate going to-----

Mr. Brian Duff

It is going from 4% to 4.1% in October and to 4.2% in October 2025, etc., in the same way as the-----

Deputy Éamon Ó Cuív

So it is only going up at the same rate-----

Mr. Brian Duff

It is going up at the same rate as the other classes.

Deputy Éamon Ó Cuív

That is a bit surprising because an actuarial analysis would show you-----

Mr. Brian Duff

I understand that the point the Deputy is making is that it has been stated that the Class S contribution does provide for an entitlement to a much wider range of entitlements than used to be the case.

Deputy Éamon Ó Cuív

Even when it was purely pension, the advice from the Department that on an actuarial basis, it was much better value. If somebody who was self-employed earning €100,000 and paid 4%, it was much better from an actuarial point of view than if he or she was earning €100,000 and the employer and employee were paying 14% between them.

Mr. Brian Duff

That was part of the Government's consideration of whether there should be greater increases in the class S area as opposed to the other PRSI classes but it decided to have the same rate of increase in class S as in the other PRSI classes. It decided to increase the minimum contribution for class S from €500 to €650 from October 2024. That minimum payment had been in place since 2013 so it was deemed to be an appropriate time to increase it by that amount.

Deputy Éamon Ó Cuív

Is Mr. Duff sure it was not 2011?

Mr. Brian Duff

My understanding is that it was 2013 but I can check that for the Deputy.

Deputy Éamon Ó Cuív

It was €350 and then went up. My understanding was that the commission that looked at the pension age recommended that 75 go up.

Mr. Brian Duff

That is correct. It recommended a greater increase in class S than is envisaged in the heads of Bill. Those recommendations were considered as part of the decision-making relating to the PRSI increases and what is called the PRSI road map for the next five years but the outcome was that the decision was that the increases in class S along those five incremental increases would be levied on class S in the same way as they are levied on the other classes.

Deputy Éamon Ó Cuív

On a technical point, Mr. Duff is saying it is going up from 1 October, which I thought was a funny date to pick because lots of people do their accounts from 1 January to 31 December. When they do the calculation, for example, for their tax return for this year, will they have to calculate what profit and loss they have and if it is on the calendar year, will they have to calculate what profit and loss they had for the first nine months and then for the three months rather than for the whole year because otherwise how will they calculate what PRSI they owe?

Mr. Brian Duff

Again, I see the point the Deputy is making. This is the result of having an increase coming in in October rather than at the start of the year. The Government decision was to bring in the increase in October. The operational arrangements about how to implement that are being looked at between this Department and our colleagues in Revenue.

Deputy Éamon Ó Cuív

I will never understand the number of crinkles we create in the system. It is petty stuff that you would play around with, particularly for people with very small incomes from self-employment. It is mind-boggling, particularly for those who are doing manual accounts, many of whom are in the small fishing and farming community who do not always have computerised accounts system. The Department might keep that in mind when it is devising these operational rules and Mr. Duff might ask it to consider that if it that is the way it is going to be, whether it could add four and multiple it by three and divide 6.5% by 12 to get an average for the year. For example, farming incomes come in in the autumn and expenditure comes in in the spring so it would be impossible to get a nine-month profit and a three-month profit.

Mr. Brian Duff

I recognise fully the point the Deputy is making. Discussions are ongoing. The aim is to indicate that very clearly once it is determined how it will operate regarding that first increase. It will come in in October 2024 but, obviously, the returns will not be made until the following year.

Deputy Éamon Ó Cuív

Yes but it will hit someone sooner rather than later.

Mr. Brian Duff

I agree.

An Leas-Chathaoirleach

If any members participating online wish to make a contribution, now would be the time to indicate. Unfortunately, Deputy Ó Laoghaire, who had a good number of questions he wanted to put, has been pulled away for speaking time in the Dáil but he said he will correspond directly with the witnesses to put the questions. It is not ideal but it is just a function of busy people trying to be in multiple locations. As there are no members indicating online, I thank our witnesses for a very helpful and constructive engagement on pay-related social welfare benefits.

Ms Jackie Harrington

Going back to a question raised by Deputy Ó Cuív regarding the numbers qualifying for the higher rate. We analysed our customer base at a point in time. These figures can change because it depends on who has applied for the scheme and their actual earnings at a point in time.

It showed that more than 70% of those who qualified were qualifying for the higher rate of payment. These people who qualified for the higher rate would actually get the maximum rate, and that figure would increase in line with increased wages and salaries. I just clarify that point for the Deputy.

An Leas-Chathaoirleach

I thank Ms Harrington, in that case. I thank all the witnesses. This does conclude the committee's business in public session for today. I propose the committee now goes into private session to consider other business.

The joint committee went into private session at 10.40 a.m. and adjourned at 11.01 a.m. until 9.30 a.m. on Wednesday, 14 February 2024.