Redundancy tends to strike a note of fear. It has similar connotations to sickness, injury or accident. The numbers who experience it, and the traumas and hardships which frequently go with it are considerable. Since the redundancy payments scheme came into operation at the beginning of 1968, over 100,000 redundancies have been notified to my Department. That figure gives an idea of the contribution which the scheme has made in alleviating the anxiety and the hardship which so many have to experience in situations of redundancy.
I am glad to say that the number made redundant in 1978 fell to below 10,000 for the first time since 1973. This was an improvement of almost 3,000 on the 1977 figures and while we must strive to bring the level of redundancies down still further, I believe the improvement is a reflection on the considerable efforts of the Government to increase employment opportunities and reduce unemployment. We will continue with our efforts and I hope to see a further significant reduction in our redundancy figures this year.
At the same time, the incidence of redundancies as a measure of job loss and human hardship must not be exaggerated. The redundancy payments scheme could be seen as an adjunct to our moves from protection to free trade. The removal of tariff barriers had begun in the early sixties and was greatly extended by the Anglo-Irish Free Trade Agreement in the middle of the decade. Membership of the European Communities was also foreseen, with which would come further dismantling of our tariff barriers.
Studies carried out in the early sixties showed that, in some industries a substantial amount of restructuring, involving job changing and training in new and developing skills would be necessary if those industries were to prosper in free trade conditions and if employment in them was to be maintained and expanded. The 1967 Act was an important contribution. It has helped to alleviate the short-term hardship of workers made redundant and to promote the necessary long-term restructuring of industry, by facilitating, retraining and readaption and promoting the general acceptance of change. Other elements of our manpower policy, including the advisory and placement facilities of the National Manpower Service, the resettlement allowance scheme and the training and retraining programmes of AnCO were all available as well to help promote the changes the country needed.
On reviewing the legislation, I have had regard to these factors as well as to developments since the scheme began. I have also taken into account criticisms, representations and suggestions received. There have been detailed discussions with both employer and worker representative bodies. The proposals in the Bill which is now before the Seanad are based on the premise that the redundancy payments scheme should continue and that it be developed as a component of manpower policy.
My review showed the scheme needed to be significantly recast. The general improvement in the level of social welfare benefits, and especially the introduction of pay-related benefit in 1974 raised the question of the continuing need for redundancy weekly payments. These are paid in conjunction with unemployment benefit and pay-related benefit but normally subject to the rule whereby the aggregate weekly amount does not exceed 85 per cent of pre-unemployment average net weekly earnings or £50, whichever is the least. This 85 per cent rule has meant that since 1976 redundancy weekly payments have been considerably curtailed. In fact, there are cases where redundant workers have ceased to become entitled to any weekly payments. A recent survey of almost 1,000 recipients showed that 78 per cent were receiving payments on a reduced or nil rate, while only 22 per cent were receiving the maximum payments of £24.
A comprehensive study of the redundancy payments scheme published in 1977 under the auspices of the Economic and Social Research Institute concluded that the weekly payments, being an income maintenance feature of the scheme, should be discontinued, income maintenance being more appropriate to the social welfare system.
My own examination of the scheme has led me to the same conclusion. One of the main provisions of the Bill is, therefore, to discontinue weekly payments. It is proposed, however, that persons currently in receipt of redundancy weekly payments at the point when they are abolished, that is, 6 April 1979, will continue to receive their entitlements until they are exhausted or cease for other reasons.
Weekly payments have always been associated, particularly by the trade unions, with the workers' contributions. This probably results from a comparison with the British scheme which has no weekly payments or workers contributions. I consider it appropriate therefore that as weekly payments are to be discontinued, so too should the workers' contribution. A proposal is accordingly included in the Bill to abolish the workers' redundancy contribution from 6 April 1979. The Redundancy Payments Fund will be financed henceforth, it is proposed, entirely by employers' contributions.
It is further proposed that these employer redundancy contributions should, as with social welfare contributions in general, be pay-related. They will be collected as part of the general social insurance contribution scheme and be levied on earnings up to the same ceiling as for social insurance purposes. The figure specified in the Social Welfare Act, 1978, is £5,000, but provision is made to update this figure. I do not think it is necessary for me to outline the advantages of a system of contributions related to pay. Senators will recall that during the passage of the Social Welfare Bill last year the House discussed the conversion from flat rate to pay-related contributions. I would just like to say that a pay-related basis is all the more appropriate for redundancy contributions since the workers' lump sum and hence the employers' rebate entitlements will be pay-related.
I am proposing that the rate of the redundancy contribution be set at 0.5 per cent of reckonable earnings. It is estimated that this will give the Redundancy Fund an income of about £9 million in the year commencing 6 April 1979, which I expect will keep the fund in credit at least up until the end of the first year of operation of the revised scheme. Then it is my intention to review the situation, including the adequacy of the contribution rate, in the light of the experience in the meantime.
I am also proposing to raise the statutory ceiling on lump sums. The ceiling for calculating lump sums is at present £2,500 and I propose to double this figure. This would give a best possible lump sum of £4,087 when the revised scheme comes into operation as against £2,043 now.
An unsatisfactory characteristic of our redundancy payments scheme is its complexity. Senators who have had to understand how the scheme works will be aware of this. An important objective in my review of the scheme was therefore to simplify it to the greatest extent possible so that it is more easily understandable to those who have to do so. Indeed, the amendments I have already indicated, though not proposed for simplicity sake, will mean a much less complicated scheme.
The rebate system as it now exists is particularly complex. At present an employer is entitled to a 55 per cent rebate if he gives the requisite two weeks' notice, with an extra 2½ per cent for each week of extra notice up to a maximum of eight weeks or 70 per cent. Further, in the case of certain long-service employees part of the lump sum is rebated at 100 per cent. Where two weeks' notice was not given, the rebate could be reduced to 45 per cent. This complicated rebate system was designed to encourage employers to give additional notice to workers so that they might make arrangements about further employment and also to provide advance information on impending redundancies to the State agencies concerned so that they might be better able to carry out their functions in relation to the redundant workers. I refer in particular to the placement function of the National Manpower Service and to AnCO.
Since the enactment of these rebate provisions there have been other developments which ensure that these objectives are more effectively achieved than through the provisions of the Redundancy Payments Acts. The Minimum Notice and Terms of Employment Act, 1973, and the Protection of Employment Act, 1977, make provision in regard to the giving of notice. The National Manpower Service and AnCO and their offices throughout the country concern themselves with the placement and training of redundant employees whenever possible.
I am proposing, therefore, to confine the notice provisions of the Redundancy Payments Acts simply to two weeks, which is adequate for the administration of the scheme, and at the same time I am proposing a uniform level of rebates set at 60 per cent which is just below the average rate of rebate up to now. I might point out that this is a fairly high rate of rebate, especially when compared with the UK's current 41 per cent. For failure to comply with the minimum of two weeks' notice a provision is included whereby the rate of rebate may be reduced from 60 per cent to 40 per cent. I am further proposing that the Minister for Labour should have power to vary these rates of rebate by regulation, subject to the sanction of the Minister for Finance and possible annulment by either the Dáil or Seanad.
When the 1967 Act was enacted the old age pension age was 70 years. This continues to be the age up to which a person can qualify for redundancy payments as it was not brought down with old age pension age. I feel the upper limit for redundancy payments entitlement should be set at old age pension age and accordingly a provision to that effect is included in the Bill. I am, however, aware that a sudden drop could disentitle many people, both employers and workers, with reasonable expectations in this respect in the event of redundancies. It is proposed, therefore, that the drop should not occur until one year after the other provisions in the Bill come into operation, that is, from 6 April 1980.
In 1967, when the scheme was established, the normal working week was 42 hours and the number of hours in a week which a worker was normally expected to work in order to qualify under the scheme was set at half that number, that is 21. The reasoning behind this is that the scheme should cover employments from which employees are deriving the main source of income and should not extend to subsidiary jobs. I am proposing that, since the normal working week is now 40 hours, the number of hours needed to qualify be reduced to 20.
One of the problems faced by an employee who is under notice of redundancy is the need to get another job. While most employers would in the circumstances allow employees reasonable time off to look for work or arrange for training, I feel this is something which should be given to employees as of right. I have accordingly included a provision in the Bill to this effect. To safeguard against abuses, employers may require the employee to give reasonable evidence of appointments in this regard.
As regards the Employment Appeals Tribunal, Senators may well be aware of delays in hearing resulting from a backlog of cases. This is largely due to the increased work-load imposed on the tribunal by the Unfair Dismissals Act, 1977. I have been conscious of this problem for some time and I am proposing in the Bill that the membership of the Tribunal be considerably expanded. Provision is made to permit the appointment of five vice-chairmen instead of three and of 30 ordinary members instead of 24. I have also provided that should the work-load of the tribunal warrant it, additional appointments may be made for the speedy despatch of business.
I now come to the remaining amendments to the Acts which affect details of eligibility and the administration of the scheme. As details of these amendments are I believe set out clearly in the Explanatory Memorandum I propose here to give you just a brief summary of what is involved.
In relation to short-time, sections 10 and 11 improve the provisions of the Act relating to short-time situations, section 10 by providing the tribunal with some index of the permanency or otherwise of the short-time involved and section 11 by allowing employees whose hours or pay are reduced substantially, 52 weeks within which they can claim redundancy.
Regarding appeals to the tribunal, section 12 empowers the tribunal at its discretion to allow appeals beyond the usual two-year limit in cases where the employer fails to give notice or a redundancy certificate. Regarding an employee leaving before expiry of notice, section 9 allows employees and employers to come to an agreement in the situation where an employee wishes to leave outside the obligatory notice period.
In cases of winding-up and bankruptcy, section 13 provides that the Minister's claim where he has paid employees direct from the fund should rank as a priority debt. This should conduce to the workers involved getting paid earlier and reduce the incidence of direct payments from the fund.
As well, provision is made in the schedule so that periods of leave for childbirth where the employee resumes and periods of dismissal where reinstatement has taken place under Unfair Dismissals Act shall not break continuity of service.
Also, to enable me to act quickly and effectively in administering the fund, I have taken power by regulation to change the ceiling for calculating lump sums, the contribution rate and the level of lump sums—all to be subject to the prior sanction of the Minister for Finance and possible annulment by either Dáil or Seanad. Penalties have been updated and the Bill contains the standard provisions on citations, construction and commencement.
In the Dáil a number of amendments were proposed by Deputies and having considered these I myself put down some amendments for Report Stage which substantially met the points sought by the original amendments. These related to certain points of detail in the matter of entitlement involving the requirements in certain short-time and minimum notice situations and the fixing of the ceiling for calculating lump sums.
I might add that it is my intention to have a guidebook prepared on the amended scheme when this Bill has been enacted.
In conclusion, I believe that the proposals in the Bill are worthwhile and useful and I hope Senators can support them.