This Bill has a twofold purpose. First, it lays the groundwork for the introduction of a new scheme, the social employment scheme for the long-term unemployed and, second, it provides for the abolition of a scheme which has outlived its usefulness, namely, the intermittent unemployment scheme known as the wet-time scheme. The explanatory memorandum circulated with the Bill was I trust helpful in the examination of the proposals by Senators.
The Government's plan Building on Reality 1985-1987 outlined a range of measures which have been devised to aid employment creation and halt the upward trend of unemployment. The new social employment scheme will offer opportunity and hope to significant numbers of our longterm unemployed. This major initiative will be introduced over the coming months by the Minister for Labour who will be announcing full details of the new scheme early in the new year. Some details of the scheme have yet to be finalised but I will mention those aspects of the scheme which are relevant to the Bill.
Under the new scheme, persons who have been unemployed for at least 12 months and who are drawing unemployment assistance will be offered part-time work for up to two and a half days per week. Generally speaking, applications for participation in the scheme will be accepted for employment on projects which respond to clearly identified community needs. These may range from environmental projects to those in the arts and cultural areas. These projects must be non-profit in nature and must not affect the employment prospects of existing workers.
A project will not under any circumstances be acceptable where it is in substitution for existing employment. Employment under the scheme will last for up to 52 weeks for each person and the £70 wages under the scheme will be paid in lieu of the unemployment assistance that would normally be paid in respect of a full week. Accordingly the savings on unemployment assistance will partially offset the cost of wages, supervision, materials and general overheads. The wages under the scheme will be like wages under any other employment, be liable for income tax, where appropriate, and for PRSI deductions.
This Bill sets out the PRSI arrangements for employees under the new scheme and it also provides for the exclusion of participants in the scheme from unemployment assistance and unemployment benefit. Sections 3 and 9 of the Bill deal with the PRSI arrangements. The effect of section 9 is to exclude employment under the new scheme from normal social insurance cover by classifying it as an "excepted employment" for the purpose of the Social Welfare (Consolidation) Act, 1981. However, section 3 of the Bill provides that the employment will be insurable for occupational injuries purposes. This is the type of insurance cover that already applies to employment under schemes promoted by AnCO and the Youth Employment Agency — the intention is that the social insurance position of social employment or training schemes should be broadly similar. As employment under the new scheme will be insurable for occupational injuries benefits only, the class J rate of employment contribution will apply instead of the normal PRSI contribution. The class J rate normally amounts to 3.4 per cent, that is 0.4 per cent for the employer and 3 per cent for the employee. The 3 per cent is made up of the 1 per cent health contribution, 1 per cent Youth Employment contribution and the 1 per cent income levy. However, where the employee has a medical card — and it can be assumed that many participants in the social employment scheme would be holders of medical cards — then the full 3.4 per cent contribution is paid by the employer.
It will, of course, be open to persons employed under the social employment scheme to engage in other employment for the remainder of the week. However, where a person does not succeed in getting insurable employment for the remainder of the week his social insurance record will be fully protected through the award of special credited contributions. These credits will substitute for the credits normally awarded when a person draws unemployment benefit or assistance and the Minister will be making regulations for this purpose on the same lines as those already in force in respect of AnCO and youth employment trainees. Accordingly, workers in the new scheme can be assured that their social insurance records will be fully protected. In the case of workers who take up a job for the remainder of the week, the employment with the second employer could be fully insurable, depending on hours worked and other factors and this would also enable the person concerned to maintain his insurance record and possibly to requalify for unemployment benefit.
Sections 2 and 4 provide that participants in the social employment scheme will not be eligible to receive unemployment payments for the balance of each week that they take part in the scheme. To allow participants to receive unemployment payments while employed under the scheme would undermine the whole rationale of the scheme. As I have stated already, the scheme is being funded on the basis that participants will not be eligible to draw unemployment assistance — hence the provision in section 2 of the Bill. Participants will also be disqualified for receiving unemployment benefit through section 4 of the Bill — this is necessary because some participants could by virtue of getting fully insurable employment for the balance of the week succeed in qualifying or requalifying for unemployment benefit.
The new social employment scheme will offer new hope to the long term unemployed and the new scheme complements the special efforts which have already been made by the Government to improve the social welfare incomes of the long-term unemployed. Senators will know that this group have received special increases in their rates of payment over the last two years. These were the 5 per cent increase granted in October 1983 and a further 1 per cent above the level of general increase in payments in July last.
The winding-up of the wet-time scheme is dealt with in sections 5 to 8 of the Bill. Before looking at the individual sections of the Bill, I would like to give Senators a general outline of the scheme and the reasons for the Government's decision to abolish the scheme from the beginning of the new year.
The scheme was introduced in the Insurance (Intermittent Unemployment) Act, 1942 and is now incorporated in Part V of the Social Welfare (Consolidation) Act, 1981. It provided insurance against loss of wages due to inclement weather for manual workers in the building trade. Prior to that, those who were normally paid by the hour, received no compensation for loss of earnings due to recurrent short periods of interruption of work due to bad weather and this gave rise to a great deal of hardship. In 1955 the scheme was extended to include manual workers in the civil engineering and painting trades.
Under the scheme workers are compensated for the earnings lost in periods of inclement weather, up to a maximum of eight hours per day. To qualify for benefit a worker must have 12 contributions paid between the beginning of the previous contribution year and the date of the stoppage of work. The wet-time benefit is paid by the employer and is repaid to him by the Department of Social Welfare out of the wet-time fund.
The current rates of wet-time benefit which have been in force since 1978 are 87p per hour for a skilled worker, 79p per hour for an unskilled worker and 32p per hour for a young person.
The total cost of benefit payments are borne by the contributions or employers and employees which are paid into the wet-time fund. The costs of administration, however, are borne by the Exchequer out of the Vote for the Department of Social Welfare. There is a separate weekly wet-time contribution distinct from the PRSI contribution and payable on a 50-50 basis by workers and employers in the industries concerned by means of stamps affixed to or impressed on wet-time books which are issued at employment exchanges. Contribution rates have been adjusted periodically over the years to ensure that the fund is adequate to discharge its liabilities. The current rates of contributions are £1.42 per week in respect of a skilled worker, £1.38 per week in respect of an unskilled worker and 52p per week in respect of a young person.
The Government had a number of reasons for winding up the wet-time scheme. The original objective of the wet-time scheme, which was a valid one at the time, was to compensate workers in the building trade for loss of wages due to unemployment caused by bad weather. However, improvements in the conditions of employment of workers concerned have meant that there is no longer any loss of wages because of unfavourable weather. The existence of the guaranteed working week in the building industry is the main reason for the Government's decision to abolish the scheme.
Under an agreement dated 1 June 1966, which was registered under section 28 of the Industrial Relations Act, 1946, with the Labour Court, the Construction Industry Federation and trade unions agreed that the working week would be 40 hours. The agreement also provided that a worker who kept himself available for work throughout the normal working hours of each working day of the week but who had been prevented from working due to inclement weather during any part of that week was entitled to payment of not less than 32 times the hourly rate applicable to him. This became known as the guaranteed week. By a further agreement which became effective from 1 November 1980 the guaranteed week is now 40 hours. A worker in this industry, therefore, is paid for a full 40 hours regardless of any time lost because of any weather and the consequent loss of wages which is part of the definition of "intermittent unemployment" no longer applies.
In practice what happens at present is that where a stoppage of work occurs due to bad weather the employer pays the full wage in respect of the guaranteed 40 hours and subsequently recovers from the wet-time fund the amount of any wet-time benefit due. In effect, therefore, the wet-time benefit partially subsidises employers in implementing the 40 hour week to the extent that it is 50 per cent financed by the employees. This subsidy costs employees over £0.5 million a year.
The termination of a scheme which no longer fulfils an effective role is all the more important in present circumstances when a central objective of Government policy is to reduce public expenditure. In this connection the administration of the scheme in recent years has given rise to much difficulty and my Department meet with a great deal of reluctance on the part of both employers and workers to comply with the provisions of the scheme. This adds considerably to the administration costs of the scheme. Abolition of the scheme will relieve the Exchequer of the cost of the staff of the wet-time section in my Department. In addition there are costs with regard to social welfare officers, employment exchange and accounts branch personnel, post office charges etc.
A further consideration in the Government's decision to abolish the scheme is that the wet-time fund would be in deficit in 1985. The fund was intended to be self-sufficient and there is no provision for any Exchequer subsidy to meet a deficiency in the fund. The only assistance which can be provided by the State in such an event is to lend the necessary moneys to the fund and these must be repaid with interest. To maintain the solvency of the fund it would be necessary to increase the contribution rates substantially — by about 30 per cent even to maintain present benefit rates.
Benefit rates were normally maintained at approximately 60 per cent of hourly wage rates in order that a worker affected by stoppages due to bad weather would not suffer any significant reduction in his take-home pay. However, these rates have not been increased since May 1978 with the result that they are now equal to only about 30 per cent of wage rates. To bring the rates of benefit into line with wage rates would require further significant increases in contributions. Needless to say, the workers concerned would hardly be willing to pay their share of the increased contribution rates because they already have the benefit of the guaranteed week. This is another argument in favour of winding-up the scheme at this stage.
I will now briefly comment on the individual sections of the Bill which give effect to the Government's decision to abolish the scheme. Section 5 substitutes a new definition of "intermittent unemployment", the effect of which is that payments of wet-time benefit will not be made for any periods of work stoppage occurring after 6 January 1985. Section 6 provides that contributions under the scheme will cease to be payable after 6 January 1985 — this coincides with the end of the contribution year under the scheme. Section 7 provides that applications from employers for repayments of wet-time benefit may be made to the Department of Social Welfare up to 29 March 1985. This should give employers ample time to submit any outstanding claims.
As I have already indicated, it is likely that there will be insufficient assets in the wet-time fund in 1985 to meet the cost of outstanding claims and section 8 of the Bill provides that any deficit will be met through an Exchequer grant to the fund. It is estimated that the short-fall could be of the order of £0.5 million and provision for this sum has been made in my Department's Estimate for 1985.
This Bill must be seen in the context of the social policy framework contained in the Government's plan for the next three years. On the one hand the Government, in drawing up the plan, were very concerned to do something positive for the long-term unemployed and the new social employment scheme is a fairly radical initiative designed to tackle what is without doubt the most serious problem facing the country at this time. The planning process also involves the review of existing services in the light of their original purpose and the relevance of the original objectives today. The abolition of the wet-time scheme is the result of this type of review. There can be little dispute that, even when times are good, unnecessary and wasteful public expenditure must be eliminated. Resources must be freed to help the less well off sections of our community and my Department will continue to review and appraise existing schemes in terms of their effectiveness and efficiency.
I commend this Bill to the Seanad for favourable consideration.