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Redundancy Payments.

Dáil Éireann Debate, Tuesday - 20 April 2010

Tuesday, 20 April 2010

Questions (127, 128, 129)

Deirdre Clune

Question:

163 Deputy Deirdre Clune asked the Minister for Enterprise, Trade and Employment the steps he will take to address the situation when an employer who has failed to pay his employees any redundancy payments when a company is wound up on the basis of an inability to pay can then proceed to establish a new company; and if he will make a statement on the matter. [14831/10]

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Deirdre Clune

Question:

164 Deputy Deirdre Clune asked the Minister for Enterprise, Trade and Employment the options open to an employee if their employer has failed to pay them redundancy claiming inability to pay but that same employer proceeds to establish a new company; and if he will make a statement on the matter. [14832/10]

View answer

Written answers

I propose to take Questions Nos. 163 and 164 together.

Under the Redundancy Payments Acts 1967-2007, the objective is to ensure that statutory redundancy payments, due to eligible employees on being made redundant, are made in accordance with the legislative provisions. The legislation places the onus, in the first instance, on the employer to discharge the obligation to pay redundancy entitlement to employees. On so doing, the employer is entitled, by virtue of the pay related social contributions made to the State, to recover 60% of the lump sum redundancy payments paid out to employees.

In the case of liquidations/receiverships, the Department acts in locus of the employer and pays the redundancy lump sums directly to the employees and then seeks to recover from the appointed liquidator/receiver the 40% which the employer would have been due to pay to the employees.

In instances where the employer does not formally wind the company up but goes into informal insolvency and is unable to pay the statutory redundancy entitlements, the Department seeks from the employer evidence of inability to pay the entitlements to the employees. This involves requesting a statement from the company's Accountant or Solicitor attesting to the inadequacy of assets to make the redundancy payments and, the latest set of financial accounts for the company. The employer is also asked to admit liability for the 40% liability attaching to the company arising from the redundancy payments. If this information is provided to the Department, the employees are paid their redundancy entitlement from the Social Insurance Fund. Upon payment, the Department pursues the company for the 40% share which the company would ordinarily have been expected to pay to the employees. In this instance, the Minister becomes a preferential creditor in a winding-up situation in recovering amounts paid from the Social Insurance Fund and this debt stands against a company for as long as it is live on the Companies Register at the Company Registration Office.

In instances where the employer is not in a position to provide the documentation as outlined, the Department advises employees to seek to establish their rights and entitlements to Redundancy before the Employment Appeals Tribunal (EAT). A positive determination of the EAT enables the Department to pay the redundancy entitlements of the employees directly to them.

Of course it is the case that company failures are a normal facet of business life and it would be unduly penal if, due to a company failure, all the directors and officers of that company were to be prevented forever more from setting up again. That is, provided it is clear that their actions resulted from genuine business failure as opposed to acts of recklessness or inappropriate behaviour.

Under Company law, there are provisions dealing with companies who fail and re-engage in trading under a new name in particular, under the provisions of Part V of the Company Law Enforcement Act 2001. Under section 56 of the Act, Liquidators of insolvent companies are required to submit a report to the Director of Corporate Enforcement within 6 months of their appointment. This report outlines the circumstances of the insolvency and addresses whether the directors acted honestly and responsibly in relation to the conduct of the company's affairs. Liquidators are further obliged to bring High Court proceedings for the restriction of such directors unless relieved of that obligation by the Director of Corporate Enforcement.

A restriction declaration, if made, prohibits an individual from acting, either directly or indirectly, as an officer of a company or from being involved in its formation or promotion for five years, unless the company is adequately capitalised.

The Director of Corporate Enforcement has the power to bring any other prosecution for breaches of the Companies Acts as deemed appropriate in any individual case. If the Deputy is aware of any activities in which the Director may have an interest, I would encourage him to have that information forwarded to the Director of Corporate Enforcement.

Brendan Howlin

Question:

165 Deputy Brendan Howlin asked the Minister for Enterprise, Trade and Employment the length of time taken to process applications for redundancy payments; if measures have been introduced for the purpose of speeding up the process; and if he will make a statement on the matter. [14864/10]

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My Department administers the Social Insurance Fund (SIF) in relation to redundancy matters on behalf of the Department of Social and Family Affairs. There are two types of payment made from the SIF — rebates to those employers who have paid statutory redundancy to eligible employees, and statutory lump sums to employees whose employers are insolvent and/or in receivership/liquidation.

The impact on business of the severe economic circumstances currently pertaining has resulted in an unprecedented increase in the level of Redundancy Payment claims lodged with my Department. This has impacted significantly on the capacity to maintain the customer service targets that previously obtained. The scale of the challenge on the Redundancy side is evident from the statistics that show incoming redundancy claims in 2009 amounted to 77,001 which represents a threefold increase over the level of claims lodged in 2007 and earlier years. In 2007, claims received were of the order of 25,000.

Efforts continue to be made by my Department to deliver more acceptable turnaround processing times for Redundancy payments given the difficulties that this gives rise to for both individual employees and the business community. Measures already taken in the Department in 2009 to alleviate the pressures on the Payments area include: almost doubling the number of staff through reassignment to a current level of 52 full time equivalents; prioritisation of the Department's overtime budget towards staff in the both Section to tackle the backlog outside normal hours; establishment of a special call handling facility in NERA to deal with the huge volume of telephone calls from people and businesses concerned about their payments; better quality information relating to current processing times on the Department's website; and engagement with the Revenue Commissioners to facilitate the offset of redundancy rebate payments by employers against outstanding tax liabilities which those employers owe to the Revenue Commissioners.

The backlog and waiting times remain at unacceptable levels. However, improvements are evident. The number of claims processed and paid by the Redundancy Payments Section in 2009 amounted to 50,664, an increase of 70% over 2008. In the first quarter of 2010, my Department processed 21,122 claims — an increase of over 151% on the previous first quarter in 2009. Claims processed in the month of March 2010 was the highest ever achieved in the Section with 8,168 claims processed in the month. In the year to date, inroads have being made on the backlog of claims on hand, which reduced from 41,168 at the end January 2010 to 37,054 at the end of March 2010.

The Redundancy Payments Section of my Department is currently processing rebate applications submitted by post from August 2009 and those filed on-line from September 2009, so that the waiting time is approximately 7 to 8 months depending on the manner of filing the application. In respect of lump sum payments paid directly to employees in instances where employers are unable to pay the statutory redundancy entitlements, the Section is, in general, processing claims dating from August 2009.

Responsibility for the payment of redundancy and insolvency payments is due to be transferred to the Department of Social Protection. The intention is to transfer by Government order, the payment functions arising under the Redundancy Payment and Insolvency Payment schemes. In transferring the functions between Departments, it is the intention that this will operate seamlessly and without any adverse impact on the service levels being experienced by individuals or the business community awaiting payment of redundancy claims.

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