The purpose of the redundancy payments scheme is to compensate workers, under the Redundancy Payments Acts, for the loss of their jobs by reason of redundancy.
Compensation is based on the worker’s length of reckonable service and reckonable weekly remuneration, subject to a ceiling of €600.00 per week. All payments are made from the Social Insurance Fund (SIF). There are two types of redundancy 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 or liquidation.
It is the responsibility of the employer to pay statutory redundancy to all their eligible employees. An employer who pays statutory redundancy payments to their employees is then entitled to a rebate of a portion of that payment from the State. Rebates to employers and lump sums paid directly to employees are paid from the Social Insurance Fund.
Significant and increasing amounts have been paid out in redundancy rebates to employers from the SIF in recent years. While the SIF is constituted primarily from employer contributions, the taxpayers’ contribution is also significant. One of the factors which influenced the Government’s decision to revise the rebate rate was the increasing cost of rebates in recent years.
I am very concerned about the deficit in the Social Insurance Fund. In term of redundancy rebate payments to employers, €152.2 million was paid out in 2006; €167.4 million in 2007; €161.8 million in 2008; €247.9 million in 2009; €373.2 million in 2010 and €185.3 million in 2011. The amounts paid out in lump sums to employees have also increased. The Budget 2012 changes were given legislative effect in the Social Welfare and Pensions Act 2012. The new changes apply where the date of dismissal by reason of redundancy occurs on or after 1 January 2012.
I do not see why this country should continue to borrow money to plug the hole in the Social Insurance Fund in order to fund the cost of making people redundant – often from very profitable companies.
As part of the deliberations on Budget 2012, the approach taken in other countries was examined and it was decided that the 60% level of rebate is not sustainable in the current economic climate. While this may cause difficulties for employers it should be noted that redundancy rebate payments to employers are not common in many EU and other jurisdictions. The new arrangements bring Ireland more closely into line with practice in other countries.
It is not proposed to introduce a tiered system of redundancy rebate rates or to make exceptions for small businesses.
