Dáil Éireann Debate, Tuesday - 8 October 2013
293. Deputy Brendan Griffin asked the Minister for Social Protection the savings made due to the changes to State redundancy contributions since 2011; if the matter is open to review; if she is concerned that the changes are acting as a barrier to employers taking on new permanent employees; and if she will make a statement on the matter. [41935/13]
View answerThe 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 per week.
It is the responsibility of the employer to pay statutory redundancy to all their eligible employees. Employers who pay statutory redundancy payments to their employees are entitled to a rebate of a portion of that payment from the State if the date of dismissal by reason of redundancy is before 1 January 2013.
In Budget 2012 the level of the rebate was reduced from 60% to 15% and in Budget 2013 the Government decided to remove the redundancy rebate to employers in respect of redundancies where the date of dismissal is on or after 1 January 2013.
Where an employer can prove that he/she cannot afford to pay a statutory redundancy payment, the State makes a lump sum payment directly to the individual and a debt is raised against the employer which the State will endeavour to recover. The Budget changes have no impact on the level of these payments.
Rebates to employers and lump sums paid directly to employees are paid from the Social Insurance Fund (SIF). I am very concerned about the deficit in the SIF. One of the factors which influenced the Government’s decision to reduce the level of the rebate initially and to remove it in Budget 2013 was the increasing cost of rebates.
While the SIF is constituted primarily from employer contributions, the taxpayers’ contribution is also significant. I do not see why this country should continue to borrow money to plug the hole in the SIF in order to compensate often profitable companies for the cost of making their employees redundant in Ireland and, in some cases, transferring their employment abroad.
The continuation of the rebate payment was 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 current arrangements bring Ireland more closely into line with practice in other countries and it is not proposed to review the matter.
As the number of redundancy claims received by the Department has reduced in recent years it is not possible to attribute all of the decrease in expenditure on redundancy rebates to the Budget changes. However, it is worth noting that expenditure on redundancy rebate payments decreased from €373.3 million in 2010 to €188.3 million in 2011 and to €167.4 million in 2012.
I am not aware of any evidence that the removal of the redundancy rebate is acting as a barrier to employers taking on permanent employees.
