Dáil Éireann Debate, Thursday - 28 November 2013
73. Deputy Michael McGrath asked the Minister for Social Protection if she has any concerns regarding the abolition of the redundancy rebate to employers, in particular, regarding the impact of its abolition on employers who themselves are considering retiring and closing their business but who will then face a very substantial redundancy bill; and if she will make a statement on the matter. [51170/13]
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.
Where an employer can prove that he/she cannot afford to pay a statutory redundancy payment, the State makes a lump sum payment, from the Social Insurance Fund (SIF), directly to the individual. Some of the employers to which the Deputy refers may fall into this category. Where the State makes a statutory redundancy payment directly to an individual a debt is raised against the employer which the State will endeavour to recover.
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. Rebates to employers are also paid from 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 significant cost of rebates in recent years. Expenditure in this regard was €373.2 million in 2010; €185.3 million in 2011; and €167.4 million in 2012. While the SIF is constituted primarily from employer contributions, the taxpayers’ contribution is also significant.
I am very concerned about the deficit in the SIF and 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.
