Vol. 462 No. 5
21 Mr. S. Brennan asked the Minister for Transport, Energy and Communications whether legislative changes planned in relation to PRSI payments by Telecom Éireann will also extend to other companies operating in the telecommunications sector. [5023/96]
When I became aware that the holding of an equity stake in Telecom Éireann by a partner would cause the company to lose its public authority status for social welfare purposes and would result in changes in the PRSI status of the company and its employees, I secured the agreement of the Minister for Social Welfare and the Government for a change in legislation to continue the existing arrangements in the event of an equity-based strategic alliance being concluded. The legislative provision is contained in the Social Welfare Bill published on 1 March.
The Social Welfare Bill, 1996, gives power to the Minister for Social Welfare to maintain the current modified social insurance status of Telecom Éireann and its employees. The purpose of this provision is simply to confirm the continuation of existing arrangements in the event of the company entering a strategic alliance. New employees recruited by the company after 5 April 1995 will be subject to full PRSI rates as is the case with all new public sector employees recruited after that date. The question of changing the current PRSI status of other companies operating in the telecommunications sector does not arise.
The Minister is making a major announcement and I trust he is doing it deliberately. Is he telling the House he has included a provision in the Social Welfare Bill whereby a State company that is privatised will continue to pay the State rate of PRSI and not the private rate?
I am surprised the Deputy's galaxy of advisers have not brought the measures in the Bill to the Deputy's attention. He should have further discussions with them.
The interests and entitlements of existing employees in Telecom Éireann must be protected and we have made provision for that in the Social Welfare Bill. Following an equity based strategic alliance the State will retain a majority share in the company. The company will continue to carry out its obligations under the Postal and Telecommunications Services Act, 1983 to provide national telecommunications services throughout the State and will continue to meet its obligations to employees under section 45 of that Act. Under this obligation, staff recruited by the company prior to 6 April 1995 and those transferred to it from the Civil Service on vesting day are subject to modified PRSI status. This legislative proposal is designed to continue the existing arrangements for those staff. Any change in their terms and conditions of employment, including a change in PRSI status, would be a matter for negotiation.
This was not done for Irish Steel, Greencore or Irish Life. Is it true that this will cost about £50 million? Is it constitutional to have a company that is part privatised paying a different rate of PRSI from that of its competitors? Will a different rate apply to each company, both of which have private interests? This is a major change in Government policy and I object to it being slipped into social welfare legislation in this way.
There is absolutely nothing to suggest that this change is being slipped into legislation. This decision was taken by the Government following consultation and legal advice. I am surprised the Deputy is advocating on behalf of Fianna Fáil that the Government and I should welsh on an agreement and our statutory obligation to the existing workforce in Telecom Éireann. We are simply providing that the status quo will remain under any new arrangements for workers who had entitlements prior to 6 April 1995.
This never happened previously in the case of the privatisation or part privatisation of State companies. Is it not the responsibility of the people from Denmark, Switzerland or wherever who buy the one-third of shares now being sold off to compensate the workers in Telecom Éireann rather than the taxpayer, to the tune of £50 million?
As the Deputy will be aware, Telecom Éireann is subject to the class D modified employers' rate whereas the standard employers' rate is 12.2 per cent. However, it is important to recognise that other issues need to be addressed in this context. While the company benefits from a lower employer contribution rate it has to provide a non-contributory pension based on full pay, full sick pay and continuity of employment for its employees. These terms are over and above those applicable in the private sector where full PRSI confers benefits on employees which do not apply to those on modified rates. The company would have to pay compensation to its employees in respect of moving from the modified employees' rate of 0.9 per cent to the standard rate of 5.5 per cent. This would give rise to changes in the entitlements of employees and, therefore, would have cost consequences for Telecom Éireann's early retirement, voluntary service and pension schemes. It would also give rise to consequences for the social insurance fund.
