May I begin by expressing my appreciation to this House for the co-operation they have extended to me in relation to putting through, in a way that I know is not terribly acceptable in the normal course of events, a piece of legislation of this nature or indeed any form of legislation. I do want to put on the record of the House my personal appreciation and I hope, in effect, the appreciation of all of the workers who will benefit from this legislation when it becomes law and when it comes into operation.
This legislation is being introduced for the purpose of implementing an EC directive but also in the interests of social justice for workers who lose their employment and are left without due rights because of their employers' insolvency.
Ever since it became publicly known that this legislation was being prepared, I have been receiving very many letters and representations from, and on behalf of, workers whose employers have become insolvent. These individual representations have underlined for me the extent of the loss being suffered by the workers affected by employers' insolvency and of the difficulties and hardship caused for them and their families. To be made redundant and have to face unemployment for any reason is a traumatic experience, but to be left without wages for the final weeks of employment and other due entitlements as well makes the situation even more intolerable. Even in cases where some assets are available for part-payment of workers' entitlements, under existing legislation, because of the operation of the legal processes involved, these payments can be delayed for months or years until bankruptcy or liquidation proceedings can be finalised. It is the purpose of this legislation to provide that workers' entitlements are paid in full and are paid quickly.
A view sometimes heard implies that worker protection legislation can itself be in large measure responsible for closures, insolvencies and unemployment. I wish to express my total disagreement with this view. Nor do I accept that the body of worker protection legislation which has been built up in recent years should now be jettisoned because of general economic and employment difficulties. On the contrary, it is in such difficult times that such legislation is most needed. That is not to say, however, that the legislation in this area should not be closely looked at and reviewed. It has developed over the years in an ad hoc fashion and experience of its operation has shown that in various aspects it needs to be improved. The work of reviewing all worker protection legislation is an extensive task but I intend to have this undertaken as expeditiously as possible given the resources available to my Department. The purpose of these reviews will be to look not only at the individual statutes but also at the overall implications of the whole corpus of worker legislation to see what changes can be made to make the law more effective and fairer for employers, for workers and in the general public interest.
The measures proposed in this Bill are particularly necessary in current economic conditions in which, unfortunately, many businesses have ceased to function, many because of insolvency. But even in an improved economic situation this type of legislation will be needed as some companies will continue to get into financial difficulties leaving their workers not only without jobs but also without their wages and other entitlements.
The Members of the House will be aware of the existence of an EC directive which contains measures to protect workers in insolvency situations. This Bill will give effect to the requirements of that directive and in a number of respects goes beyond these requirements. Among the payments to be covered are wages, arrears of statutory minimum wages, holiday pay, payments on foot of company sick pay schemes and entitlements arising under various worker protection legislation as well as unpaid contributions to company pension schemes. Workers have been entitled to claim for the benefits set out in the EC directive as from 22 October 1983 and I am providing in the Bill for the payment of claims relating to pay in insolvency cases arising on or after that date. Strong representations have been made to me seeking to have an earlier implementation date but this is not feasible for a number of reasons. As with all worker protection legislation, it is unfortunately the case that regardless of what implementing date is chosen some workers will lose out. In this case, the most objective date which can be chosen is 22 October 1983, the date on which the EC directive came into force.
Detailed provisions are set in section 1 to cover the various types of insolvency situations which can arise. This section also outlines the criteria to be used to determine when an employer will be regarded as being insolvent. As the date of the insolvency will be of vital importance for the calculation of amounts due, the Bill specifies, in section 4, the date on which an employer will be regarded as having become insolvent. Section 4 will also enable me to specify by regulations the circumstances in which employers who are of a class or description specified in the regulations are to be taken to have become insolvent. This provision will enable me to cover situations which might arise where no formal winding up or bankruptcy proceedings are initiated.
The EC directive to which I referred requires the setting up of a fund — referred to in the directive as a Guarantee Institution — which will guarantee the payment of employees' outstanding claims relating to pay and this requirement will be met by the proposed extension of the existing Redundancy Fund. In my view, this is the simplest and most satisfactory way of doing so. The extended fund will be called the Redundancy and Employers' Insolvency Fund and this retitling is provided for in section 2 of the Bill.
The Redundancy Fund is financed by way of contributions from employers, including the Government in their role as employers, and this will continue to be the case with the extended fund. Because of the already high level of expenditure from the fund in respect of redundancy payments, it was necessary to raise the employers' contribution rate in this year's budget. The increase in the redundancy contribution from .01 per cent to .4 per cent contains an element of .02 per cent to cover anticipated expenditure arising from the measures provided for in this Bill. This .02 per cent element of the contribution should guarantee an income of approximately £1 million in a full year. It is difficult to predict what the likely level of expenditure will be but the best estimates which we have been able to make suggest that an income of this level should be sufficient.
I have power under the Redundancy Payments Acts to alter the level of contribution should this be necessary. While some information is available as to the number of companies which are the subject of formal insolvency proceedings during particular periods, little information is available in regard to the number of employees involved or the extent and nature of their claims. Account must also be taken of the informal type of insolvency situations about which figures are not available. Given that workers are unlikely to be in a position or willing to continue to work for long periods without remuneration, I consider that in the majority of cases, claims in respect of ordinary pay should not be substantial. The experience in the United Kingdom, where a similar fund has been in operation since 1976, has been that the major items of expenditure for the fund are minimum notice and holiday pay and I expect that the situation will be somewhat similar here. The average period in the UK was approximately for two weeks of arrears of pay.
Section 3 provides that the Bill will apply to those in employment which is insurable for all benefits under the Social Welfare Acts. The effect of this will be that the benefits provided for in the Bill will be available to those who are covered by the Redundancy Payments Acts. At present these Acts apply only to persons who work 20 hours or more a week for the same employer, although employers pay contributions to the Redundancy Fund in respect of people who work 18 hours a week and over. 18 hours is also the general limit for eligibility under the Social Welfare Acts.
When the EC directive was being drawn up, it was foreseen that the position of those who were outside the social insurance system could give rise to difficulties in the context of the Guarantee Institution from which payments would be made. For this reason the directive provides for the exclusion in the case of this country of persons who work for fewer than 18 hours per week for one or more employers and who do not derive their basic means of subsistence from the pay for this work.
Arising from the changing employment patterns and the growth in part-time working and jobsharing in this country and throughout the EC the question of part-time workers vis-à-vis worker protection legislation in general is being examined. Senators may be aware of the discussions that are in progress on a draft EC directive to cover a whole area of part-time working.
The basic approach in this Bill has been to cover employees whose employers pay a contribution to the Redundancy Fund on their behalf. I am, however, taking power in section 11 to enable me to extend the protection being provided to cover other categories of employees should I consider this to be desirable at a later stage. I have also provided in the Bill, in sections 12 and 13, for the reduction of the thresholds operated in a number of other pieces of worker protection legislation to 18 hours. These changes involve a reduction from 20 hours in the case of the Redundancy Payments Acts and from 21 hours in the Minimum Notice and Terms of Employment Act, 1973 and the Unfair Dismissals Act, 1977. These changes will bring about a desirable harmonisation in the eligibility thresholds for protection under the various Acts and are also in line with present trends in European Community labour practice.
I already referred to the fact that section 4 will give me power to deal with situations where no formal insolvency proceedings have been initiated. The Bill envisages a major role for receivers, liquidators and similar officers who are referred to as "relevant officers", in cases where formal insolvencies have occurred. It is necessary for me to have power to appoint a person to perform corresponding functions in situations in which formal insolvency proceedings have not been instituted but where workers are still left without their due payments, for example where employers have gone away or merely ceased trading and effectively insolvent. The same power may be needed in exceptional cases of formal insolvencies where, for example, a liquidator has withdrawn or failed to discharge his or her obligations under the Bill. The power is contained in section 5.
The duties envisaged for relevant officers under the Bill mainly involve arranging for the completion of various forms and certifying that amounts claimed are due and remain unpaid. The various forms to be used are referred to in the Bill as prescribed forms and will be set out in regulations to be made under section 16 when the Bill has been enacted.
Sections 6 and 7 outline the payments which will be made from the fund. While the EC directive refers specifically to outstanding claims relating to pay, it allows member states freedom to adopt their own definition of this term. I am providing in the Bill for the payment of claims in respect of the following: wages, arrears of statutory minimum wages, holiday pay, payments on foot of company sick pay schemes, entitlements under the Minimum Notice and Terms of Employment Act, 1973, and Anti-Discrimination (Pay) Act, 1974, the Employment Equality Act, 1977, the Unfair Dismissals Act, 1977, civil court awards in respect of wages, sick pay, holiday pay or unfair dismissal and also outstanding contributions to company pension schemes. A limit of eight weeks will operate in the case of wages, holiday pay and amounts due under company sick pay schemes. This is fully in line with the terms of the EC directive. The directive also allows member states the option of setting a ceiling on the weekly amounts which will be paid.
As the measures provided for in the Bill are related, in many ways, to the provisions of the Redundancy Payments Acts, I propose to limit the amount of payments, where these are related to wages, to the amount provided for in the Redundancy Payments Acts. At present this limit is £211.54 a week. The existence of this limit will not affect lower-paid workers. I will, of course, be keeping the limit under review — the Bill gives me power to revise it and also to vary the period of weeks in respect of which payments will be made. A limit of 12 months' contributions will operate in respect of unpaid contributions to company pension schemes. As far as workers' contributions are concerned, payment will be made only in respect of amounts deducted from pay but not actually paid into the scheme. The payments which I am providing for in the Bill go further than the requirements of the EC directive in a number of areas — for example, payments relating to company sick pay schemes, unfair dismissals and pension contributions.
In addition to providing for the protection of workers' claims relating to pay, the EC directive also imposes an obligation on member states to ensure that the necessary measures are taken to protect workers interests under company pension schemes. Because of the wide variety of pension arrangements which operate, it was apparent when the directive was being discussed that movement in this area would take some considerable time. The directive does not require that pensions be paid from the Guarantee Institution and it also provides that the institution need not be liable for outstanding contributions to company pension schemes. I am very concerned that workers' interests under company pension schemes be protected but I have also to take account of the possible cost implications of any measures which I introduce. In this Bill, I am providing for the payment from the fund of outstanding contributions whether payable by an employer on his own behalf or where deductions have been made for a worker's pay but not paid into the scheme, subject to a limit of 12 months contributions in each case.
I have given very detailed consideration to the whole question of company pension schemes and in particular to the best means of protecting employees' entitlements under such schemes. I am satisfied that the best way to proceed is in the context of the proposals for a national income-related pension scheme which are at present under consideration by my colleague, the Minister for Social Welfare. It is only prudent to have the position examined in full rather than making some hasty provision in this Bill which could have very wide reaching cost consequences for the Redundancy Fund, and which might not afford full protection for workers' rights. The overall security of company pension schemes is one of the matters which will be considered in connection with the proposals for a national scheme.
The Bill provides in section 9 that persons who have applied for payments in respect of wages, sick pay, holiday pay or arrears of pension contributions may, within a period of six weeks beginning on the day on which the decision on the application was communicated to them, or if that is not reasonably practicable, within such further period as the Employment Appeals Tribunal considers reasonable, present a complaint to the tribunal that no payment has been made or that any payment made was less than the amount which should have been paid. This appeals procedure will not extend to entitlements under the Minimum Notice and Terms of Employment Act, the Unfair Dismissals Act, the Anti-Discrimination (Pay) Act, the Employment Equality Act, court awards, or in respect of arrears of statutory minimum wages under the Industrial Relations Acts.
In relation to the pension schemes area there has been some debate in recent weeks because of the unfortunate circumstances that arose in respect of a particular company in the midlands. I hope we will be in a position to move quickly to ensure that workers who have pension schemes in their companies make sure that the trustees who represent their interests are properly informed and indeed that they have a say in the appointment of such trustees because of the difficulties that have arisen in those cases.
The question of pensions is much broader and much larger than the measures we are dealing with in this legislation. The thrust of the legislation is to ensure that workers who are entitled to payments out of the proceeds of a company in respect of wages they have already earned — which is money that is needed for day-to-day purposes — do not have to wait in line with the other creditors for that essential form of income but can be paid as quickly as is administratively practicable from a fund that would be funded entirely by the employers contribution and that they can take their money from that fund in the normal way. Then I, as Minister for Labour, would step into their shoes in the queue and would wait for the liquidator to wind up the company and if there were sufficient assets available to cover, in whole or in part, the wages that were the legal due of the worker in the first place, those wages would come back into the fund to pay other workers who might be affected.
The essence of the entire Bill is to avoid what is manifestly an injustice where workers who have earned wages but who have not been able to collect them have to wait in some cases over a year before they can get basic income. This fund will avoid that injustice and will avoid it in the most efficient, effective administrative system that seems appropriate to us.