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Social Insurance Fund Deficit

Dáil Éireann Debate, Wednesday - 31 May 2017

Wednesday, 31 May 2017

Ceisteanna (55, 98)

Gino Kenny

Ceist:

55. Deputy Gino Kenny asked the Minister for Social Protection his views on the decision by his Department to write off moneys owed by employers under the insolvency and redundancy scheme; and if he will make a statement on the matter. [26041/17]

Amharc ar fhreagra

Bríd Smith

Ceist:

98. Deputy Bríd Smith asked the Minister for Social Protection the position regarding the write-off by his Department of moneys owed by employers under the redundancy and insolvency schemes; and if he will make a statement on the matter. [26007/17]

Amharc ar fhreagra

Freagraí scríofa (Ceist ar Social)

I propose to take Questions Nos. 55 and 98 together.

Employers pay into the Social Insurance Fund (SIF) at a rate of up to 10.75% of employee salaries. This payment is designed to contribute to the cost of benefits paid out of the social insurance fund.

One of the benefits funded by the SIF is the provision of redundancy related payments in circumstances where the employer making the redundancies is unable to fund these payments itself – in the majority of cases because the employer concerned is insolvent.

In this way the payments made into the SIF by all employers help to protect the interests of workers when any individual employer cannot meet its obligations under law to pay salary arrears and redundancy settlements to employees who lose their jobs.

Notwithstanding that payments out of the SIF are properly made in accordance with this insurance principle the Department pursues recovery of the amounts paid. The Department has a dedicated debt management unit which has responsibility for recovering as much as possible of the amount paid out in redundancy related payments. It does this through raising a debt against the employer concerned and then seeking payment of this debt either directly from the employer (typically by means of an agreed repayment schedule) or from any liquidator that may be appointed to wind up the affairs on an insolvent business. A total of €10.7 million in employer debt was recovered by the Department in 2016 (provisional figure).

The majority of debt relates to companies which are insolvent. The total employer debt to the SIF at 31 December, 2016 stood at €459 million (provisional figure). Almost two-thirds of the debt originated during the recession years of 2008 to 2013 and three-quarters of current outstanding employer debt is in respect of insolvent companies, i.e. companies which are no longer trading. In company insolvencies, the Minister for Social Protection is a preferential creditor, along with the Revenue Commissioners. The amount recoverable depends on a funds being generated during the liquidation process. Given these circumstances, the Department estimates that up to 90 per cent of employer debt is unlikely to be recoverable..

The process of debt write-offs is part of the proper management of debt and allows resources to be targeted at debts which have a greater chance of recovery. Debt is written-off at the conclusion of the liquidation process – a process that can take up to seven years and only takes place where the Department has completed all appropriate checks and is completely satisfied that the debt is not recoverable. Debt write-offs are carried out under delegated sanction from the Department of Public Expenditure and Reform.

Following a recommendation from the Comptroller and Auditor General, a comprehensive review of employer debt to the SIF was completed in 2016. This resulted in a cumulative write-off of €95 million in the SIF financial statements for 2014 to 2016.

The Department is currently reviewing its employer debt policy and practices, taking into account the best practice guide for collection of debt by public bodies published by the Department of Public Expenditure and Reform in January 2017.

The following table outlines employer debt, recoveries and write-offs for the years 2011 – 2016:

Redundancy & Insolvency Payments Scheme

2011*

2012*

2013

2014

2015

2016**

€m

€m

€m

€m

€m

€m

Payments (debt incurred)

87.1

117.3

98.65

82.1

40.9

38.3

Recoveries

3.78

5.89

7

10.2

7.4

10.7

Amount written-off

8.9

0

24.2

63.5

18.7

12.8

These figures are taken from the published SIF Financial Statements.

* The figures for 2011 and 2012 were revised following a review of employer debt.

** 2016 figures are provisional, pending finalisation of the SIF Financial Statements.

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