The purpose of the redundancy payments scheme is to compensate employees for the loss of their jobs, where the employer is unable to pay statutory redundancy due to financial difficulties or insolvency. The scheme was never intended as a support to businesses to hire staff. The scheme is funded from the Social Insurance Fund (SIF).
Up to 2011, the scheme provided a rebate of 60 per cent to employers who provided statutory redundancy payments to their employees. I am advised by my Department that in Budget 2013, the rebate payment was abolished. This decision was made because of the high cost of the rebate and its impact on the financial sustainability of the social insurance fund at the time of the economic crisis. Furthermore, the rebate to employers was paid regardless of a company’s financial situation and ability to pay, thus benefitting viable and profitable companies, including multinational companies. It was not a targeted use of the resources of the Social Insurance Fund.
The redundancy payments scheme as it now operates benefits employees whose employers are unable to make statutory redundancy payments. Employers who declare they cannot sustain the cost of redundancy payments, while continuing to trade, are required to submit verified financial information to prove this and are liable to the Social Insurance Fund for any redundancy payments made on their behalf. This ensures that the current scheme takes into account both an employer's ability to pay redundancy payments and that the Social Insurance Fund can be reimbursed in the future, through debt repayment if an employer's financial position improves.
Any proposals to restore the redundancy rebate scheme and any development of policy in this area would have to have regard to: the level of costs involved in restoring the rebate; the many other demands on the Social Insurance Fund including this Government's decisions to extend social insurance benefits to self-employed workers and to provide for paternity benefit and parental leave benefit; and other supports available to businesses who wish to hire staff.