Mary Hanafin (Dún Laoghaire, Fianna Fail)

The family income supplement, FIS, payment provides income support for employees on low earnings with children. The manner in which the value of the payment is calculated is designed to preserve the financial incentive to take up or remain in employment in circumstances where the employee might be only marginally better off on social welfare payments. Fundamental to the design of the FIS scheme is that a person must be engaged in insurable employment for a minimum number of hours - currently 38 hours per fortnight. A couple may combine their hours of employment to meet the qualification criteria. The payment amount is based on a fixed proportion of the gap between the assessable income of the household and prescribed FIS income thresholds. As these thresholds are linked to the number of dependent children in a household, FIS provides an important policy instrument in reducing child poverty in working households as well as improving incentives to work.

An example of how FIS works is as follows. If a family has one parent working full-time and the other working 19 hours a week, with both on the minimum wage, their net income from employment would be approximately €500 per week. If they have four children, they would be entitled to a FIS payment of about €190 per week, as a top-up to their wages, giving them a combined net income from employment and FIS of about €690. If only one parent in the same family was working, and they were in full-time employment at the minimum wage, their gross income from employment would be around €340 per week and their additional income from FIS would be about €280 per week. Their combined net income from employment and FIS would, therefore, be around €620 per week. In both scenarios, they would also be entitled to child benefit of €155.53 per week.

Considerable improvements have been made to FIS since the late 1990s. These have improved its effectiveness as an instrument of support for low-income employees. These changes include a change in how income is assessed - that is, from a gross to net basis - and, in recent years, the refocusing of income thresholds to include additional gains for larger families. Partly as a result of this, and partly reflecting higher levels of take-up, spending on FIS has risen from €33 million in 1997 to an estimated €215 million in 2010.

Increases to FIS thresholds were already announced as part of the budget 2010 package. These increases effectively compensate low-income households on FIS for the necessary reduction in child benefit rates. I do not propose any further significant changes to the qualifying criteria of FIS at this time.

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