Dara Calleary (Mayo, Fianna Fail) | Oireachtas source

I move:

That Dáil Éireann:recognises:

- the fact that there are 200,000 small businesses in this country that employ more than 655,000 people;

- the ongoing credit and cash flow problems being endured by small businesses;

- that in 2010, employers paid €5 billion or 75 per cent of the total contributions to the Social Insurance Fund;

- that cost competitiveness is one of the key determinants of every firm’s success; and

- that if the cost of doing business is reduced, firms in Ireland will become more competitive;

agrees that:

- the plans of the Minister for Social Protection, to impose what would amount to an additional €89 million in taxation on struggling businesses with the introduction of a new sick pay scheme, should not proceed;

- the Minister is using flawed and misleading international comparisons in justifying her plans;

- an additional taxation burden on employers will drive many small and medium enterprises out of business, damaging the economy and generating more unemployment; and

- the Government has failed to tackle rising costs for businesses; and calls on the Government not to proceed with the job-destroying Statutory Sick Pay Scheme.

I wish to share time with Deputies Ó Cuív, Michael McGrath and O'Dea.

I thank the Minister of State, Deputy Perry, for being present for the debate. I also wish to thank my colleagues in Fianna Fáil for allowing our Private Members' time for this week to be used to highlight the issue of the threat posed to small and medium enterprises, SMEs, throughout the country by the plans of the Minister for Social Protection, Deputy Burton, to introduce a very unnecessary statutory sick pay scheme. The Government's amendment to the motion refers to the fact that a consultation process is still under way and that a final decision has yet to be made. It also highlights all the Government believes it is doing in the interests of small business. As on previous occasions, I welcome the introduction - at long last - of the credit guarantee scheme. I do not doubt that the action plan on jobs will be mentioned more often during this debate than the name of Santa Claus at Christmas.

I am concerned that the Minister, Deputy Burton, has form when it comes to attacking and undermining the SME sector. Last year she reduced the redundancy rebate from 60% to 15%. The Government indicated that this measure was taken specifically so that the taxpayer would not be obliged to pay for the redundancies of large employers who were moving to lower-cost locations and that there would be minimal impact on SMEs. That is a laudable aim. However, when I tabled a parliamentary question to the Minister in respect of the breakdown of companies which employ fewer than 50 and which had received redundancy rebates in the previous 24 months, she replied that information in this regard is not available within her Department. How is it possible to state that a proposal will not impact on a sector when the most basic of information is not to hand in one's Department? We now have an idea of the impact this proposal has had.

A survey of 500 businesses carried out by Chambers Ireland and published earlier this month shows that 60.7% of respondents said the cut in redundancy rebate has had a negative impact on their business; 40.7% said it had made them less likely to employ new staff and 18.1% said it had limited their business's ability to survive. I am putting the Minister of State, who has responsibility for small business, and the Government on notice that a second "Burton burden" must not be placed on small businesses. This evening we are beginning our campaign to inform such businesses about this oncoming threat. They must be aware that "Hurricane Joan" is back in town. We encourage small businesses to act and to lobby Government Deputies, in particular, in order to protect their capacity to grow, to employ more people and, in many cases, to remain in operation. I assure those on the Government benches that this campaign will not end with tomorrow night's vote.

Nobody is denying that we need a properly thought-out debate on workplace absenteeism in Ireland and all of the causes and effects relating thereto. However, forcing businesses to pay for the lack of a proper debate is completely unacceptable. Let us reflect on the research available in respect of the current position. The 2011 IBEC guide to managing absence, which is based on data provided by 635 companies which employ in excess of 110,000 people, found that employees missed 5.98 days on average, an absence rate of 2.6%, compared to 3.4% in the last comprehensive survey in 2004; and that absence levels were higher in large organisations, 3.6% for companies with over 500 employees, versus 2.2% for companies with fewer than 50. According to the Secretary General of the Department of Public Expenditure and Reform - in evidence given to the Committee of Public accounts last December - the rate of absence in the Civil Service is 4.9%, an average of 11.3 days a year. This cost the State between €400 million and €500 million in terms of pay. Similar absence levels are reported by local authorities, the HSE and other bodies. When asked about this matter in the Dáil on 22 February last, the Taoiseach stated, "There is little absenteeism in the small and medium enterprise sector and persons who are ill are genuinely out sick". He can, therefore, vouch for the bona fides of the SME sector.

At present, there is no legal obligation on employers to pay sick pay for their employees. If someone is sick for more than three days, he or she can claim from the Department of Social Protection. However, IBEC figures suggest that 60% of employers have voluntarily put sick pay schemes into operation. The Minister for Social Protection, Deputy Burton, has claimed that the system under which the State pays for most employee sickness is different from those which obtain in the majority of other countries. She plans to make employers pay staff for the first four weeks for which they are out sick. However, she has not acknowledged that employers already pay billions in PRSI to cover the cost of many things, including sick leave. In 2010, employers paid €5 billion - or 75% of the total - in contributions to the social insurance fund. As already stated, this covers sick pay benefits. If, therefore, we proceed with the Minister's proposal, will employers be obliged to pay on the double?

The international comparisons the Minister uses in respect of this matter do not recognise that there is no cap on the employers' PRSI rate in this country - which currently stands at 10.75% - or that, unlike the United Kingdom, for example, the rate applies to all income. While some OECD countries have statutory sick pay schemes to which employers contribute, some do not. OECD countries where, in the main, statutory sick pay is not paid by employers include Canada, Greece, Portugal, Turkey, the United States and, except under certain collective agreements, Denmark. These are our competitor nations and they have markets into which we are seeking to trade. We should take note of the arrangements which exist in these countries.

As the amendment to the motion indicates, in February the Minister commenced a consultation process regarding the introduction of a statutory sick pay scheme under which employers will share the cost. She suggests that the annual saving to the Exchequer of such introducing such a scheme could be €23 million, if the employer paid for the first week, or €89 million, if the employer paid for the first four weeks. However, the Minister does not appear to be concerned with regard to from where that €23 million or €89 million will come. I can be of some assistance to her in this regard. For 40% of employers - mainly smaller employers who currently do not have formal sick pay schemes in place - what is envisaged will give rise to a new and substantial additional cost. This new cost burden will be a tax on jobs and will have most effect on smaller, more vulnerable employers who operate low-margin businesses. These employers operate in the domestic economy - in the services and retail sectors - and are among those worst affected by the crisis affecting business. The 2010 Forfás report, Costs of Doing Business in Ireland, showed that for the sectors to which I refer, labour already accounts for approximately 60% of domestic input costs, while for the services sector as a whole, labour costs account for 84% of location-sensitive costs and must be reduced. In the report to which I refer, the Government's own economic agency is telling it something.

For the majority of employers with sick pay schemes in place, the additional cost implication of each week's sick pay could be €188 - based on the current social welfare flat rate - per person. This would be on top of the current high-cost burden of existing company sick pay schemes. Many of these employers would be obliged to further realign their existing schemes in order to cover this additional cost. This will open up entire schemes to negotiation and give rise to difficulties within companies.

We know that a minimum of one in four companies has reduced basic pay since 2008. In the current year, some 74% of IBEC members will either freeze or reduce basic pay. As this is happening, we are imposing a statutory sick pay scheme higher PRSI charges on these employers and obliging them to pay the wages or any replacement workers. Furthermore, we must consider the high administrative costs that will arise. In its amendment, the Government praises itself on the work it is doing to reduce the administrative burden of small businesses and again commits itself to achieving the 25% target in this regard. If a statutory sick pay scheme is introduced, the Government will impose a whole new burden of administration on the businesses in question. It is acknowledged that the statutory sick pay scheme which obtains in the UK places an enormous burden on small businesses in particular.

We must consider the potential impact the introduction of a statutory sick pay scheme here could have on employment levels. We are all about the creation of new jobs and the maintenance of existing employment. A major survey carried out among over 2,000 SMEs throughout the country was published in recent days. This survey was carried out by ISME on behalf of the local business alliance, which represents 30,000 businesses which employ 400,000 people and which is composed of members of RGDATA and the Restaurants Association of Ireland, vintners, hoteliers and companies which employ people locally. Those businesses to which I refer have kept going despite the huge adversity with which they must deal.

Research by ISME and the Local Business Alliance survey show that this potential Burton burden will have a disastrous impact on competitiveness and jobs and that it will lead to an increase in absenteeism levels in the small and medium business sector. The survey confirms that if the proposals are introduced, 96% of companies surveyed anticipate job losses; 94% of companies outlined that their cost base would increase; 94% feel that absenteeism levels will increase with only 1% expecting a reduction. Another group which has done research in this area is Early Childhood Ireland which represents 3,330 child care professionals supporting more than 100,000 children. Its survey found that almost four out of ten child care providers would have to cut staff numbers if the sick pay proposal was introduced while 42% said they would increase their fees. Therefore, those on the lowest incomes who depend on child care will be faced with a cost increase or a reduction in service and this will present difficulties and challenges for small employers and for the social welfare budget. This is the word from the coalface if the Minister proceeds with her plan. That is why we cannot allow the plan to proceed.

I expect to hear a lot about the action plan for jobs. I will begin the process. One of the comments in the jobs plan is:

Cost competitiveness is one of the key determinants of every firm's success. Notwithstanding the cost competitiveness gains made since 2008, a range of business inputs remain relatively expensive compared to other jurisdictions.

Referring to manufacturing the plan states: "Specific challenges facing manufacturing in Ireland include: reducing costs of production in Ireland including costs of labour." With reference to the tourism industry the plan states: "Costs remain high relative to competitors - a structural change to the costs of doing business in Ireland is essential - of particular concern are labour, waste and energy costs and local authority charges."

The Government amendment to the motion refers to those cost reductions in those sectors. However, the Minister of State will know that such reductions are not happening. As we continue to cosset our energy sector and the State-controlled energy sector, we are not seeing cost reductions. This is another cost completely outside of the control of employers. Our labour costs are too high relative to our competitors yet the Minister proposes to increase those costs.

I note some voices of reason within the Government. The Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, has said that "proposals for a statutory sick pay scheme would impact on competitiveness and employment. The evidence of this impact will need to be weighed against the potential for savings in terms of reduced absence due to sickness". We have provided evidence from more than 2,000 employers of increased absence, increased costs and very little savings. I call on the Ministers to publish the Forfás report which the Minister, Deputy Richard Bruton, commissioned on the matter in November of last year. I understand it details the potential impact on jobs and competitiveness in the economy and the direct impact on companies to proposals on sick pay from the Minister for Social Protection, Deputy Burton.

The Minister for Agriculture, Food and the Marine, Deputy Simon Coveney, is of a similar view. He heads another Department in a very job-sensitive area. He said on Newstalk radio on 22 February that:

Many small businesses across the country would struggle to afford to be able to pay a significant sick pay bill. Before we would agree to make any changes in this area we would want to think about it very carefully in terms of its impact on employment. That is why it wasn't introduced in the last budget even though some people were strongly arguing for it, including Joan Burton.

This is a Cabinet colleague of the Minister's saying she is committed to the introduction of the scheme. This makes a mockery of the consultation process.

I suggest the Minister, Deputy Burton, should listen to voices within her own party. Senator John Whelan warned that such measures could push many small and medium enterprises "over the edge". He cited Deputy Burton's recent comments to the effect that middle Ireland could not take more financial pain and said: "I do hope that Joan Burton keeps her comments in mind when it comes to any changes within the whole area of employers' PRSI or within the whole area of sick leave in the private sector."

I do not doubt that any Member will break ranks on the vote tomorrow night. However, from reading regional newspapers and Fine Gael press office statements I know that many Members will echo the views of the Ministers, Deputies Bruton and Coveney, and Senator Whelan. The Minister, Deputy Burton, however, does not have a good record and she is not a good listener when it comes to the pressures facing small business employers and their businesses.

Fianna Fáil will not give up on this issue. Tonight is merely the start of a concerted campaign on this issue to show the damage it will do to our economy, to employment and to an already fragile SME sector.

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