Dáil debates

Wednesday, 23 November 2011

Priority Questions

Illness and Disability Benefits

1:00 pm

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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Question 1: To ask the Minister for Social Protection the amount of money reimbursed by her Department to employers for sick leave in 2006, 2007, 2008, 2009, 2010 and to date in 2011; her plans to review this system; if she has had discussions with employer groups on the issue in relation to the Budget 2012; if a cost impact analysis on business has been undertaken; and if she will make a statement on the matter. [36438/11]

Photo of Joan BurtonJoan Burton (Minister, Department of Social Protection; Dublin West, Labour)
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To set the question of statutory sick pay in context, the total expenditure by my Department in 2010 on payments in respect of illness and disability to almost 250,000 beneficiaries amounted to more than €2.8 billion. In 2001 the number of beneficiaries was less than 174,000 and expenditure was some €1.1 billion. A table setting out these figures in detail follows.

The total amount in illness benefit paid in each of the years specified by the Deputy is: 2006, €627.6 million; 2007, €755.1 million; 2008, €852.3 million; 2009, €919.8 million; and 2010, €942.8 million. Expenditure on illness benefit in that five year period amounted to more than €4 billion, while annual expenditure on the scheme has almost trebled in the past ten years. Expenditure in the current year will be at broadly the same level as 2010, when some 330,000 illness benefit claims were awarded.

Introducing a scheme of statutory sick pay is one of a range of options being examined with a view to reforming the social welfare system to bring it into line with practices in other countries, addressing the deficit in the social insurance fund and meeting the commitments which the previous Government entered into with the European Union, the IMF and the ECB to achieve substantial reductions in current spending.

Depending on how it is structured, a statutory sick pay scheme has the potential to achieve considerable savings. I am conscious of the pressures many employers face, particularly in the SME sector, and any statutory sick pay scheme will seek to take account of these concerns to the greatest extent possible. Some of the employers' concerns were outlined to me during a meeting I held with IBEC last week. However, such a scheme is the norm among most EU member states. The extent to which employers are liable varies significantly, with a figure of two years in the Netherlands, 28 weeks in Britain and north of the Border and nine days in Finland.

Additional information not given on the floor of the House

The specific manner in which such schemes operate varies considerably in terms of coverage, payment rates and compensation for certain employers. It is also the case that statutory sick pay will tend to stimulate and incentivise employers, both in the private and public sectors, to take a more active role in managing absenteeism. In the Netherlands, for example, rates of absenteeism fell from 10% to 4% following the introduction of a statutory sick pay scheme.

The House will be aware also that the rate of social insurance paid by employers is low in Ireland when compared to most other EU member states, with the result that the social insurance fund is now in deficit. In order to address that deficit, the choices we face are to increase social insurance rates, including for employers, reduce benefit rates and coverage or adjust the payment model in a manner which would require employers to share the costs associated with short-term sickness but which would also give them a greatly enhanced role in the management of that cost.

The House will be aware also that the rate of social insurance paid by employers is low in Ireland when compared to most other EU member states, with the result that the social insurance fund is now in deficit. In order to address that deficit, the choices we face are to increase social insurance rates, including for employers, reduce benefit rates and coverage or adjust the payment model in a manner which would require employers to share the costs associated with short-term sickness but which would also give them a greatly enhanced role in the management of that cost.

YearIllness BenefitDisability AllowanceInvalidity PensionOccupational Injury BenefitBlind PensionTotal
RecipientsCost (€m)RecipientsCost (€m)RecipientsCost (€m)RecipientsCost (€m)RecipientsCost (€m)RecipientsCost (€m)
200150715329897576553323085061535445912540704962125131561736501100316
200254590385297627834075855214740361712844770182095142211844591287738
200357464433455677204636085341444026313014787572061148161936731430899
200458726479611729765444895586448737513393826572027158682029861610000
200561845540245792536307285835254828513738880571985166612151731823976
200665774627642836977384315195460241413908959881476169642168092081439
2007704047550778904890113153956618133142141043491474150312290962393721
20087360985230595754105266053725685717145631120141472163192391232719015
20097766591978399576114276952922681642145641123361467162772461942872807
201081253942836101111110954950766640007149301048841485160332495452813309

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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I do not know if the Minister has met representatives of ISME in addition to those of IBEC. ISME has stated the proposed change could be the death blow for the retail sector. Businesses will be facing an increase of 2% in VAT on top of commercial rates at a time when their turnover and retail spending have reduced. This will be a further imposition on employers and appears to be anti-jobs. Will the Minister elaborate on any discussions she might have had with IBEC and ISME and their response to the proposal? It will, in effect, amount to a sick leave tax on businesses in direct contrast with the Government's rhetoric on job creation. How do IBEC and ISME understand the effects of the proposal? Has a cost impact analysis been undertaken to assess the effect on employers?

Photo of Joan BurtonJoan Burton (Minister, Department of Social Protection; Dublin West, Labour)
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All our competitors, including those countries which have good social protection systems, have followed the advice of the OECD to develop schemes of statutory sick pay, under which the cost for first few days is taken care of by the employee before the employer and, after a period of time, the state steps in. North of the Border and in Britain the period is 28 weeks. We are proposing that in this country employers take responsibility for a period of four weeks.

In regard to how businesses operate in other jurisdictions, our competitors are acting in line with the recommendations of the OECD which recommended these reforms because illness days claimed constitute a significant cost to businesses and social insurance systems. This year we have spent €940 million on illness benefit and a further €1.8 billion on disability and invalidity allowances. We have one of the lowest contribution rates of employee and employer social insurance in the OECD.

We have had a broad outline discussion with IBEC. Introducing a scheme of this nature would require detailed legislation and further consultation with trade unions and employers.

Photo of Barry CowenBarry Cowen (Laois-Offaly, Fianna Fail)
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Has the Minister met representatives of ISME and other representative associations of small businesses and retailers? Many employers in that sector have been pushed into unemployment in recent years and do not have the cushion others have in terms of access to the social protection system. I acknowledge that in the budget cost neutral measures may be introduced in this regard. It is only right and proper that a safety net be provided, given that the sector has been forgotten in the past 12 to 18 months.

Photo of Joan BurtonJoan Burton (Minister, Department of Social Protection; Dublin West, Labour)
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I regret that the opportunity was not taken during the Celtic tiger years to build a structure of contributions by employees and employers to offer the social protections to which most of us aspire. It is unfortunate these reforms were not made when the money was available. Fianna Fáil in government signed the EU-IMF deal this time last year. The troika has been investigating the areas in which our structures differ from those in other countries. Several countries have social protection systems that we would envy to share the burden because the important aspect is managing absences in a way that makes provision for those who are ill, while reducing the taking of illness leave unnecessarily. This can apply in the public as well as the private sector.