Michael Ahern (Cork East, Fianna Fail)

I wish to respond to Senator Finucane on behalf of the Minister for Enterprise, Trade and Employment, Deputy Martin, who is unable to attend.

The redundancy payment scheme was established on 1 January 1968 and is governed by the Redundancy Payments Acts 1967, 1971, 1979 and 2003. In general, a redundant employee with at least two years' service is entitled to receive two weeks' pay per year of service plus one week's pay at the gross rate of pay up to a ceiling of €600 per week. Wages in excess of €600 per week should not be included when calculating a statutory redundancy lump sum payment.

It is up to the employer to pay the statutory payment in the first instance. If the employer is unable to pay the statutory amount but gives the employee the necessary documentation to claim the statutory lump sum from the social insurance fund — form RP50 — then the employee can be paid directly by the Department from the fund on foot of form RP50. When an employer pays the statutory redundancy lump sums to the employees, he or she is entitled to claim a rebate of 60% from the social insurance in respect of each redundant employee. When the necessary checks are carried out on the claims and officials of the Department are satisfied that they are in order, then a payable order in respect of 60% of the statutory amounts paid to the employees is issued to the employer in settlement of his or her claim.

In cases when the statutory redundancy lump sums are paid directly by the Department to the employees, 40% of each lump sum paid is recoverable from the assets of the employer by the Department for the social insurance fund. This statutory redundancy recoveries function is provided for in sections 42 and 43 of the Redundancy Payments Act 1967 as amended by section 14 of the Redundancy Payments Act 1971 and further amended by section 14 of the Redundancy Payments Act 1979. Section 42 of the 1967 Act, as amended by section 14 of the 1979 Act, gives the Minister preferential status in a winding up situation in recovering amounts paid from the social insurance fund. Thus, under section 14 of the 1979 Act, a redundancy lump sum — or part thereof — is made a priority debt under section 285 of the Companies Act 1963 in cases of winding up and a priority debt under section 81 of the Bankruptcy Act 1988 in cases of a bankrupt or arranging debtor.

Section 43 of the 1967 Act also makes general provision whereby all moneys due to the fund — whether in a winding-up situation or not — are debts which can be recovered in any court of competent jurisdiction. Section 14 (5) of the 1971 Act makes provision for companies in liquidation, receivership, bankruptcy or administration or insolvent companies to get the benefit of 60% rebate in determining their outstanding debt to the fund in respect of statutory redundancy lump sum payments made by the Department to eligible employees.

As can be seen from the foregoing, the Minister has no discretion with regard to the 40% due to the social insurance fund. He has no legal powers to divert — from the social insurance fund to the employees concerned — moneys which may be recovered from Castlemahon Food Products. As the Senator said, on 25 February 2005 Castlemahon Food Products notified the Department in accordance with the provisions of the Protection of Employment Act 1977 that due to intense competition in the marketplace and escalating operating costs, 150 employees would be made redundant. On 28 February 2005, the FÁS office in Limerick was notified by the Department of the forthcoming collective redundancies, so that appropriate action could be taken.

A number of those employees were not entitled to receive statutory redundancy. However, rebate was paid to the company in respect of 87 employees. In September 2006, the company went into liquidation. At that time there were 310 employees remaining in the employment of the company, 266 of whom were entitled to receive statutory redundancy lump sum payments. To date, the Department has paid statutory redundancy lump sums directly to 260 of those eligible out of the social insurance fund. These claims were received in the Department in various groups through its online computer system. The payments were made between 14 November 2006, when the first group was paid, to 14 February 2007 when the last group was paid. All the claims received online were paid well within the six week time span for making such payments.

A further six employees are still working with the liquidator. I understand these employees will be made redundant within the next two weeks. When the final redundancies have taken place in Castlemahon Food Products, a letter of claim will be sent to the liquidator for 40% of the amount paid in statutory lump sums seeking acknowledgement of the debt to the social insurance fund and querying if and when payment will be made. The liquidator's attention will be drawn to the sections of the Acts outlined above. The claim will rank as a priority debt and the moneys due to the fund must be treated as a preferential claim by the liquidator.