Áine Brady (Kildare North, Fianna Fail)

I am delighted to have the opportunity to address the House on this important initiative. On Sunday, 20 June, my colleagues, the Taoiseach and the Minister for Social Protection, whom I represent, launched the employer job PRSI incentive scheme, which we expect to play a significant role in helping to create much needed new jobs. This scheme works by exempting employers from a liability to pay their share of PRSI contributions of wages for one calendar year. This amounts to a saving of 8.5% on wages up to €356 per week or 10.75% where pay is above €365 per week. On this basis, an employer paying the average industrial wage will save more than €3,000 from the annual cost of employing an additional worker. We hope this saving will tip the balance in favour of job creation for a significant number of employers.

The Government is acutely aware that employers are wary of taking on new staff in these difficult times. Many have been forced to let staff go in recent years to reduce costs and protect the long-term viability of their businesses. Even though the economy is stabilising, employers will continue to be averse to incurring additional costs, even where sound business opportunities exist. In this environment, it is important that we do all we can to make the decision to employ new staff easier. The decisive action taken by the Government since the current crisis broke has resulted in stability being restored during 2009 and into 2010. The latest indicators are consistent with our expectations of returning the economy to growth during the course of the year. We have to turn this economic stability and growth into jobs. Job creation is the No. 1 challenge facing our society.

This PRSI incentive scheme will play a significant part in meeting this challenge by supporting new jobs. Everybody will win under the scheme. The State will benefit from reduced social welfare costs, employers will get a break on their costs of employment, and, most important, people will be saved from the slide into long-term unemployment and given the dignity of a job once again. The scheme is part of our ongoing work to support job creation and to deal with the difficulties that unemployment creates for people in their daily lives.

In its Employment Outlook 2009, the OECD highlights that where employment creation subsidy schemes are heavily targeted, they can be effective. The scheme is specifically targeted at those who have been on the live register for six months or more. Many people in this category are highly skilled and capable and, therefore, I expect this scheme to have wide appeal across a range of employment sectors.

Schemes of this nature must be carefully targeted to avoid deadweight issues. Deadweight is where a scheme supports the creation of a job that would have been created anyway. We need to avoid this as much as possible and use government expenditure in the most effective way. The proportion of people who return to employment after a short period out of work remains relatively high. However, after six months on the live-register, there is a danger that people will drift into long-term unemployment and welfare dependency. This is why the scheme will only be available for new employees who had been unemployed for six months or more. Another potential issue with schemes of this nature is substitution, where an employer might let a current employee go in order to take on a new employee who would qualify for the exemption. Under the terms of the scheme this will not be allowed, as the employment being created will have to represent an increase on the employer's total workforce over the three months prior to its application.

The scheme is only available for full-time jobs that are wholly new and additional. It is not open to employers operating in seasonal industries or for employees on short-term contracts because the particular focus of this scheme is on supporting the creation of jobs that will be sustainable over the long term. The scheme criteria provide that if a qualifying job ceases within six months of the granting of an exemption then the employer's PRSI exempted under the scheme will have to be paid. However, flexibility is built into the scheme so that these amounts may be deemed not to be due where the cessation is for genuine reasons such as the employee moving on to another employment or the failure of the business venture.

The full scheme criteria are as follows: the employee must have been in receipt of jobseeker's benefit, jobseeker's allowance, one-parent family payment or disability allowance for at least six months or on the work placement programme of more than three months; the job must be full-time - 30 hours or more per week; it must be new and additional - employers will not be allowed to substitute existing employees to avail of the scheme; the employer will be required to furnish an up-to-date tax clearance certificate; employers will be limited to a maximum participation rate of 5% of their existing workforce or, for smaller companies, a maximum of five new jobs; and the job must last for six months or more - if it does not the PRSI exempt amounts will have to be paid by the employer but this provision will not be applied if the job ends for genuine reasons. The scheme will run for 2010 only but the 12-month exemptions will run into 2011.

Any job created in 2010 that meets these criteria will be eligible for the scheme. For example, if a job was created in February, employers will have paid standard employee and employer PRSI since hiring the new worker. They should apply for an exemption but continue to operate PRSI as normal. When their application is approved, they will be granted an exemption from employer's PRSI for 12 months and will be given a date from which to apply the exemption to their payroll. On this basis if an exemption is granted in July, it will run until July 2011. The scheme has been set up in this way to avoid having to refund PRSI, which is administratively cumbersome for the employer and the Department of Social Protection.

Over the past year, we have increased the supports for people going back into education and training and unemployed people can expect more opportunities for work activity in the coming months. This scheme is about also offering them their No. 1 choice, which is the opportunity of new jobs being available. We expect that this scheme will support significant numbers of employers, particularly in small and medium-sized enterprises, in creating the jobs that will add momentum to economic recovery and restore people to the dignity of paid employment.