Joan Burton (Dublin West, Labour)

While I accept the Senator's concerns, under the current arrangements that apply before the lower rate of employer PRSI is applied, a wage reduction in the example the Senator gave - from €390 to €356 per week - results in a saving in wage reductions of €34 a week to the employer. The lower rate of employers' PRSI that applies at that level from budgets by the previous Government, there would also be a PRSI saving of €11.67 per week. That is there already. In the context of the Dáil debate, I asked my officials to look at the evidence because a point was raised by the Senator's colleague, Deputy Ó Snodaigh. There was no great evidence of employers reducing wages to get the reduction in employers' PRSI, the reason being that people wanted to keep their existing staff. In existing employments, employers do not tend to lower wages arbitrarily by the level the Senator mentioned. There was no great evidence of that in the research undertaken for me.

As to the changes that will come into effect on Monday, if an employer lowers a wage of €390 to €356, there is a saving to the employer of €34. The actual PRSI reduction will be about €26.80 per week. There is, therefore, an overall potential saving to the employer of €61 per week. That is a significant amount. All I can say in that respect is that with the current arrangements in place, parallel reductions of up to €45.67 a week are already available. There is no great evidence that employers have dropped wages as a consequence. Again we will have to wait and see, but I would be concerned if this was being done on a widespread basis.

The important point, however, and as was said about earlier sections, is to actively encourage employers to retain employment. There are many industries where, because of difficulties in terms of rent, rates and other costs, employers are hanging on by their fingernails, as the Senator said. The biggest difficulty arises where many small employers are heavily compromised in terms of difficulties with their banks and personal mortgages. In many cases the owners of small businesses may have taken out personal home loans, the repayments on which they now find difficult to meet. They may also have got involved in small-scale property transactions in small towns and villages throughout the country. There are a range of difficulties that small businesses face arising from the general crash.

Where employers, especially in lower paid employments, have built up a core of reliable employees, there is no great evidence of arbitrary wage cuts of the kind the Senator suggested. Obviously in cases where a business may be on the point of closure, there may be negotiations between the employer and employees. As to the arbitrary wage cutting to which the Senator referred, I asked my officials to look for specific such examples in the context of the debate in the Dáil and there was very little evidence of that. It is something we will certainly keep under review and check as time passes. I hope the focus in these measures will be on generating greater activity and more revenue and, by doing that, generating a better platform for a business to return to good health if it is in difficulty or, in the case of a business that is doing okay, to do even better and to expand employment.