Joe Costello (Dublin Central, Labour)

I apologise that the Minister for Social Protection is not here.

As the Senator is aware, on 1 January 2011, the Department of Social Protection assumed responsibility from the then Department of Enterprise, Jobs and Innovation for administering the redundancy payments scheme. The purpose of the redundancy payments scheme is to compensate workers, under the Redundancy Payments Acts, for the loss of their jobs by reason of redundancy.

Compensation is based on a worker's length of reckonable service and reckonable weekly remuneration, subject to a ceiling of €600 per week. All payments are made from the social insurance fund, also known as the SIF. There are two types of redundancy payment made from the SIF: rebates to those employers who have paid statutory redundancy to eligible employees; and statutory lump sums to employees whose employers are insolvent and-or in receivership or liquidation. It is the responsibility of employers to pay statutory redundancy to all their eligible employees. Employers who pay statutory redundancy payments to their employees are then entitled to a rebate from the State. Rebates to employers and lump sums paid directly to employees are paid from the social insurance fund.

Significant and increasing amounts have been paid out in redundancy rebates to employers from the SIF in recent years. While the SIF is constituted primarily from employer contributions, the taxpayers' contribution is also significant. One of the factors which influenced the Government's decision to revise the rebate rate was the increasing cost of rebates in recent years.

The Minister is concerned about the deficit in the social insurance fund. Where the date of dismissal for the purposes of redundancy occurred before 1 January 2012, the social insurance fund refunded employers 60% of the cost of making people redundant. A sum of €152.2 million was paid out in rebates to employers in 2006. Some €167.4 million was paid in 2007, €161.8 million in 2008, €247.9 million in 2009, €373.2 million in 2010 and €188.2 million in 2011. The amounts paid out in lump sums to employees have also increased. The Minister does not see why this country should continue to borrow money to plug the hole in the social insurance fund in order to fund the cost of making people redundant, often from very profitable companies.

As part of the deliberations on budget 2012, it was decided that the 60% level of rebate is not sustainable in the current economic climate. While this may cause difficulties for employers, it should be noted that redundancy rebate payments to employers are not common in many European Union and other jurisdictions.