John Perry (Sligo-North Leitrim, Fine Gael)

I thank Senator Daly for raising this very important issue. I am taking this Adjournment matter on behalf of the Minister for Social Protection, Deputy Joan Burton, who sends her apologies for not being present to respond in person to the Senator. 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. An eligible employee is entitled to two weeks statutory redundancy payment for every year of service, plus a bonus week. Compensation is based on the worker's length of reckonable service and reckonable weekly remuneration, subject to a ceiling of €600 per week. Employees must have at least two years' service to be eligible for a redundancy payment.

It is the responsibility of the employer to pay statutory redundancy to all their eligible employees. An employer who pays statutory redundancy payments to its employees is then entitled to a rebate from the State. I am sure the Senator is aware of these provisions. Where an employer can prove to the satisfaction of the Department that it is unable to pay the statutory redundancy to its employees the Department will make lump sum payments directly to the employees and will seek to recover the debt from the employer.

Both the redundancy and insolvency payments scheme transferred to the Department of Social Protection in January 2011. Payments under both schemes are made from the Social Insurance Fund, SIF, which is currently in deficit.

While the SIF is constituted primarily from employer's contributions, the taxpayer's contribution is also significant. Significant amounts have been paid out in redundancy rebates to employers from the SIF in recent years. The total amount paid out in redundancy rebates to employers was €152.2 million in 2006; €167.4 million in 2007; €161.8 million in 2008; €247.9 million in 2009; €373.2 million in 2010; and €185.3 million in 2011.

The deficit in the Social Insurance Fund is of significant concern at present and it is not considered that the country should continue to borrow money to plug the hole in the SIF in order to fund the cost of making people redundant - often from very profitable companies.

In the context of the 2012 budget, the Government decided that the 60% level of rebate was not sustainable in the current economic climate. As a result, the rebate was reduced to 15% for cases where the date of dismissal for the purposes of redundancy occurs after 1 January 2012. It is expected that this measure will save €81 million in 2012.

It has been acknowledged that this may cause difficulties for employers, and I appreciate the Senator is making this point, but it should be noted that redundancy rebate payments to employers are not common in many EU states or other jurisdictions. For example, in the UK the redundancy payment is funded by the employer and there is no recovery from the state. In Sweden there is no statutory system of redundancy payments from employers while in Spain the employer cannot claim back any amount from the state. This new arrangement brings Ireland more closely into line with practice elsewhere.