Paschal Mooney (Fianna Fail)
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I thank the Cathaoirleach for selecting this matter and welcome the Minister of State. However, I put on record my disappointment that the line Minister is not present. It is a practice I have never really supported, irrespective of the administration. I understand Ministers can be called away but it is vitally important for the status of, and respect for, the House that the line Minister is present to take Adjournment matters, in particular if the Department accepts them.

ISME carried out a survey following the passing of the Social Welfare Bill 2011 which reduced the State liability from 60% to 15% for statutory redundancies. I understand perfectly why the Minister took this decision and I suggest that it was taken on two fronts. One was for revenue purposes - it reduces the State's liability in difficult times - but it also prevents large companies from walking away and leaving the State to pick up the mess. TalkTalk in Waterford was mentioned as an example of the devastation that can be caused to a local economy in this regard. However, I do not think anybody needs to be reminded that the small and medium enterprise sector plays a significant role in creating and maintaining jobs. Some 85% of such companies have fewer than 20 employees. The survey carried out on week ending 20 January had 766 respondents and confirmed the following. Some 79% indicated that national employment levels will be reduced as a consequence of the change; 71% of companies feel the rebate reduction will negatively influence their future employment decisions; 71% are in favour of reducing statutory redundancy payments to the levels that exist in the UK, with which I am sure the Minister of State is familiar; and 94% of companies would like to see a derogation for SMEs. The last percentage is not all that surprising.

I agree with Mr. Mark Fielding, chief executive of ISME, who stated: "The change is effectively another tax on jobs; a short-sighted move that will have the greatest impact on small and medium Irish enterprises, which do not have the option to up sticks and leave, as the Minister asserts." Mr. Fielding continued: "Even at this late stage, it is imperative that the Minister reviews her position and, at the very least, introduces a derogation from the reduced rate for the SME sector, and reduces the actual statutory payments to UK levels, which will go some way to alleviating the substantial burden that has been placed on already struggling businesses."

I am raising this survey not just because it is an important document and a pointer to what is happening in the struggling SME sector, which provides the vast bulk of jobs, but also because it comes at a time when we are awaiting yet another jobs initiative from the Government. After Christmas, it was promised that there would be cross-referencing of various Departments and that a strong jobs initiative would be unveiled to address seriously the high unemployment rate. If that happens, we on this side of the House will be the first to applaud it. We are all here to ensure that jobs are created and maintained, so this is not a case of taking a cheap shot at the Government. However, questions marks have been raised by this survey. These question marks were there from the time the Government first proposed this plan. I tabled an amendment to the Bill seeking an exemption for small employers engaging up to 20 employees. Some form of accommodation or compromise should be reached because anecdotal evidence, not included in the survey, suggests that once the legislation was passed by both Houses of the Oireachtas employers let people go. They made them redundant because they found that if they were to make anybody redundant in future, they would have to take up 85% of the cost.

I fully understand the financial strait-jacket in which the Government finds itself. That is a given, but I feel there is a certain contradiction here. The Government has repeatedly stated its support for the SME sector - as both sides of the House have - and sees it as an integral part of economic recovery. This initiative and any other legal obstacle to maintaining existing jobs or affecting potential jobs should be avoided; otherwise, employers will not take people on. Small businesses are subject to the vagaries of the market and such employers may not wish to hire people because they may feel there will not be economic growth in six months' time. All the statistics are not stimulating great encouragement at the moment, although I wish it were otherwise.

Over the next 12 months this legislation should be revisited to see how it has impacted, irrespective of the survey. I do not wish to impugn the survey's results in any way, but it is coming from a vested interest after all. We need some formula to monitor what impact this legislation has had over a 12 month period. Is it, as the survey points out, having a negative impact, preventing the creation of new jobs or actually losing jobs? I am sure the Minister of State will agree the last thing the Government wants to see is that a legislative initiative it introduced, perhaps for the very best of reasons, is failing and damaging our economy.

Joe Costello (Dublin Central, Labour)
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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.