Written answers

Thursday, 26 January 2012

Department of Social Protection

Redundancy Payments

5:00 pm

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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Question 34: To ask the Minister for Social Protection the reason she failed to conduct an assessment of the impact of her budgetary measure cutting the redundancy rebate from 60% to 15% on companies; and the reason she did not direct her Department to explore whether the measure could be linked in some way to the size of the firm, its profitability or capacity to absorb the cut. [4355/12]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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There is little doubt that the recent reduction in the redundancy rebate to employers will have an impact on companies. However, a reduction in the size of the redundancy rebate would not necessarily reduce the size of redundancy payments made to workers. Many employers are anxious to ensure that their former employees are adequately compensated in the event of redundancy and pay their former employees in excess of the statutory minimum requirement. Redundancy payment practices in this country have been out of step with arrangements in other jurisdictions. For example:

In Sweden there is no statutory system of redundancy payments from the employers;

In Spain the employer cannot claim back any amount from the State;

In the Netherlands there is no rebate to employers;

In Cyprus the employers are obliged to pay a monthly contribution of 1.2% on the earnings of their employees to the Redundancy Fund so as to cover redundancy;

In Slovakia the employer cannot claim any part of the cost back from State;

In Finland there is no statutory redundancy;

In the UK the redundancy payment is funded by the employer and there is no recovery from the State.

The total amount paid out in redundancy rebates to employers alone 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 so far in 2011. The amounts paid out in lump sums to employees have also increased. While redundancy rebates to employers are paid out of the Social Insurance Fund (SIF), the SIF itself has had to be supported by taxpayers' funds in recent years. The current operating balance of the SIF moved into deficit in 2008 when expenditure exceeded income by €231million.

Significant annual savings can be expected as a result of this measure to reduce the rebate. The measure was not linked to the characteristics of a firm as I do not wish to discriminate against any company operating in the Irish economy. It should be noted that there has been a high cost associated with the relocation of Irish jobs to other countries by multinationals. This practice has effectively been subsidised by the high level of rebates.

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