Seán Kyne (Galway West, Fine Gael)
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403. To ask the Minister for Social Protection if, in view of recent examples of companies entering receivership or examinership, if further consideration can be given to introducing a tiered redundancy rebate scheme based on turnover/company size which would provide a safety net for smaller, indigenous enterprises as well as ensuring adequate provision for employees in the unfortunate event of a company collapsing or downsizing. [3111/13]

Joan Burton (Dublin West, Labour)
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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 the worker’s length of reckonable service and reckonable weekly remuneration, subject to a ceiling of €600.00 per week.

It is the responsibility of the employer to pay statutory redundancy to all their eligible employees. Employers who pay statutory redundancy payments to their employees are entitled to a rebate of a portion of that payment from the State if the date of dismissal by reason of redundancy is before 1 January 2013.

In Budget 2012 I reduced the level of the rebate from 60% to 15% and in Budget 2013 the Government decided to remove the redundancy rebate to employers in respect of redundancies where the date of dismissal is on or after 1 January 2013.

Where an employer can prove that he/she cannot afford to pay a statutory redundancy payment, the State makes a lump sum payment directly to the individual and a debt is raised against the employer which the State will endeavour to recover. The Budget change will have no impact on the level of these payments.

Rebates to employers and lump sums paid directly to employees are paid from the Social Insurance Fund (SIF).

I am very concerned about the deficit in the SIF. One of the factors which influenced the Government’s decision to reduce the level of the rebate initially and to remove it in Budget 2013 was the increasing cost of rebates in recent years.

In term of redundancy rebate payments to employers, €152.2 million was paid out 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 amounts paid out in lump sums to employees have also increased. While the SIF is constituted primarily from employer contributions, the taxpayers’ contribution is also significant.

I do not see why this country should continue to borrow money to plug the hole in the Social Insurance Fund in order to compensate often profitable companies for the cost of making their employees redundant in Ireland and, in some cases, transferring their employment abroad.

The continuation of the rebate payment 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 EU and other jurisdictions. The new arrangements bring Ireland more closely into line with practice in other countries.

It is not proposed to introduce a tiered system of redundancy rebate rates or to make exceptions for small businesses.