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Written Answers - Redundancy Payments

Tuesday, 27 March 2012

Dáil Éireann Debate
Vol. 760 No. 3

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 339.  Deputy Seán Kyne Information on Seán Kyne Zoom on Seán Kyne  asked the Minister for Social Protection Information on Joan Burton Zoom on Joan Burton  if pursuant to the recently announced changes to the redundancy rebate scheme, favourable consideration can be given in introducing a tiered rebate system which would take into account the much greater difficulties encountered by small to medium companies, in particular local, indigenous companies, in covering the cost of redundancy payments which are regrettably necessitated at times of severe economic conditions for such companies. [16946/12]

Minister for Social Protection (Deputy Joan Burton): Information on Joan Burton Zoom on Joan Burton 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. All payments are made from the Social Insurance Fund (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 the employer to pay statutory redundancy to all their eligible employees. An employer who pays statutory redundancy payments to their employees is then entitled to a rebate from the State. Rebates to employers and lump sums paid directly to employees are paid from the SIF.

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 costs of rebates in recent years.

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. €152.2 million was paid out in rebates to employers in 2006; €167.4 million was paid in 2007; €161.8 million was paid 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.

As part of the deliberations on Budget 2012, the approach taken in other countries was examined and 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 EU and other jurisdictions. The new arrangements bring Ireland more closely into line with practice in other countries.

[840]It is not proposed to introduce a tiered system of redundancy rebate rates.

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