Business

Tuesday 25 July 2017

€100m in PRSI debt written off by department after recession

Total debt now approaching €500m as a result of the economic crash and recession

'The majority of this debt, standing at approximately €230m, dates from 2011, which was on the eve of the economic crash, with the remainder created during the recession years of 2012-2014.' Photo: PA
'The majority of this debt, standing at approximately €230m, dates from 2011, which was on the eve of the economic crash, with the remainder created during the recession years of 2012-2014.' Photo: PA

Simon Rowe

The Department of Social Protection has written off more than €100m of PRSI debt owed by thousands of firms that got into trouble during the recession.

The total debt pile owed by 13,600 companies has soared to nearly half-a-billion euro in recent years and just 10pc of this figure is deemed recoverable, according to the department's debt recovery unit.

Total employer debt to the Social Insurance Fund, made up of PRSI contributions from employers, employees and the self-employed, amounts to €447m.

The majority of this debt, standing at approximately €230m, dates from 2011, which was on the eve of the economic crash, with the remainder created during the recession years of 2012-2014.

The Department of Social Protection is responsible for the redundancy and insolvency payments schemes, which are paid from the Social Insurance Fund.

These payments are typically made when employees cannot secure a redundancy or insolvency payment from their employer when a business ceases to trade - this is in general because the employer is deemed to be insolvent.

In these circumstances the department steps in and funds the redundancy payment and then raises a liability against the employer.

Any money recovered in the final winding-up of the business, where the department is deemed a preferential creditor in liquidations and receiverships, is paid back into the Social Insurance Fund. The department also seeks recovery of debt directly from employers who continue to trade after getting into difficulty.

Department officials said the high debt figure "comes at the end of a period of major economic difficulties".

"Given the circumstances in which the department makes the redundancy payments, the vast majority of debt refers to insolvent companies and up to 90pc of employer debt is unlikely to be recoverable.

"However, debt is only written off where the department has completed all appropriate checks and is completely satisfied that the debt is not recoverable, in line with Comptroller and Auditor General requirements," said a department spokesman.

The debt write-off figure is likely to increase significantly over the coming years as there is "a substantial time lag before debt can be considered for write-off under the department's debt management policy", said department officials.

"Liquidations/receiverships are not complete in the majority of cases (the average time frame is 5-6 years) and, therefore, debt created from 2012 onwards will start falling due for write-off from 2017 onwards."

In late 2014, the department installed a new €3m debt management IT system to help limit overpayments of benefits and speed up debt recovery.

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