Employer redundancy rebates slashed to 15pc
IBEC warns cut may be passed on to workers
Published 07/12/2011 | 06:00
THE Government is slashing payments to employers who announce redundancies.
It said the measure will stop profitable companies like Dell, Talk Talk and SR Technics getting big state refunds when they "up sticks".
But employers have warned that the cut to their redundancy rebates -- which was deeper than expected -- may backfire on workers who lose their jobs.
Their representative groups threatened to pass the cuts on to workers after the Government announced a drastic drop in the rebates.
Up to now, employers have been able to claim back 60pc of statutory redundancy payments.
They had expected the refunds might be cut to 30pc, but were outraged yesterday when the Government announced that they would only get 15pc back.
Workers who are made redundant are entitled to a tax-free statutory redundancy payment.
It is worth two weeks' pay per year of service, plus a bonus week, capped at €600 a week.
Some employers give an extra payment on top of this -- which can be an extra six weeks per year of service in some cases.
IBEC said members would be forced to reduce these extra 'ex gratia' payments to compensate themselves and this could lead to industrial unrest.
It claimed the measure meant it would be three times more expensive to make a worker redundant than it is in the UK or Northern Ireland.
The employer group said a reduction in the 'ex gratia' payment would translate into a cut of up to a week's pay per year of service per worker.
It had anticipated the loss of up to half a week's pay per worker because it believed the rebate would be cut to just 30pc.
But the Budget change would leave a worker on the average industrial wage of €34,800 with five years' service around €3,000 out of pocket when they lost their job.
"We hadn't expected the cut to be this deep," said IBEC director Brendan McGinty.
"We thought the rebate was being reduced to 30pc.
"It is effectively a tax on jobs and will discourage investment."
Fianna Fail said the measure would "hammer" small businesses, who face a two percent increase in VAT when further cuts are announced today.
Brid O'Brien of the Irish National Organisation of the Unemployed said it was "extraordinary" that the State was making the refunds to employers.
She said the measure might encourage employers not to let staff go, but she said there was a difference between companies "making adjustments to become more profitable" and those who were trying to survive.