Taxpayer faces soaring bill for private redundancies
Published 24/08/2010 | 05:00
THE taxpayer is facing a soaring bill to help hard-pressed firms pay redundancy to workers losing their jobs.
Employers who pay workers their statutory redundancy entitlement and have given redundancy notice of at least two weeks are entitled to reclaim most of the payment.
New figures show the State has paid more than €600m to troubled employers to fund workers' redundancy payments since the recession began.
And the bill is on course to almost double this year from its level five years ago.
The soaring redundancy payments are adding to the strain that the unemployment crisis has put on the public purse.
These payments are on top of the cost of social welfare, and the loss of income tax that the Exchequer suffers whenever someone is made redundant.
New figures reveal the Department of Enterprise, Trade and Innovation had already refunded €236m to employers entitled to reclaim statutory redundancy payments by the end of last month.
This year's bill is on course to almost double its €138m level in 2005.
It is already close to the full €248m bill for last year.
Employers can apply for a 60pc rebate within six months from the State's Social Insurance Fund by applying to the Department of Enterprise, Trade and Innovation.
The Social Insurance Fund -- financed by employee and employer PRSI -- has come under massive strain in the past few years.
The depleted fund also finances numerous welfare benefits and will need an Exchequer top-up of more than €2bn this year.
Last month, when jobless numbers rose above 450,000 for the first time, the extra 8,500 people on the dole that month alone put a further €170m strain on the public finances.
Business groups said their struggling members had come under increased pressure because there had been major delays in the rebate payments.
Chief of the Irish Small and Medium Enterprises Association Mark Fielding said this was having a negative effect on their cash flow.
However, he said the Government had allowed rebates to be offset against current taxes, which was assisting many businesses.
"Currently the delay in rebate refunds is seven to eight months and needs to be reduced," Mr Fielding said.
"The redundancy rebate is an essential part of the system and reduces the cost of redundancy for employers.
"As redundancies invariably occur when a business is struggling the gross cost of redundancy would, in most cases, be crippling on the business.
"It is, in fact, a refund of a tax on labour paid by the employer at a rate of 10.75pc of the wage cost," he added.
Irish Business and Employers Confederation economist Reetta Suonpera urged the Government to redeploy staff to speed up the processing of rebate claims.
"The sharp increase in redundancy rebate payments is not a surprise, given the scale of job losses experienced in the economy," she said.
"The massive influx in claims has resulted in payment delays, which can represent serious cash-flow issues for companies already struggling."
Workers with over two years' service in a job are legally entitled to a tax-free redundancy lump sum. The payment is worth two weeks' pay per year of service plus a bonus week.