Redundancy pay to be slashed as employer refunds cut
WORKERS face cuts in their redundancy payments due to a row over state refunds to employers.
At the moment, workers who lose their jobs get a statutory lump sum.
Many also get an extra payment from their employers on top of this.
But employers have threatened to slash this extra payment by at least €1,673 per worker if their refunds from the state are reduced.
The threat comes after it emerged that the Government is planning to cut refunds of the statutory payment that employers are entitled to claim.
Employers pay the statutory lump sum up front, but are entitled to get 60pc of this back by applying to the Department of Jobs.
They now fear this could be reduced to 30pc.
The main employer group IBEC warned that it would have no choice but to cut the extra payment it makes to staff who lose their jobs.
It said an employee on the average industrial wage of €34,800, who was in a job for five years, will lose €1,673.
The loss for someone with 20 years service would grow to €6,692. Those on higher pay and with longer service would lose even more.
The stax-free statutory payment is worth two weeks' pay per year of service plus one bonus week, capped at €600 a week, if they lose their job.
But the extra 'ex gratia' payments vary from sector to sector.
They are usually offered in workplaces where a long-standing package has been offered to staff.
The more generous payments are usually available where a workforce is heavily unionised, or a voluntary redundancy scheme is on offer.
In a letter this week to the Minister for Social Protection Joan Burton, IBEC Director General Danny McCoy said members would have to reduce the extra payment by half a week per year of service because they could not afford the cuts.
"IBEC would in light of any decision by government have no option but to prepare detailed guidance to members in respect of the need to alter severance terms," it said.
"In many cases these have already been adjusted downwards to reflect new economic realities and would now have to be revisited."
It warned that this could give rise to industrial conflict, especially where there were long-standing severance terms.
However, not all staff would be affected by its threat as some employers do not give any ex gratia payment.
Minister Burton said she did not accept that a cut in the rebate would necessarily reduce the size of redundancy payments to workers.
"Many employers are anxious to ensure that their former employees are adequately compensated in the event of redundancy and pay their former employees in excess of the statutory minimum," she said.