In an almost hidden part of Budget 2013, the Government has abolished the Redundancy Rebate scheme for employers.
Up until now, an employer was able to avail of a rebate of 15% (reduced in January 2012 from 60%), on any redundancy lump sum payable to an employee. This 15% was paid from the social insurance fund, and in circumstances where an employer was unable to pay the lump sum the entirety would be paid by the Social Insurance Fund, with the employer then becoming a creditor which must repay the required 85%.
This one-liner about the abolishment of the Rebate was not in Michael Noonan nor Brendan Howlin's budget day speeches and is only found on page 15 of the 209-page Expenditure report on the Budget website. It states that the Government is to "discontinue the employer rebate element of the statutory redundancy scheme" and this is projected to save €30 million during the full year.
Ireland holds very favourable conditions in relation to redundancy with an employer required to pay two weeks per year of service and a bonus week to all employees qualifying for a lump sum payment (over 104 weeks service), and the enticement was that there was a rebate available on this amount. Chambers Ireland has called on the government to reintroduce this immediately.
This 'carrot' has now been taken away and could lead to circumstances where employers are unable to afford redundancy payments outright and a potential increase in claims under the Redundancy Payments Act.
Need our help?
If you would like further complimentary advice on this from an expert, our advisors are ready to take your call any time day or night. Call us on 0818 923 923 or request a callback here.
