Check Against Delivery

Address by Mary Harney, T.D Tánaiste and Minister for Enterprise, Trade and Employment

To Seanad Éireann on the Second Stage of the Redundancy Payments Bill, 2003

on 14^th May 2003

I move that the Redundancy Payments Bill, 2003 be read a second time.

I am very pleased to be here in the Seanad today to move this important piece of legislation.

This Bill provides for the implementation of the enhancements to redundancy payment levels and other improvements to the operation of the redundancy scheme that are provided for in the Partnership Agreement "Sustaining Progress" and the Report of the Redundancy Review Group.

The Bill will also amend the Insolvency Payments legislation to allow employees of insolvent companies to claim their minimum notice entitlements under the Insolvency Payments Scheme through a liquidator or receiver without first having to obtain an award from the Employment Appeals Tribunal.

Background

In April 2002, the Government established a Review Group, in the context of Social Partnership, to examine the operation of the Statutory Redundancy Payments Scheme so as to ensure the scheme best meets the requirements of employers and employees. The Review Group, which reported back to me and Government in July 2002, agreed a range of changes to the Redundancy Scheme, including

• Simpler method for calculating service
• Changes in the treatment of absences form work
• Treatment of service abroad
• Simplification of application forms
• New IT system, including e-government aspect

The Group did not reach consensus on issues such as an increase in the level of statutory redundancy payments and size of rebate to employers.

The Partnership Agreement "Sustaining Progress" endorsed the changes agreed by the Redundancy Review Group and provided, in addition that

• The distinction between service under and over 41 years will be removed
• There will be 2 weeks pay for every year of service
• The bonus week will be retained
• Rebate of 60% to the employer will be retained

On 18^th February 2003 the Government approved the drafting of a Bill, on a priority basis, to give effect to the new enhanced Redundancy Payments Scheme. The Government Decision also approved the provision of a sum of €1 million, to cover the cost of supporting IT; the funding of administration costs and operational overheads (including the enhancement of supporting IT) to be made from the Social Insurance Fund with arrangements to be put in place with the Departments of Finance and Social and Family Affairs. The Government also agreed to amend the Protection of Employees (Employers' Insolvency) Act 1984 to 2001 to enable employees of insolvent companies to make claims for minimum notice entitlements under the Insolvency Payments Scheme without having to obtain an award from the Employment Appeals Tribunal.

On 30^th April 2003 the Government approved the text of a Bill, to give effect to the new enhanced Redundancy Payments Scheme and the amendment to the Insolvency Payments Scheme. The Government Decision of 30^th April 2003 also approved the presentation of the Bill to Seanad Éireann and circulation to Senators.

The Bill was published on 7^th May 2003.

Costs

Social Insurance Fund

When the improved statutory redundancy payments come into operation it is estimated that a full years cost of payments to the Social Insurance Fund (based on the 2002 level of redundancies at c. 24,000) will be in the region of €149 million. This is an increase of €96 million in the annual cost to bring the new enhanced rates into effect.

Administrative implications

An amendment of the redundancy IT system will be required to implement the full range of changes set out in the new Bill at a cost in the region of €1 million. It is anticipated that the new system, when it is fully operational, will simplify administration especially for employers. It will also bring improved efficiencies in administration by the Department.

Section 4 of the Bill provides that the administrative costs of redundancy and insolvency be met from the Social Insurance Fund by means of an Appropriation in Aid to the Vote of the Department of Enterprise, Trade and Employment. This will provide greater accounting transparency, in that all costs (payments as well as administration) will be funded by the SIF. Detailed arrangements have been agreed between the Departments of Enterprise, Trade and Employment, Finance and Social and Family Affairs to implement these changes.

Retrospection

The legal advice from the Office of the Attorney General is that: -

(i) As the payment of a statutory redundancy lump sum is a legal requirement on employers, it could not be imposed on them with retrospective effect. In fact employers are entitled to due notice of the intention to legally require them to pay enhanced rates.

The new Redundancy Act has to be brought into effect by Ministerial Order after enactment by the Oireachtas. This cannot be made retrospective.

I hereby give advance notice to all employers that it is my intention to make best endeavors so that the new Redundancy payment levels will come into effect on Sunday 25^th May 2003 or as soon as possible thereafter. This will require swift passage of the Bill through the Oireachtas. Employees who are issued with notice of Redundancy on that date or later will be entitled to:

• 2 weeks pay per for each year of service
• Plus a bonus week

It is proposed that when this Bill has passed through both Houses of the Oireachtas and is enacted that a Commencement Order will be made so that most sections of the Bill will become effective, including the increased payment amounts. However section 10 will be brought into effect on 30^th January, 2004, while there are three sections 8,12 and 13 that will not come into effect until well into 2004 when the new IT system will become fully operational. A Commencement Order giving effect to these three sections will be made at that time.

Provisions of the Bill

I would now like to outline in detail the main provisions of the Bill to the House which are as follows:

Section 1 is a standard provision, which provides for the short title of the Act and the collective citation of the Act with other relevant Acts and the standard commencement provisions.

Section 2 provides definitions of terms used in the Act.

Section 3 provides that the Social Insurance Fund may cover the administration costs of the Redundancy and Insolvency schemes.

Section 4 provides for the amendment of section 2(1) of the Principal Act by inserting up to date definitions of "contract of employment", "employee" and "employer". These definitions are similar to those given in the Protection of Employees (Part-time Work) Act 2001 and other pieces of labour legislation i.e. Organisation of Working Time Act, 1997 and the Carer's Leave Act 2001.

Section 5 provides for the amendment of section 4 of the Principal Act, which deals with the insurability of an employee. The purpose of amending this section is to add clarity to the insurability requirements in line with the Social Welfare Acts and the Protection of Employees (Part-time Work) Act, 2001.

Section 6 provides for the amendment of section 7(2) of the Principal Act. The Employment Appeals Tribunal when dealing with redundancy cases has long been of the view that redundancy is impersonal. According to the Tribunal in St. Ledger V Frontline Distributors Ltd UD56/94 the statutory definition of "redundancy" has two important characteristics, namely "impersonality" and "change". This section is designed to provide certainty in this regard.

Section 7 provides for the amendment of section 9 (1) (b) of the Principal Act to include fixed purpose contracts; when the fixed purpose contract ceases there is a redundancy situation.

Section 8 provides for the amendment of section 17 of the Principal Act. The position at present is that the three forms RP1, RP2 and RP3 are the main forms used for statutory redundancy. They contain a lot of repetition and will be amalgamated into one form, when the new IT system is available later next year: this one form will be the basis for any rebate/lump sum claim.

Section 9 provides for the amendment of section 25 of the Principal Act to include an employee who started work in an employment abroad, is transferred to the company or associated company in this jurisdiction, works here for at least two years and is subsequently made redundant while working here: he will be entitled to statutory redundancy for his entire service from the date of commencement of his employment in the company abroad.

Section 10 provides for the amendment of section 39 (2) of the Principal Act so that Vice-chairmen of the Employment Appeals Tribunal must have been practising barristers or solicitors for at least 5 years. The existing service provision for the Chairman is 7 years.

Section 11 provides for the amendment of paragraph 1 subparagraph (a) of Schedule 3 to the Principal Act by substituting "two weeks" for "one-half" and subparagraph (b) by inserting after "product of" "two weeks of". These amendments are known as Transitional Arrangements, which will allow for the payments of increased statutory redundancy levels as soon as the Act comes into force following minor changes to the existing IT system. These arrangements will cease to have effect on the commencement of section 12.

Section 12 provides for the amendment of Schedule 3 to the Principal Act by substituting new paragraphs for paragraphs 1, 2 and 3 to allow for enhanced redundancy payments of 2 weeks pay per year of service plus one extra week's pay. Any "excess" days will be credited as a proportion of a year. These arrangements will come into force when a new IT system becomes fully operational.

Section 13 provides that continuity of service is preserved even when there are certain `breaks' in employment. It also provides that certain `breaks' in service are reckonable in the calculation of a lump sum except breaks occurring in the 3 year period prior to the date of termination of employment. These arrangements will come into force when a new IT system becomes fully operational.

Section 14 provides for penalties that may be imposed on people who defraud the system.

Section 15 provides that the minimum rates of pay laid down in the National Minimum Wage Act 2000 as updated, be taken into account when calculating a statutory redundancy lump sum.

Section 16 provides for the amendment of section 6 of the Protection of Employees (Employers' Insolvency) Act 1984 to 2001. At present, where a worker in an insolvent firm has not received statutory notice, it is necessary to take the case to the Employment Appeals Tribunal, to determine the Minimum Notice entitlement. In order to streamline the process and relieve pressure on the Employment Appeals Tribunal it is proposed to allow these employees to submit claims to the liquidator/receiver without having to go to the Employment Appeals Tribunal, thereby diverting these cases from the Tribunal and ensuring a better service. (The Employment Appeals Tribunal was established under the Redundancy Payments Act, 1967.)

Section 17 provides for the repeal of section 17 (4) of the Employment Equality Act 1998. This section exempted the existing calculation of a statutory redundancy lump sum, which differentiates between service under and over the age of 41, from the provisions of the Employment Equality Act 1998.

I would like to acknowledge the work that was done by the Social Partners within the Redundancy Review Group, which reported to me last Autumn. That Group proposed several improvements to the operation of the Scheme to make it more intelligible for employers and employees and to streamline the Scheme. These improvements are included in the Bill and will improve efficiency and customer service.

In the negotiations for "Sustaining Progress" all Social Partners reached agreement to increase the level of statutory redundancy payments. This ability of the Social Partners to reach consensus shows the strength of the Social Partnership process.

Before concluding I would like to say that I am very pleased to bring this Bill before the House to-day. The method of calculation of the statutory redundancy lump sum and the level of payments have not changed, except for the ceiling on the weekly wage, since the Redundancy Scheme came into operation back in 1968. This is a timely piece of legislation which will give a reasonable level of increased statutory payments to employees who are unlucky enough to lose their jobs through redundancy. It is hoped that the increased lump sum payments will help to alleviate the financial hardship caused by redundancy until these employees find alternative employment.

I commend this Bill to the House

ENDS