I move: "That the Bill be now read a Second Time."
The Redundancy Payments Act, 1967, was not a controversial piece of legislation; nevertheless it was important. Its importance is highlighted by the fact that since the redundancy payments scheme came into operation at the beginning of 1968 over 100,000 workers have benefited from it. That figure gives an idea of the contribution which the scheme has made in promoting the restructuring of industry, in facilitating retraining and re-adaptation, in promoting the climate necessary for change, and in alleviating the anxiety and the hardship which so many would otherwise have had to experience in situations of redundancy.
For the purposes of the scheme there is a fund financed by contributions by employers and workers as part of the general social insurance stamp. Under the scheme a redundant worker with at least two years' service with his employer is assured of a lump sum payment. This is payable by the employer who can then obtain a rebate from the fund varying generally from 55 per cent to 70 per cent. If the worker is unemployed a weekly payment may be paid at the employment exchange. Workers' entitlements are calculated by reference to age, service and pay. The independent Employment Appeals Tribunal determines issues of entitlement. The scheme at its initiation was seen as providing employees with some compensation for the loss of their jobs, recognising the rights built up by workers in their employments. The financial help in the form of lump sums and weekly payments was meant to be of assistance to employees in the period between the loss of one job and the securing of another.
Apart from this, the scheme could be seen as an adjunct to our moves from protection to free trade. The removal of tariff barriers had begun in the early sixties and was greatly extended by the Anglo-Irish Free Trade Agreement in the middle of the decade. Membership of the European Communities was also foreseen, with which would come further dismantling of our tariff barriers.
It was realised that some industries would have difficulties in facing increased competition and that a degree of rationalisation involving job changing would be a probable consequence. The 1967 Act was an important response to alleviate the hardship of workers made redundant. The Act was designed to reduce worker resistance to necessary changes in our manpower structure. Other elements of our manpower policy, including the advisory and placement facilities of the National Manpower Service, the resettlement allowance scheme and the training and re-training programmes of AnCO were all available as well to help promote the changes the country needed.
On reviewing the legislation, I have had regard to these factors as well as to developments since the scheme began. I have also taken into account criticisms, representations and suggestions received. There have been detailed discussions with both employer and worker representative bodies. The proposals in the Bill which is now before the House are based on the premise that the redundancy payments scheme should continue and that it be developed as a component of manpower policy.
All parties were agreed that the scheme needed to be significantly recast. The general improvement in the level of social welfare benefits, and especially the introduction of pay-related benefit, raised the question of the continuing need for redundancy weekly payments. These are paid in conjunction with unemployment benefit and pay related benefit but normally subject to the rule whereby the aggregate weekly amount does not exceed 85 per cent of pre-unemployment average net weekly earnings or £50, whichever is the least. This 85 per cent rule has meant that since its introduction in 1976 redundancy weekly payments have been curtailed in many instances. In fact, there are cases where redundant workers have ceased to become entitled to any weekly payments.
A comprehensive study of the redundancy payments scheme published in 1977 under the auspices of the Economic and Social Research Institute concluded that the weekly payments, being an income maintenance feature of the scheme, should be discontinued, income maintenance being more appropriate to the social welfare system.
My own examination of the scheme has led me to the same conclusion. One of the main provisions of the Bill is, therefore, to discontinue weekly payments. It is proposed, however, that persons currently in receipt of redundancy weekly payments at the point when they are abolished that is 6 April 1979, will continue to receive their entitlements until they are exhausted or cease for other reasons.
Weekly payments have always been associated, particularly by the trade unions, with the workers' contributions. This probably results from a comparison with the British scheme which has no weekly payments or workers' contributions. I consider it appropriate, therefore, that as weekly payments are to be discontinued, so too should the workers' contribution. A proposal is accordingly included in the Bill to abolish the workers' redundancy contribution from 6 April 1979. The redundancy payments fund will be financed henceforth, it is proposed, entirely by employers' contributions.
It is further proposed that these employer redundancy contributions should, as with social welfare contributions in general, be pay-related. They will be collected as part of the general social insurance contribution and be levied on earnings up to the same ceiling as for social insurance purposes. The figure specified in the Social Welfare Act, 1978, is £5,000 but provision is made in the Social Welfare (Amendment) Act, 1978, to update this figure by means of regulations which are to be subject to the sanction of the Minister for Finance: a draft of any such proposed regulations must come before each House of the Oireachtas for approval. I do not think it is necessary for me to outline the advantages of a system of contributions related to pay. Deputies will recall that during the passage of the Social Welfare Bill last year the House discussed the conversion from flat rate to pay related contributions. I would just like to say that a pay related basis is all the more appropriate for redundancy contributions since the workers' lump sums and hence the employers' rebate entitlements will be pay-related.
I am proposing that the rate of the redundancy contribution be set at 0.5% per cent of reckonable earnings. It is estimated that this will give the redundancy fund an income of about £9 million in the year commencing 6 April 1979 which I expect will keep the fund in credit at least up until the end of the first year of operation of the revised scheme when it is my intention to review the situation, including the adequacy of the contribution rate, in the light of the experience in the meantime.
I am also proposing to raise the statutory ceiling on lump sums. The ceiling for calculating lump sums is at present £2,500 and I propose to double this figure. This would give a best possible lump sum of £4,087 when the revised scheme comes into operation as against £2,043 now. Assuming the upper age limit for qualifying is dropped to 66 after the first year of operation of the scheme this figure will, of course be somewhat reduced—to £3,702, in fact. I will come to this reduction in the qualifying age later.
An unsatisfactory characteristic of our redundancy payments scheme as it has developed over the years is its complexity. I am sure this observation will not be lost on Deputies who have had to understand how the scheme works. An important objective in my review of the scheme was, therefore, to simplify it to the greatest extent possible so that it is more easily understandable to those who have to do so. Indeed the amendments I have already indicated, though not proposed for simplicity sake, will mean a much less complicated scheme.
The rebate system as it now exists is particularly complex. At present an employer is entitled to a 55 per cent rebate if he gives the requisite two weeks' notice, with an extra 2½ per cent for each week of extra notice up to a maximum of eight weeks or 70 per cent. Further, in the case of employees with over 20 years' service, that part of the employees' service over 20 years is rebated at 100 per cent. Where two weeks' notice was not given, the rebate could be reduced to 45 per cent.
This complicated rebate system was designed to encourage employers to give additional notice to workers so that they might make arrangements about further employment and also to provide advance information on impending redundancies to the State agencies concerned so that they might be better able to carry out their functions in relation to the redundant workers. I refer in particular to the placement function of the National Manpower Service and to AnCO. Since the enactment of these rebate provisions there have been other developments which ensure that these objectives are more effectively achieved than through the provisions of the Redundancy Payments Acts. The Minimum Notice and Terms of Employment Act, 1973, and the Protection of Employment Act, 1977, make provision in regard to the giving of notice. The National Manpower Service and AnCO and their offices throughout the country concern themselves with the placement and training of redundant employees whenever possible.
I am proposing therefore to confine the notice provisions of the Redundancy Payments Acts to simply two weeks, which is adequate for the administration of the scheme, and at the same time I am proposing a uniform level of rebates set at 60 per cent, which is just below the average rate of rebate up to now. I might point out that this is a rate which is fairly high, especially when compared with the UK's current 41 per cent. For failure to comply with the minimum of two weeks' notice, a provision is included whereby the rate of rebate may be reduced from 60 per cent to 40 per cent. I am further proposing that the Minister for Labour should have power to vary these rates of rebate by regulation, subject to the sanction of the Minister for Finance and possible annulment by either the Dáil or Seanad.
When the 1967 Act was enacted the old age pension age was 70 years. This continues to be the age up to which a person can qualify for redundancy payments, as it was brought down with the old age pension age. I feel the upper limit for redundancy payment entitlement should be set at old age pension age and accordingly a provision to that effect is included in the Bill. I am however aware that a sudden drop could disentitle many people, both employers and workers, with reasonable expectations in this respect in the event of redundancies. It is proposed therefore that the drop should not occur until one year after the other provisions in the Bill come into operation, that is, from 6 April, 1980.
In 1967, when the scheme was established, the normal working week was 42 hours and the number of hours in a week which a worker was normally expected to work in order to qualify under the scheme was set at half that number, that is, 21. The reasoning behind this is that the scheme should cover employments from which employees are deriving the main source of income and should not extend to subsidiary jobs. I am proposing that, since the normal working week is now 40 hours, the number of hours needed to qualify be reduced to 20.
One of the problems faced by an employee who is under notice of redundancy is the need to get another job. While most employers would in the circumstances allow employees reasonable time off to look for work or arrange for training, I feel this is something which should be given to employees as of right. I have accordingly included a provision in the Bill to this effect. To safeguard against abuses, employers may require the employee to give reasonable evidence of appointments in this regard.
As regards the Employment Appeals Tribunal, you may well be aware of delays in hearing resulting from a backlog of cases. This is largely due to the increased work-load imposed on the tribunal by the Unfair Dismissals Act, 1977. I have been conscious of this problem for some time and I am proposing in the Bill that the membership of the Tribunal be considerably expanded. Provision is made to permit the appointment of five vice-chairmen instead of three and of 30 ordinary members instead of 24. I have also provided that should the work-load of the tribunal warrant it, additional appointments may be made for the speedy despatch of business.
I now come to the remaining amendments to the Acts which affect details of eligibility and the administration of the scheme. The first of these amendments is to the effect that an employee shall not lose previous service in the case of reinstatement or re-employment under the Unfair Dismissals Act, 1977.
A further amendment concerns the concept of "obligatory period". In the Redundancy Payments Act, 1967, the "obligatory period" was devised as some protection to employers in cases where redundant employees wished to leave before the period of employers' notice expired. It means the period of notice to which an employee is entitled either under the contract of employment or statute. Where the employer gives longer notice the "obligatory period" of that longer notice is the period which expires at the time when the employer's notice expires. An employee wishing to leave before expiration of employer's notice and remain entitled to redundancy payments can do so only by giving, within the obligatory period, written notice of intention to leave, and with the employer's consent. When an employer objects the Employment Appeals Tribunal can decide the issue.
This provision can operate unsatisfactorily. For example, the employee might obtain an offer of other employment conditional on his taking up the job without delay, but if the employee leaves before the obligatory period he loses redundancy entitlement, and if the employer nevertheless pays, he loses entitlement to rebate. I am therefore proposing that the parties may by agreement bring forward the termination date of employer's notice so that the employee's notice may be within the obligatory period.
The time limit for claiming a redundancy payment is 52 weeks which the Employment Appeals Tribunal may extend to 104 weeks. It could happen that an employee could become redundant, and entitled to redundancy payment—having been technically dismissed by one employer and employed by another—without his learning of the fact before the 104 week limit had expired. This would be because of the failure of an employer to give notice or a redundancy certificate. I am proposing to empower the tribunal at their discretion to extend the time for claiming in such circumstances.
The next provisions I want to refer to concern a worker's entitlement to claim redundancy in the event of being on short time. In order to explain, I refer first to the position in relation to lay-off. At present the legislation provides that where an employee's employment ceases by reason of his employer's being unable to provide the work for which the employee was employed to do and it is reasonable in the circumstances for that employer to believe that the cessation of employment will not be permanent and where the employer gives notice to that effect to the employee prior to the cessation, that cessation of employment shall be regarded for the purpose of the redundancy payments scheme as lay-off. The reasonableness or otherwise of the employer's belief that the cessation of employment will not be permanent is subject to scrutiny of the tribunal, which have regard to all the circumstances in deciding whether employer's belief was reasonable or whether the purported lay-off in fact amounted to a constructive dismissal. In the case of short-time, however, the tribunal are precluded from investigating the matter because of the absence of any provision as to the reasonableness or otherwise of the employer's belief that short time will not be permanent. I propose therefore to include a provision which will subject short-time to the same tests as lay-off.
In another respect, too, the existing provision in relation to short-time is rather unsatisfactory. A worker can claim redundancy if he is put on short-time, which is for this purpose defined as less than half his normal weekly hours or for which he receives less than half his normal weekly remuneration and where such short-time continues for specified periods. Where the short-time working leaves the worker with half his normal hours or normal pay or more, he may still be able to claim redundancy on the grounds that his former job has ceased and the new job does not constitute an offer of suitable employment which would disentitle him to redundancy payments. But, in the latter case, that is where the reduction in hours or pay is not more than one half, the worker would have to refuse the new working conditions immediately or carry them out for not more than four weeks.
The Employment Appeals Tribunal which decides these issues has intimated that on the basis of counsel's opinion it feels constrained to decide in such circumstances that the worker who has worked the new situation for four weeks or more has accepted revised terms and conditions and is not therefore entitled to claim redundancy. It is felt that the legislation should not discourage the acceptance of reasonable short-time working whenever appropriate, and should not encourage workers to claim redundancy by virtue of part-time working which is not a particularly severe reduction. Therefore the Bill provides that in such circumstances dismissal for redundancy may be deemed to have occurred notwithstanding that the person has accepted reduced hours and/or pay for not more than 52 weeks, that is, he shall not for that reason alone lose redundancy entitlement.
Under the 1967 Redundancy Payments Act, the rules governing continuous employment lay down that employment shall be taken to be continuous unless terminated by dismissal or by the employees voluntarily leaving the employment. It is nevertheless also provided that continuity of employment is preserved in certain circumstances and subject to defined time limits where employment is resumed with the same employer whether or not notice of termination of employment had been given. Childbirth or maternity is not actually specified in this respect but, where an absence of up to 26 weeks for any cause is authorised by the employer, continuity of employment is preserved if the employee had been dismissed within such 26-week period but was later re-employed. I am providing in the Bill that an absence for childbirth for a period not exceeding 13 weeks should not break continuity of a woman's employment, even if the absence was not authorised, that is, had not the prior agreement of the employer, provided there is a resumption of work.
Section 39 of the 1967 Act provides that notices of appeal to the Employment Appeals Tribunal must be sent to the Minister for Labour. Appeals under the Unfair Dismissals Act, 1977 and the Minimum Notice and Terms of Employment Act, 1973 go directly to the tribunal. As there is no necessity for appeals under the Redundancy Payments Acts to be channeled through the Minister, the Bill includes a provision that such appeals should go direct to the tribunal.
Under the coming pay-related system of contributions the rate of redundancy contribution should not have to be changed from time to time simply because of the declining value of money since it is set at a percentage of reckonable earnings. It is being proposed that the ceiling to reckonable earnings will change automatically whenever it is changed for the social insurance contributions. Nevertheless, it may be necessary to change the rate by reference to the varying requirements of the Redundancy Fund, and as the redundancy contribution will be collected under the PAYE system along with the social insurance contribution, any change can only be made with effect from the beginning of a tax year and must be determined in good time. The yield required will depend primarily on the incidence of redundancies, and also on the age and service pattern of the redundant persons with due regard to the reserve in the fund. The Minister for Labour, as manager of the fund, should be in a position to act quickly to keep the income and expenditure of the fund in a proper relationship, without, if possible, having to borrow from the Exchequer. Therefore the Bill includes a provision for the variation of the rate of contribution by regulation subject to the sanction of the Minister for Finance, with a proviso that every such regulation shall be laid before each House and if a resolution annulling the regulation is passed the regulation shall be annulled accordingly. I have already drawn attention to the provision for the variation by regulation of the rate of rebate.
The method of calculating the amount of lump sum is set out in Schedule 3 of the Redundancy Payments Act, 1967 as amended; it also sets out the rules governing normal weekly remuneration by reference to which the lump sum is calculated. Briefly this is a half week's pay for each year of continuous employment between the ages of 16 and 41, and a week's pay for each year over the age of 41 plus one week's pay, pay in excess of £48.08 per week being disregarded. I am proposing that power should be given to the Minister for Labour to vary the basis of calculation of lump sums by regulation but, as with respect to the power to vary the rates of contribution and rebates, this would be subject also to the sanction of the Minister for Finance and possible annulment by either House of the Oireachtas. Similarly the Bill enables revision of the ceiling to gross normal remuneration by Regulation so that, with the minimum of procedural difficulty, this ceiling may be adjusted as may be appropriate.
If an employer refuses or fails to pay a worker his statutory lump sum entitlement the Minister is required to pay the lump sum out of the fund whereupon all rights and remedies of the employee with respect to the lump sum are transferred to and become vested in the Minister. The Minister, in cases of insolvency, is then entitled to claim, in the bankruptcy arrangement, administration of the insolvent estate or winding-up, the amount paid less the amount of rebate which would have been payable. A provision that in winding-up and bankruptcy circumstances the Minister's claim should rank as a priority debt, apart from helping to preserve the solvency of the fund, should, it is felt, reduce the incidence of direct payments from the fund in that the lump sum entitlements would in fact more often be paid along with wages due, and it would also thereby cut out or reduce the delay in workers getting their payments. Accordingly, I propose to cover this in the Bill.
Finally, the penalties provided for in the 1967 Act have not been updated and the Bill raises these penalties. In addition the Bill contains the standard provisions covering citations, construction and commencement and for removal by regulation of any difficulties that may arise in bringing the revised legislation into operation.
In view of the way in which this Bill had to be drafted I directed that the Explanatory Memorandum should set out as clearly as possible the various changes proposed. I might add that it is my intention to have a guide-book prepared on the amended scheme when this Bill has been enacted.
In conclusion, I believe that the proposals in the Bill are worthwhile and useful and I hope that all Deputies can support them.