EMPLOYERS WILL have to pay the first four weeks of their staff’s sick pay under proposals drawn up by Minister for Social Protection Joan Burton to shave €150 million off her budget.
Ms Burton is proposing to transfer responsibility for paying sick pay from the Department of Social Protection to individual employers in the first month of illness, The Irish Times understands.
The plan, which would make a substantial inroad into the approximately €700 million in cuts Ms Burton has to make in next month’s budget, is likely to be strongly opposed by employers’ groups.
It was one of a number of cost-saving measures affecting social welfare which were discussed at a special pre-budget meeting of Ministers yesterday. The proposal would take at least a year to get up and running but is projected to save the exchequer €150 million in 2013.
Ms Burton argues that the current system under which the State picks up the tab for most employee sickness is an anomaly, and differs sharply from the practice in many other countries.
Under the current system, an employee must apply for illness benefit within seven days of becoming ill. To qualify, the employee must have paid at least 104 weeks’ PRSI or the equivalent. No payment is made for the first three days of illness.
Thereafter, the employer usually continues to pay the employee but is reimbursed for illness benefit by the department. The current rate of payment is €188 a week for a person earning over €300 a week, but the payment is smaller for lower-paid workers. Workers with a spouse and children receive high sums, and may qualify for medical cards and supplementary social welfare. Some, but not all, employers make up the balance of salary for a specified period.
Depending on the number of PRSI contributions the employee has paid, sickness benefit is paid for up to two years, or for as long as the person is sick in the case of some workers who fell ill before 2009.
In the UK, there is a system of statutory sick pay, under which an employer is obliged to pay a flat rate of sick pay for at least 26 weeks. In the Netherlands, the employer alone is responsible for the payment to sick workers for the first two years of illness. The government only steps in when the employer is unable to pay sickness money due to “financial failure”. The attraction of the proposal for Ms Burton is that it allows for substantial savings in the social protection budget without affecting core entitlements.
Social protection is the Government’s biggest-spending department, paying welfare, pension and benefits to 1.4 million people each month and with an annual budget of €21 billion. The bulk of its spending is on welfare. As the Government has committed itself not to cut the rates of primary social welfare payments, it will have to find alternative savings within the department.
Ms Burton launched an anti-fraud initiative in September in which she contended that new fraud-control measures could achieve as much as €625 million in savings next year. However, any savings will be separate from the €700 million in cuts required. In preparation for the December budget, the Cabinet yesterday devoted a special meeting to discuss Minister for Public Expenditure and Reform Brendan Howlin’s wide-ranging proposals for reform in the public service.
It is understood that discussion during the seven-hour meeting focused on proposals to reduce the number of State agencies and quangos. Early plans suggested some 102 bodies should be axed or merged, but the number has since been reduced to under 50.
Mr Howlin is also expected to outline his proposals for reduction in public sector numbers on Thursday. One measure is expected to set new levels of annual leave for all existing staff across the public service, ranging from a minimum of 22 days and a maximum of 32.