Aer Lingus faces €32.5m payout

Aer Lingus may have to pay up to €32.5 million as part of a settlement with the Revenue Commissioners in relation to redundancy payments it made to staff in 2009.

The airline has said it will make provisions for the payment in its financial results. The amount will cover PAYE, PRSI, interest, penalties and related costs arising from its restructuring programme negotiated at the Labour Relations Commission in 2008.

Some 913 staff received payments under the scheme, which related to the outsourcing of the majority of its Dublin-based ground operations. In total, 715 were re-hired in new roles within the group, at lower salaries and different duties.

"This restructuring was agreed by Aer Lingus management at the time on the basis that the severance payments made to staff under the restructuring programme would qualify as a redundancy under the relevant legislation, with related rebates for Aer Lingus and termination of employment tax relief for affected staff," the airline said in a statement.

However, last year it emerged that the Revenue and the Department of Enterprise Trade and Innovation were questioning if those 715 staff should be considered to be redundant, and a review of the terms was undertaken. The review is still ongoing.

"In negotiations yesterday, Revenue confirmed their intention to seek to recover PAYE and PRSI which they considered should have been deducted from termination payments to employees in 2009," Aer Lingus said in a statement.

Aer Lingus said it was in shareholders' and the group's best interests to settle the matter, to lessen the potential costs, and that it was inappropriate to seek to recover the money from staff.  "We are deeply disappointed and frustrated that the group must now provide for and settle this liability," the airline said.

Ryanair, which has a 29.8 per cent stake in its rival, said it was very concerned at the announcement and said the provision raises a number of very serious questions for shareholders.

In a statement, Siptu acknowledged the airline’s statement. "We are satisfied with the company's confirmation that it does not intend to seek to recover any amounts arising from the plan from Siptu members,” the union said.

A spokeswoman for the Revenue Commissioners confirmed officers had been in discussions with Aer Lingus regarding the tax issues arising from their restructuring scheme for some time, but would not be commenting further.

The Department of Enterprise, Trade and Innovation has also questioned whether staff members who left and subsequently applied for new roles and returned to Aer Lingus should be considered to be redundant under the
relevant legislation.

A spokeswoman confirmed no decision had yet been made in relation to paying Aer Lingus a rebate on payouts under the redundancy payments scheme.

Additional reporting: PA