Higher earners to get larger social welfare payments if they lose jobs under reform plan

Higher earners could receive larger welfare payments if they lose their job under fresh proposals due to go to Cabinet before Christmas.

Minister for Social Protection Heather Humphreys has been given a series of options by officials around how to link welfare payments to previous income, and she now plans to bring a memo outlining the proposed changes by either the end of this month or the start of December.

It is understood that the system would see graduated welfare payments offered depending on the previous income or PRSI contributions of the person in question, but that there will be a cap on the maximum weekly payments.

A source said the memo will contain a “strawman proposal” which will provide an illustrative example of how such a new system would work including a time frame for its implementation. It will also set out details for a period of consultation with employers’ bodies and trade union groups.

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While such a reform has been mooted previously, it is understood that the Government was further encouraged by the graduated system of supports that was offered to workers during the Covid-19 pandemic. “This showed us that a pay-related system works,” a source said.

During the pandemic, up to five rates were available for those who were out of work. At one stage, those who were earning between €151.50 and €200 a week were eligible for a €203 payment, those who earned between €200 and €299 were eligible for a €250 payment and for those earning between €300 and €399, the payment was €300. The highest rate, €350 per week, was for those earning more than €400 per week.

Confirming the move to reform the system and offer higher earners a higher welfare payment, Ms Humphreys said she did not want to see a situation whereby people faced a steep drop in income if they suddenly lost their job.

“In terms of a pay-related benefit, I want to try and bring that particular payment in because I don’t want [a situation in which] somebody, when they lose their job, that there is a sudden cliff edge and drop in their income. I saw that myself when I worked in the credit union where people lost their jobs and they were faced with a sudden drop. That is something that I am working on.

“My officials have brought forward a number of proposals and I plan to bring a memo to Government in due course. It will be the end of this year or early next year,” she said. A source said the memo could be ready by the end of the month, but cautioned that any major reform would need a process of consultation and therefore the changes may take some time.

The reforms come amid growing anxiety around tech-sector job cuts, although a source said the changes were in train before recent announcements and speculation about job cuts in companies such as Twitter and Meta.

In June of this year, a report from the Economic and Social Research Institute said there was a “coherent economic case” for linking jobseekers’ benefit for the recently unemployed to their previous earnings. However, the group said such a reform could give rise to weaker financial work incentives unless it was capped or time-limited.

The report found that Ireland is one of the few countries in the European Union without a strong link between the level of payment provided to those who have lost their job and the level of earnings in that job, at least for an initial period. The report found that setting the jobseeker’s payment to 60 per cent of earnings with a cap of €350 per week would cost an estimated €278 million per year more than the current system. Increasing the cap to €462 a week would cost €588 million annually.

The report also said there was “at least as strong a case for linking maternity benefit and illness benefit to previous earnings” as this could reduce the gender wage gap and have public-health benefits.