The Government has scrapped rules that gave older workers better redundancy payments because it believed the system would fail an age discrimination legal challenge.
Meanwhile, it emerged that redundancy payments under the old rules cost Irish employers less than half the amount paid by their UK counterparts.
Under the old system, which was replaced on June 1st, workers received one week's pay for each year worked over the age of 41, and a half week's pay for each year served under 41.
"The original thinking behind this differentiation between service under-41 and service over-41 was that older people were considered to have more difficulty in securing alternative employment," the Department of Enterprise, Trade and Employment said in an April 2002 briefing paper.
"This may be less relevant today.
"Indeed it has been argued that older workers who are made redundant have less expected working years ahead of them and that therefore their compensation should be less than for younger workers," officials wrote.
"On equality grounds it would be difficult to sustain the anomaly," said the April 2002 Department of Enterprise, Trade and Employment briefing paper, one of a number released to The Irish Times under the Freedom of Information Act.
However, it refused to release papers dealing with discussions within the Government about calls to pay the increased payments to workers laid off before the June 1st introduction date.
The Tánaiste and Minister for Enterprise, Trade and Employment, Ms Harney, has denied allegations that she promised Kilkenny workers during the last election campaign that they would qualify for higher redundancy payments.
The Redundancy Payments Act 2003 grants all laid-off workers two weeks' pay for each year worked, while workers sacked by insolvent companies will find it easier to get payments.
The abolition of the difference between years of work under and over 41 years of age will cost the State's Social Insurance Fund (SIF) heavily.
"The cost to the SIF of removing the distinction has not yet been examined in details.
"However, in a 'typical' redundancy year (payments in respect of c. 13,000 redundant workers) the cost could be expected to increase by around 50 per cent, i.e. up from c. €26 million to €39 million.
"In 2002, where payments in respect of c. 20,000 workers are envisaged, a 50 per cent increase in costs would raise redundancy payments from the SIF from c. €40 million to €60 million," said the briefing paper drafted in 2002.
However, the total cost to the Exchequer is now likely to be even higher since unemployment numbers could well exceed 200,000 if current trends continue.
A €1 million investment in new computer systems will be necessary in 2004 to implement the new regime, though the Department insisted that rules would be kept as simple as possible.
"The current IT system is 'fragile' and not suitable for modification (according to Deloitte and Touche, developers of the system, who look after its maintenance," according to a note from the Department's redundancy section last January.
A survey conducted by the redundancy section in December 2002 showed that the net cost of redundancy payments to Irish employers were substantially below UK levels.
"In all of the scenarios the net employer cost in Ireland is less than half of the cost in the UK and in 16 of the 18 scenarios the net employer cost in less than 40 per cent of the UK," officials wrote.
For example, an Irish employer would pay €1,200 to lay off a 30-year-old Irish worker with 10 years' service.
However, a British counterpart would have to pay €3,568 to lay off a similar worker.