New redundancy plan aims to protect workers and firms

Analysis: Measures to help those ‘caught in limbo’ may cost up to €130m over three years


The aim of the Government’s new redundancy initiative is to ensure workers do not lose out on financially as a result of being laid-off during the pandemic while at the same time seeking to prevent businesses being forced to the wall due to the cost of meeting the entitlements of staff it let go.

While the numbers claiming the pandemic unemployment payment has fallen steadily over recent months from a peak of nearly 600,000 in April/May 2020, there are still about 100,000 people receiving the benefit.

Tánaiste and Minister for Enterprise and Employment Leo Varadkar said a number of these people were “caught in limbo” and faced losing their full statutory redundancy entitlements from a previous employer if they accepted another job.

Under legislation going back to 1967 a worker who was laid-off or placed on short-time working could after a period require the employer to either take them back on or make them redundant.

At the start of the pandemic the Government effectively suspended this right. The fear was that given the numbers of people being laid-off at the time, there could be a “flood” of redundancy claims leading to costs could sink businesses that might otherwise be viable.

Another issue was that redundancy payments are calculated on the basis of service over the previous three years.

Trade unions and employers have pointed out that workers who were laid-off and were claiming the pandemic unemployment or some other jobseekers’ payment over the last 18 months and who were then subsequently made redundant, would lose out as the lump sum calculations could not include the specific periods in which they were receiving the benefit.

Mr Varadkar said the Government believed the State should step in given the very unusual circumstances in which thousands of workers were laid-off during the pandemic.

The Department of Enterprise and Employment has received legal advice suggesting that imposing the cost of the layoff period (if it were to be allowable as reckonable service) on employers would give rise to constitutional issues and was “fraught with legal risk”.

Essentially with the suspension on the right to seek redundancy being lifted from next week, workers who are let go and who lose out on reckonable service during their period on the pandemic unemployment payment can now receive a special payment of up to €1,860.

The measure will apply up to 2024.

Employers facing difficulties in meeting redundancy costs will be offered what are essentially soft loans from the State to meet this bill.

The numbers of people or companies who may avail of the new supports are not known precisely.

However, the Government estimates the moves will cost between €30 million and €130 million over three years.

The money will come from the social insurance fund which underpins State welfare and pension benefits. However, this scheme was already facing a deficit of almost €1.2 billion last April.

Payments under the new arrangements will require primary legislation and the money may not be available for workers until next year.