Government to offer interest-free loans to firms struggling to pay redundancy

The Government is to offer interest-free loans to businesses that face difficulties in meeting redundancy payments for staff following the pandemic.

The Government has extended until September a current suspension of the right of workers who have been laid off temporarily to seek redundancy from their employer.

However, in a letter to employers this week the Tánaiste and Minister for Enterprise and Employment, Leo Varadkar, said this would be the final such extension.

He said the suspension of section 12A of the Redundancy Payments Act 1967 had been extended “one last time” until September 30th, at which point employees can trigger a redundancy claim if not taken back on by their employer.

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“Companies genuinely unable to pay will be able to get an interest-free loan from the Social Insurance Fund,” Mr Varadkar said in the letter.

Government sources indicated that further details on this arrangement would be announced in the weeks ahead.

The right of workers who had been temporarily laid off to seek redundancy has been suspended on a rolling basis over the past year or so. Ministers believed without such a measure, a large number of redundancy claims would have “crystalised” under provisions of existing legislation, potentially causing hundreds of businesses to fail.

Taoiseach Micheál Martin told the Dáil on Tuesday the current freeze on the right to seek redundancy would "not be extended beyond September".

Mr Martin also signalled that workers would not lose out on redundancy entitlements for any period they spent on the pandemic unemployment payment (PUP) since it was introduced in March 2020.

Pandemic environment

The Taoiseach said in response to questions from the leader of the Labour Party, Alan Kelly: "As this is unique, and it is in a pandemic environment, we want to make sure that workers are not disadvantaged and that neither are employers. It needs a bespoke approach to deal with the issue."

Mr Kelly said workers needed certainty on their redundancy entitlements.

“Hundreds of thousands of workers could lose out on payments because they spent time on the PUP. We need to know if that is going to be used in regard to calculable entitlements for their actual redundancy. Every worker is entitled to two weeks of pay for every year of service when made redundant. Normally, after four weeks of lay-off, a worker has the right to demand the return to work or to seek redundancy. We need certainty but we have not been able to get clarity on this issue from anyone in Government for a long time.”

Separately, in a letter to Mr Varadkar on Wednesday, the Irish Congress of Trade Unions (Ictu) criticised the further suspension of the right to seek redundancy until the end of September.

Its general secretary, Patricia King, said: "The continuation of this measure will deny workers their entitlement to claim their statutory entitlements to redundancy payments where such arises. It is yet another mechanism utilised to serve the interests of the private business sector, with scant regard for interests of workers."

Exacerbated

“This will be further exacerbated if measures are not put in place to afford redundant workers full credit for all reckonable service inclusive of the pandemic period.

“We would expect that you will, as a matter of urgency, set out proposals as to how these issues will be satisfactorily rectified and that equity of treatment will prevail.”

Ictu also said it “cannot and will not support the Government’s plans to cut the income of some of the lowest income workers in the State” as part of moves to roll back the operation of the PUP in the months ahead.

Ms King said it was very likely that workers in sectors such as aviation, hospitality, arts and entertainment would “still find themselves subject to public health restrictions and hence excluded from their employment and to be on reduced incomes”.