State picks up €30m redundancy bill for insolvent firms

THE Government paid out almost €30 million in redundancy payments in the first two months of 2009, latest figures from the department of Social Welfare Department of Social and Family Affairs have shown.

And the latest estimates from the department for 2009 say it is expected that e234 million will be spent on statutory redundancy payments this year.

The figures come on the same day that the Public Accounts Committee heard the Social Insurance Fund (SIF) — from which statutory redundancies are paid — will probably run out by the end of the year.

Labour Party spokeswoman on Social and Family Affairs Roisin Shortall said that often the Government was left to pick up the tab when companies declared insolvency. She said a legal loophole means there is no comeback for the state in recouping monies from directors.

“This has been before the PAC before. If a company becomes insolvent, and the Government is left to pay redundancies, directors are not liable.

“Recommendations have been made since 2002 to close up the loophole so that they can be pursued for costs.”

Ms Shortall said companies should not be allowed to run down funds to the extent that they could not pay their employees’ redundancies.

“We need to protect the public purse. The state is pursuing directors but not getting anywhere and there is often delays over a few years and meanwhile the state is picking up the tab,” she said.

Ms Shortall said individuals were able to get involved in another company without old debts being cleared and this needed to be regulated.

She said the problem has been there for some time, and a consultant has now been appointed to look at the situation and report back.

Last year e189 million was spent on statutory redundancy payments from the SIF.

In 2008 the total expenditure from the SIF on schemes of the department of Social and Family Affairs was e8.1 billion.

Of that nearly e4.3 billion was spent on pension payments, including the state pension contributory, the state pension transition and widows contributory pension.

The SIF takes in annually approximately e7 billion to e8 billion in social insurance contributions from employers and employees.