Covid layoffs bill published
The Redundancy Payments (Amendment) Bill 2022 was published by the Tánaiste and Minister for Enterprise, Trade and Employment Leo Varadkar on 21 January. The Bill once enacted will give employees who lost out who have lost out on reckonable service while they were on lay-off due to COVID-19 restrictions, and have subsequently been made redundant, a special payment of up to a maximum payment of €1,860 tax-free to bridge the gap in their redundancy entitlements.
This follows an announcement on 21 September of last year by Government that they would introduce a new special payment in the event of redundancy for workers who lost out on reckonable service while temporarily laid off because of Covid restrictions during the emergency period.
Schedule 3 of the Redundancy Payments Acts provides that absence by reason of lay-off in the three years immediately preceding the termination of employment is not reckonable for the purpose of calculating a redundancy payment. While there had been calls by opposition parties for this section of the Redundancy Payments Acts to be amended in respect of time spent on lay-off during the ‘emergency period’, the Attorney General confirmed that such an amendment to the legislation would not be constitutional.
Therefore, it remains the case that in the case of redundancies now arising, where the qualified employee may have been on Covid-19 related lay-off for protracted periods, through no fault of their own or of their employer’s, their redundancy entitlement will not factor in those periods.
However, the provisions of the Redundancy Payments (Amendment) Bill will plug that gap by introducing a special state payment for workers made redundant who have lost reckonable service through a direct payment from the Social Insurance Fund. The payment will ensure that the employee being made redundant will receive the same total redundancy payment as though they had not been laid off during the pandemic.
The amount an eligible worker will receive will depend on the length of time they were placed on lay-off due to COVID-19 before the date they were made redundant. The calculation for the payment is based on existing statutory redundancy provisions. The maximum to which any employee will be entitled is €1,860 if they earned in €600 or more a week and were laid off for the full emergency period.
The Department of Social Protection is working on the necessary administrative systems to provide for the application and payment processes. It is expected payments will become operational in the first half of this year.
What does this change for the employer?
The scheme will not impact on the employer’s responsibility to pay the normal statutory redundancy payments, which excludes layoff periods due to Covid-19 restrictions. However, as outlined above, the State will provide a payment to employees who lost out who have lost out on reckonable service while they were on lay-off due to COVID-19 restrictions, and have subsequently been made redundant, a special payment of up to a maximum payment of €1,860 tax-free to bridge the gap in their redundancy entitlements.
The lump sum payable under the legislation will continue to be paid by the employer directly to the employee and the amount of said payment is related to the employee’s length of service with that employer and his or her normal earnings. The scheme will not change how an employer operates in a redundancy scenario. It will be the responsibility of the employee to claim this payment from the Social Insurance Fund.
Reckonable vs non reckonable service
To be entitled to a redundancy payment an employee must have 104 weeks’ continuous employment with the company. The Acts provide that an employee’s service shall be continuous unless the employee is dismissed or voluntarily leaves employment.
For the purposes of calculating the redundancy lump sum, reckonable service is used when estimating years of service. The provisions of the Redundancy Payments Act which apply to Reckonable Service are set out in Schedule 3 of the Act. Certain ‘breaks’ in service are deductible in the calculation of a lump sum, where the ‘breaks’ occur during the three-year period prior to the date of termination of employment. Any absence that occurred more than three years prior to the redundancy taking effect is automatically considered to be reckonable.
- During, and only during, the three-year period ending on the date of termination of employment, none of the following absences will be reckonable:
- Absence in excess of 52 consecutive weeks’ owing to an occupational injury or disease within the meaning of the Social Welfare (Consolidation) Act 1993.
- Absence in excess of 26 consecutive weeks’ due to illness or injury not covered at point 1 above.
- A period of absence by reason of lay-off by the employer.
- Absences from work by reason of a strike.
The following absences will be allowable as reckonable and therefore should not be deducted from the calculation of an employee’s Reckonable Service.
- Any period of absence due to Statutory Leave, including maternity leave, additional maternity leave, natal care absence, adoptive leave, additional adoptive leave, parental leave, force majeure leave, paternity leave, parent’s leave and carer’s leave.
- Any period of leave authorised by the employer e.g. a career break.
- A week falling within a period of continuous employment and during which the employee was actually at work.
- Any period of absence because of an unfair dismissal under the Unfair Dismissals Acts 1977 to 2015 and where the redress provided for re-instatement or engagement of the employee.