Employers to Account for Sick Pay

Peninsula Team

November 25 2011

Proposal by Minister Burton to place sick pay for the first four weeks on employer

A whirl wind of employer upset, uproar and, above all, anger has come of the most recent proposal from Minister Joan Burton in respect of employee sick pay benefits. In effect, to shave €150 million of the Department of Social Protection budget, Minister Burton is proposing to avoid having to cut welfare payments by putting the onus on employers to cover the cost of sickness benefit for the first 4 weeks of an employee’s sickness absence.

This recent proposal announcement would form part of Minister Burton’s overall requirement to cut €700 million off her own departmental budget in advance of the Minister Michael Noonan’s Budget in December. The proposal was discussed at a special pre-budget meeting of the Ministers on Monday 14thNovember and it is anticipated that this proposal would take at least a year to implement with projected exchequer savings being made by early 2013 with 2013 year end savings of €150million.

Ms Burton believes that change is necessary and justifiable on the basis that substantial savings are required and because the current Irish system is an anomaly considering the majority of EU countries currently require employers to contribute a towards their employees’ sickness benefits.  

The proposal has been met with uproar from business lobby groups including Peninsula Business Services (Ireland) Ltd. and Chambers Ireland. Peninsula’s Managing Director for Ireland and Northern Ireland, Alan Price, has vouched to oppose the proposal on the strongest possible level and has described this proposal as a further blow for employers, particularly small-to-medium enterprises, after the re-introduction of the €8.65 National Minimum Wage.

As it currently stands in Irish law an employee has no right to be paid by their employer while on sick leave.  Whether or not an employee receives sick pay is entirely at the discretion of the employer but employees may claim sickness benefits from the State.  Thus, employers are referring to the new proposal as yet another tax on Irish businesses and it may be the final nail in the coffin for struggling businesses. Ironically, this move may lead to several more employees ending up in the unemployment line as employers may have no other option but to reduce costs which has generally meant a need for staff reductions. Thus, employees will then be seeking a different type of benefit from the Department of Social Protection and ultimately a more expensive one; the Jobseeker’s Benefit/Allowance.

Interestingly, shortly after this proposal was announced further information came to light that the Government is also considering reducing the redundancy rebate for employers from 60% to 30%. Once again this is another additional burden and cost being placed on employers during what are already extremely difficult times for Irish businesses.

At this stage both proposals remain just that; proposals. However, they are definitely topics that are going to come up for strong debate over the coming weeks with both employer and employee bodies fighting tooth-and-nail over the points. With no legislation in place to support the proposal from Minister Burton it may be difficult to implement but one thing is for certain is that both proposals are going to be watched very closely and debated strongly in the coming months.

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