Burton's department 'had no strategy' to recover redundancy debt

Sunday 31 August 2014 22.40
Responsibility for redundancy debt transferred to Joan Burton's department in 2011
Responsibility for redundancy debt transferred to Joan Burton's department in 2011

Tánaiste Joan Burton's department has been criticised in an unpublished internal report over claims it had no strategy in place to recover millions of euro in outstanding redundancy debt.

The report has been seen by RTÉ's This Week.

The debts arise when the State is forced to step in and pay employee redundancy and insolvency payments in cases where bosses claim they cannot afford to pay.

Debt levels soared over recent years due to the economic crisis, with the State paying out more than €300 million since early 2011. 

The new figures show just 4.7% on average of this money was recollected during the period. Responsibility for the schemes transferred to Ms Burton's Department of Social Protection in January 2011.

The unpublished report found there was "no comprehensive policy for pursuing outstanding debt".

Cumulative debt was "continuing to rise year on year with no clear direction or strategy on how to deal with it," the report said.

Among a series of criticisms, internal auditors within the department flagged a "high" concern over the level of proof required from employers who claimed they could not pay redundancy or certain insolvency-related payments to outgoing staff being made unemployed.

The auditors concluded that "in many of the informal insolvency and bankruptcy cases, redundancy lump sums were being paid without financial proof of the employer's ability to pay".

Staff told the internal audit team that employers who claimed inability to pay went uncontacted for years, in some cases, after initial contact was made.

The report, which was finalised in the middle of 2013, found there was no policy or procedures in place for the follow-up of debt once an initial letter was sent to an employer.

The report was obtained by RTÉ's This Week under a Freedom of Information request.

The internal auditors also said that those working on redundancy and insolvency cases within the department needed specialist training, given the complexity of the files they were dealing with.

The scheme was previously administered at the Department of Enterprise.

The auditors said it was apparent that this training could not be provided in-house.

The report goes on to note that despite this issue being first flagged in 2012, just €1,000 was provided to an external training budget for the purpose in 2013.

The department did not say what the budget allocation was for 2014.

The auditors argued that the level of proof should be strengthened and a new debt recovery strategy should be put in place as a matter of urgency.

The department asked the Revenue Commissioners for advice on how to establish the veracity of employers' claims of inability to pay, according to the report.

However, department officials later chose not to use a special form which is used by Revenue for this purpose; describing it as overly bureaucratic.

The report did acknowledge that increased efforts were being made by the department to tackle the issue, and debt collection had improved recently.

Responding to the report, the department told RTÉ that it was confident that the self-declaration provided by employers via the official application form was sufficient, although the department said it continued to work with the Revenue Commissioner to strengthen the proofs required.

A spokesman said that recent legislation introduced earlier this year had given the department the power to seek greater recovery of over-payments, although the vast majority of the increased monies recovered relate to social welfare over-payments made to individuals rather than companies.

The new legislation includes the power to place attachment orders on future earnings - although this will apply mostly to individual social welfare payment recipients rather than employers. There is provision in the new legislation to recover outstanding monies via employer PRSI payments.

On a percentage basis the amount of redundancy and insolvency over-payments which were recovered has increased from 4.7% annually in recent years up to 22% for the first half of 2014 - although this figure may be artificially inflated due to the sharp fall in the amount being paid out under the scheme.

The State has paid out just under €30 million under the redundancy scheme so far this year, compared to an average of €91 million for each of the last three years.

The department said a debt management strategy would be rolled out later this year.

The internal auditors gave the debt recovery operation their highest risk rating. They expressed a "high" level of concern over the operation of the Redundancy Scheme, which posed a "financial and reputational risk for the Department."