The Government has not yet confirmed whether certain elements of the Aer Lingus redundancy proposals will qualify for state rebates and favourable tax treatment potentially worth millions of euro.
Uncertainty centres on a proposal whereby employees could take a redundancy package, but return to work at the company on lower pay and conditions.
A spokesperson for Aer Lingus said the airline believed the 'leave and return' option qualifies as a redundancy, and that it will be applying for the statutory redundancy rebate. SIPTU also said it was satisfied that the proposals were fully compliant with the Redundancy Payments Acts
Under current proposals, Aer Lingus employees can take a nine weeks pay per year of service redundancy package, and then return to the airline - although on new contracts with lower pay and conditions.
But is this a genuine redundancy? This is important for the taxpayer. If a genuine redundancy exists, Aer Lingus can claim a significant statutory redundancy rebate from the state.
Three years ago, Irish Ferries received over €4m after making 500 staff redundant.
Secondly, the employee receives favourable tax treatment on the lump sum - and the Revenue forgoes significant amounts of tax.
If it is not a redundancy, then employees have to pay full income tax on their lump sums.
Sources say these are redundancies, because there would be a time gap between leaving and returning, staff would compete formally for a job, and the new job would be completely different.
Aer Lingus says it will be claiming its state rebate, and insists the redundancies are genuine. But as yet, no Government agency has confirmed this view.
Informed industry sources said that the issue of tax treatment of the Aer Lingus redundancy proposals was discussed at a high level meeting with unions and management at the Department of Enterprise, Trade & Employment on Tuesday.
While no formal agreement was reached, the sources claimed the Department had signalled that on the basis of the potential scenario outlined by the company and SIPTU, that the 'leave and return' element of the restructuring scheme would fall within the scope of existing redundancy legislation.
This would mean that the company would qualify for the state rebate for part of the cost of redundancy payments, while employees would receive favourable tax treatment on the lump sums.
Industry observers estimate that the company's rebate and the tax benefit to the employees would run into millions of euro.
Meanwhile, SIPTU said the alternative to the proposals agreed through the Labour Relations Commission process was outsourcing, 'which could throw up 1,400 people on the dole'.
Aer Lingus said that in the event that the current proposals were rejected by staff, and the outsourcing alternative were implemented, Sky Handling has been selected as the preferred service supplier.
