Business groups have reacted angrily to Minister for Public Expenditure & Reform Brendan Howlin's announcement of changes to the redundancy and insolvency scheme to reduce the employer rebate from 60% to 15%. He said the measure would save €81m.
Minister Howlin told RTÉ the reduction was a pro-employment initiative. He said the current system incentivised employees to get rid of people and that in many other countries the governement paid no rebate for redundancy.
Employers' group IBEC said that, while there was a need for reductions in public spending, the adjustments could have been made in a way which would have been less damaging to growth and jobs.
It described the changes to the statutory redundancy rebate as effectively a further employer tax on jobs. "The change will make employers less likely to take on new staff, at a time when jobs should be the priority," IBEC said.
"The expenditure reduction in 2012 is overly reliant on cuts to public capital investment. Not enough will be delivered through greater efficiency in day-to-day spending," said director general Danny McCoy.
Small business group ISME said it was "livid" at the redundancy rebate change, saying the cost would affect those companies that are already in the greatest difficulty and would have the biggest impact on smaller companies.
The organisation criticised the Government for not scrapping what it called the "unaffordable" Croke Park agreement, and it added that more could have been done to address the current level of social welfare payments, which ISME claimed were acting as a disincentive to work.
Chambers Ireland also said the cuts in the redundancy rebate for employers would have a serious impact on businesses which were just seeking to survive.
The Small Firms Association has condemned what it called the ''short-sighted'' proposal. ''Such a substantive increase in the cost of making an employee redundant will mean that even more employees have to lose their jobs, just to cover the cost of the redundancies and the net impact this will have on the company's cashflow,'' commented SFA Director Patricia Callan.
''The Government is being very short-sighted on this measure - it is much cheaper to maintain a job, than to try and create one. Employers and their employees already contribute significantly to the social welfare bill through the PRSI system," she added.
The Construction Industry Federation also criticised the move, saying it has huge cost implications for employers, leading inevitably to some company failures.
"This is a retrograde decision. Employers contribute to the redundancy fund through their employers' PRSI so this amounts to another tax on employers and employment,'' commented CIF director General Tom Parlon.
''The redundancy rebate is also a factor in a company's investment decisions as it's an employment cost consideration. This decision runs contrary to the Government's stated aim of promoting a business friendly economy", he added.
