AER LINGUS has reached a settlement of €29.5 million with the Revenue Commissioners arising from a controversial redundancy scheme at the airline in 2008.
The amount it is to pay the Revenue under the deal, which was announced yesterday, is €3 million less than the €32.5 million the company had set out last week in an exceptional provision to cover the cost of the settlement.
The new settlement with the Revenue does not include the €5 million to €6 million which Aer Lingus wrote off in the accounts last year in rebates which it had initially sought from the Department of Enterprise, Trade and Innovation on the amount it had paid in redundancy payments to staff who left the company in 2008.
The airline said yesterday that the settlement with the Revenue Commissioners related to PAYE, PRSI, interest and penalties as well as other costs arising from payments made to 715 staff who left under a restructuring programme negotiated in 2008 at the Labour Relations Commission and implemented in early 2009.
In a statement to the markets Aer Lingus said: “The reduced exceptional provision represents the revised likely total cost of dealing with this matter.”
Under the so-called “leave and return scheme” the 715 staff involved received redundancy payments from the company but were taken back on several weeks later to more flexible roles but on inferior terms and conditions.
However, from the outset there were queries raised over whether the scheme represented genuine redundancies which would have allowed the company to reclaim a rebate from the State of several million euro paid out in redundancy costs while the staff would have received favourable tax treatment of their lump sums.
Aer Lingus said last week, when it announced its original exceptional provision, that the restructuring deal was agreed by management on the basis that the severance payments to staff would qualify as a redundancy under the relevant legislation, with related rebates for the company and termination of employment tax relief for affected staff.
However, it said that by late 2010 it had become clear that both the Revenue and the Department of Enterprise, Trade and Innovation were seriously questioning this assumption.