Firms in financial trouble to be offered interest-free loans for redundancy costs

The Government is to introduce a new scheme to offer interest-free loans to businesses that face difficulties in meeting redundancy payments for staff following the pandemic.

The Department of Enterprise, Trade and Employment said at the weekend it was working on a new arrangement under which such debts would be "warehoused" for a particular period of time.

Taoiseach Micheál Martin told the annual Industrial Relations News conference last Friday that the Government would in September lift a temporary suspension which has been in place during the pandemic on the rights of workers who had been laid off to trigger claims for redundancy.

The Taoiseach described the decision to introduce the suspension on claims for redundancy payments during the Covid crisis as “a proportionate step to mitigate a risk to businesses and of course to jobs”.

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Mr Martin said following the lifting of the current suspension the Government would “ensure businesses in financial difficulties are supported with a deferred payment arrangement while ensuring employees receive their entitlements”.

Tánaiste and Minister for Enterprise and Employment Leo Varadkar had raised the issue of the Government providing interest-free loans to employers that would face difficulties in meeting redundancy payments in a letter to businesses earlier this month.

The department set out more details of the planned new scheme following Mr Martin’s speech on Friday.

It said that under existing provisions of the Redundancy Payments Act 1967, the State can fund statutory redundancy payments from the Social Insurance Fund on behalf of an employer in situations where the employer can provide evidence of inability to pay due to financial difficulties or insolvency.

It said that in such situations a debt was raised and the employer was liable to repay it. "The Department of Social Protection will seek recovery of the debt directly with the employer and each case is assessed on its own merits. A mutually agreed repayment plan can be put in place, including repayments by instalment to minimise financial hardship."

Warehousing

The Department of Enterprise, Trade and Employment said that to coincide with the lifting of the emergency suspension of the right to seek redundancy and in recognition of the challenges that some businesses would face in meeting the costs involved, “it is proposed that, for a limited period, the existing practice will be restructured to introduce a form of ‘warehousing’ of Covid-related redundancy debt.

“The details of this proposal are currently being worked out, but the intention is that, subject to eligibility criteria including verification of inability to pay, redundancy debt will be formally deferred or ‘parked’ for a defined period, with no interest or penalties applying.

“The Departments of Enterprise, Trade and Employment and Social Protection are working together with a view to finalising these arrangements and introducing amending legislation over the coming months.”