Yesterday marked 300 days since the Debenhams workers began their struggle for a fair redundancy package. Despite government denials, Eddie Conlon presents three ways that they could meet workers demands and settle this dispute.
It’s over 300 days since the Debenhams workers began the fight for their ‘2 plus 2‘.
The state has thus far refused to make any substantial proposal to meet their demands. Micheál Martin is claiming the state has done right by the Debenhams workers by paying €13m in statutory redundancy. He claims it is not able to go any further and can’t meet the workers demand for two additional weeks per year redundancy pay, estimated that this would cost about €10m.
It’s a bit surprising then that his Finance Spokesperson, Willy O’Dea, has called for a supplementary fund to be established to meet the workers’ demands. This has wider application as Arcadia workers who were more recently made redundant are also seeking 2 weeks’ additional redundancy pay, as other workers will likely do in the future.
This is a proposal worth considering but in reality, there are a number of ways this dispute could be settled which the government have refused to consider. At a minimum, the €3m allocated for the proposed training fund for Debenhams workers should be converted to cash a down payment for the workers on their 2 plus 2. But let’s consider some of those other options.
1. Use the Social Insurance Fund
The way Martin is behaving you would think he has paid Debenhams workers out of his own pocket. Yet he is not even using tax revenues, which he might argue could be better spent elsewhere. The €13m comes from the Social Insurance Fund (SIF) which is funded by employers and workers’ PRSI payments.
Many workers view PRSI as just another form of taxation but this fund is not for financing education or other public services. It specifically finances in-work benefits, including pensions or provides protection for workers when they get sick or when their employer can’t pay their statutory redundancy pay. 70% of the payments from this fund are for contributory pensions.
Workers are paying in to be protected. I estimate that the Debenhams pay bill was around €29m in 2019. The average employee PRSI contribution is around 4% so a rough estimate is that the workers paid just over €1m in 2019 alone. Some of those workers have been at Debenhams for over 20 years. There can be no doubt that the cost of their statutory redundancy has been well covered. And that’s to say nothing of the employer’s PRSI contribution which I estimate was around €2m in 2019.
In normal circumstances the SIF would have considerable resources to cover the extra €10 m that workers are owed. A Parliamentary Budget Office (PMO) Report from May 2020 tells us that the SIF accumulated a surplus every year from 1997 to 2007 until it was eliminated by 2010. It ran a deficit every year from 2008 to 2015 as a result of the financial crash and was supplemented from state resources, but has had a surplus each year since then.
At the end of 2018, the SIF had reserves of almost €2.32bn, growing to €3.89bn in 2019. Without any impact from Covid-19, they were expected to reach €5.75bn in 2020, when it was projected to run a surplus of €1.8bn.
While this report was completed in May, revised estimates for 2020 suggest that by year’s end the fund will have a small deficit due to a requirement to pay €3.7bn in PUP payments. Though it is questionable that the fund has been used in this way, while other pandemic supports are being funded by central government, estimates for 2021 show the fund should almost break even this year.
Given this, and the extraordinary measures that have been taken across the economy, there is no reason why the operation of the fund cannot be amended to allow for the payments of additional redundancy entitlements to Debenhams workers.
2. Levy The Employers
Employers could also be asked to pay a Covid-19 solidarity contribution to cover the extra demands on SIF at this time. Employer’s PRSI contributions are low in Ireland compared to other EU countries and despite the pandemic, Corporation Tax receipts rose by 9% in 2020 due to increasing profitability among multinationals.
Some of the biggest and most profitable brands and companies operating in Ireland have also benefited from the Government’s Covid-19 wage support scheme. In October Revenue published the names of more than 66,500 companies that availed of the Temporary Wage Subsidy Scheme (TWSS). Some examples are:
- Kingspan which predicted in November that full year trading profit was expected to be “marginally ahead” of 2019, when it was €497m.
- Ryanair which made €1bn in 2019, up from €885 m in 2018.
- Volkswagen Ireland which made €10.3 m in 2019, up 13% on 2018.
Further, employer’s PRSI did not apply to the subsidy and was reduced from 10.5% to 0.5% on any top-up payments to workers, further undermining the sustainability of the SIF.
And we should not forget that Oxfam’s Inequality Virus report shows that the fortunes of Irish billionaires have increased by €3.3 billion since the start of the pandemic.
So, Debenhams workers have been paid statutory redundancy out of resources they paid into the SIF themselves and the government has refused to take any extraordinary measure to meet their extra entitlements, despite the fact that extraordinary measures have been taken for very many others, especially employers.
3. Use the IBRC Precedent
The government has claimed that nothing can be done to change the order of creditors so that workers’ claims against the company can take precedence over other creditors. The recent mediator’s report clearly says that the state will not mandate the liquidator to make any financial contribution to the resolution of this dispute.
But Micheál Martin, and KPMG, are completely misleading workers when they say that legally nothing can be done to meet workers’ demands through the liquidation process. Consider the following in relation to workers threatened with redundancy in the Irish Bank Resolution Corporation (IBRC) in 2013, who also had an agreement for 2 plus 2.
In April of that year, then Minister for Finance Michael Noonan said it would be legally problematic to ask the liquidator, KPMG, to divert assets from creditors to employees and ruled out any change in this stance.
He wrote: “There are standard rules on how the assets of companies in liquidation are distributed and it could be legally problematic for me to ask the Special Liquidators to interfere with these standard rules to the detriment of creditors and preferment of employees.”
If that sounds awfully familiar, it is because we have been hearing it ad nauseam from government ministers through the Debenhams dispute. But guess what happened next. On April 25 2014, The Journal reported that:
The threat of strike action by lower-paid workers at the Irish Banking Resolution Corporation looks to have been avoided after a deal was struck on redundancy payments by the Labour Relations Commission. It is understood that the deal will see payments of €18,000 to staff that had been with the company for 10 years or more. Staff with between two and ten years of service will receive €15,000, while those with less than 2 years service are in line for a payment of €2,000.
A statement from the special liquidators of IBRC confirmed that an agreement had been reached which will see “a sum of money set aside to facilitate termination payments to certain IBRC employees. The sum was understood to be €5.5m.
The LRC Annual Report for 2014 says “the agreement, made with the approval of the liquidator, meant a termination payment for all staff earning less than €120,000 a year based on their length of service with IBRC or its predecessors, Irish nationwide building society and Anglo Irish bank.”
And who was the liquidator? The same Kieran Wallace of KPMG who is dealing with the Debenhams liquidation. So it was and is possible to move workers up the queue, to pay them ahead of other creditors. It seems there is no reason why the state couldn’t waive its own demands on the liquidator, for €18m in tax and other payments, to allow these resources to be prioritised to meet workers’ demands.
There are many ways to sort this dispute but the state simply refuses to do so, and the trade unions have not exerted enough pressure to force their hand. Given the prospect of many more redundancies across the retail sector, it is now imperative that unions push for a fund to meet the entitlements of all workers who have agreements for enhanced redundancy payments.
They must also demand that employers are levied to pay for it.
