I want to thank my colleagues in Fianna Fáil for allocating our private business time this week to the issue of highlighting the threat been posed to SMES across this country by Minister Joan Burtons plans on the introduction of an unnecessary statutory sick pay scheme. I can anticipate the government’s response in advance. They will probably tell us that there is still a consultation process underway and no final decisions have been made. They will point out all that they believe they are doing in the interests of small business. I have no doubt that the Jobs Action Plan will be mentioned more times over the next two nights then santa will be at Christmas.
However my worry is that Minister Burton has form when it comes to attacking and undermining the SME sector. Last year she reduced the redundancy rebate from 60% to 15%. The government responded that this measure was taken so that the taxpayer wouldn’t have to pay for the redundancies of large employers who were moving to lower cost locations and that there would be minimal impact on SMEs. A laudable aim. However when I questioned the minister in relation to the breakdown of companies employing less then 50 who had received redundancy rebates in the previous 24 months-she replied that such a breakdown was not available within the department. So she had no idea of the impact the proposal would have on SMEs-and no particular care either. However we now know the impact. A Chambers Ireland survey of over 500 businesses across the country published earlier this month shows that
· 60.7% of respondents said the cut in redundancy rebate has had a negative impact on their business.
· 40.7% said it had made them less likely to employ new staff;
· 18.1% said it had limited their business’s ability to survive; and
· 14.6% said it had made their business less competitive.
So this time Minister we are putting the government on notice. You will not be allowed to place a second Burton Burden on small businesses.
Tonight marks the start of a campaign to inform businesses about this oncoming threat of a new Burton Burden, to encourage them to act and lobby their government TDs in order to protect their capacity to grow, to protect their capacity to employ more people and in many cases to protect their capacity to stay in business. I want to assure government TDs that this campaign doesn’t end with tomorrow night’s vote.
Sick Pay – The Current Situation
Nobody is denying that we need a proper and thought out debate on the whole area of workplace absenteeism in Ireland. However, forcing businesses to pay for the lack of a proper debate is not on.
Let’s reflect on the research available to us in relation to the current situation.
The 2011 IBEC Guide to Managing Absence, based on data provided by 635 companies employing in excess of 110,000 employees, found that:
• employees missed 5.98 days on average, an absence rate of 2.6%, compared to 3.4% in the last comprehensive survey in 2004;
• absence levels were higher in large organisations, 3.6% for companies employing over 500 employees, versus 2.2% for companies with less than 50 employees;
According to the Secretary General, Department of Public Expenditure and Reform to the Public Accounts Committee on 8 December 2011, absence in the Civil Service was 4.9%, an average of 11.3 days a year. This cost the State between €400 million and €500 million in terms of payroll costs only. Similar absence levels are reported by the local authorities and by the HSE.
The Taoiseach told the Dáil on the 22nd of February: There is little absenteeism in the small and medium enterprise sector and persons who are ill are genuinely out sick.
At the moment, there is no legal obligation for the employer to pay sick pay for their employees and if someone is sick for more than three days, they can claim from the social welfare department. However IBEC figures suggest that 60% of employers have a sick pay scheme in operation.
Minister Burton claims that the current system under which the State pays for most employee sickness is different from most countries. Her plans are to make employers pay the first four weeks sick pay for their staff. However she hasn’t acknowledged that
• Employers already pay billions in PRSI to cover the cost of sick leave: in 2010 employers paid €5 billion in contributions to the Social Insurance Fund, 75% of the total. This covers sick pay benefits-so it’s fair to say that the current proposal would make employers pay on the double
• The International comparisons she uses do not recognise that our employers’ PRSI rate of 10.75% has no cap on the employers’ contribution and the rate applies to all income, unlike, say in the UK.
• While some OECD countries do have a statutory sick pay scheme to which employers contribute, some do not. OECD countries, where in the main, statutory sick pay is not paid by employers, include Canada, Greece, Denmark (except under certain collective agreements), Portugal, Turkey, and the United States.
The Minister started a consultative process in February on the introduction of such a statutory sick-pay scheme where the employer shares some of the cost. In her consultation she suggests the annual saving to the exchequer would be €23 million if the employer paid for the first week or €89 million if the employer paid for the first four weeks. What she doesn’t say is where that €23 million or €89 million will come from. Let me be of assistance to her
• For over 40% of employers in Ireland – mainly smaller employers who currently have no sick pay cost – statutory sick pay would represent a substantial additional cost.
• This new cost burden will be seen as a tax on jobs and will have most effect on smaller, more vulnerable employers, operating in low-margin businesses.
• Typically these will include employers operating in the domestic economy and in the services sector who are already worst affected by the economic crisis.
• The 2010 Forfas report, ‘Cost of doing business in Ireland’ showed that for sectors like retail and hospitality, labour costs already account for about 60% of domestic input costs whilst for the services sector as a whole, labour costs account for 84% of location sensitive costs and need to be reduced.
• For the majority of employers (60%) with a sick pay scheme in place, the additional cost implication of each week’s sick pay could be €188 (based on the current social welfare flat rate) per person, on top of the current high cost burden of company sick pay.
• Many of these employers will have to realign their scheme benefits to cover any additional cost, giving rise to potentially difficult employee relations issues.
• We know that at least one in four companies have reduced basic pay since 2008 and in 2012, IBEC research shows that 74% of employers will either be freezing or reducing basic pay.
• Employers would face paying statutory sick pay, a higher PRSI charge related to that, along with paying the wages of any replacement worker.
• Furthermore we must take account of the high additional administrative cost which businesses would bear if such a scheme were introduced. The Government also wishes to achieve a 25% reduction in the regulatory burden on business set by the EU. It has been acknowledged that the statutory sick pay scheme in the UK brings with it a very high administrative burden on employers.
So how will this affect employment levels?
A major survey of 2068 SMEs across the country has been carried out by ISME. They are members of business organisations aligned to the Local Business Alliance- who represent 30,000 employers and 400,000 jobs.
They confirm that the latest Burton Burden will have a disastrous impact on competitiveness, jobs and absenteeism levels in the small and medium business sector.
The Survey confirms that if the proposals are introduced:
· 96% of companies anticipate job losses.
· 94% of companies outlined that their cost base would increase.
· 94% feel that absenteeism levels will increase with only 1% expecting a reduction.
Another group who have done work in this area is Early Childhood Ireland who represent 3330 childcare professionals supporting over 100,000 children and their families through preschool, afterschool and full daycare provision, in both community and private settings
· In their survey, almost four out of ten childcare providers would have to cut down on staff numbers if the sick pay proposal was introduced while 42 per cent said they would increase their fees to accommodate the plan.
So Minister, that’s what this Burton Burden will achieve. And that is why it cannot proceed.
I mentioned at the outset that I expected to hear a lot about the Action Plan on Jobs. Let me begin the process
“Cost competitiveness is one of the key determinants of every firm’s success. Notwithstanding the cost competitiveness gains made since 2008, a range of business inputs remain relatively expensive compared to other jurisdictions.
Referring to Manufacturing the plan states “Specific challenges facing manufacturing in Ireland include: reducing costs of production in Ireland including costs of labour”
Referring to the tourist industry the plan states “Costs remain high relative to competitors – a structural change to the costs of doing business in Ireland is essential – of particular concern are labour, waste and energy costs and local authority charges.”
Can I suggest that Minister Burton might read the Jobs Action Plan. If she proceeds with her plan, then we might as well rip the document up.
(On an asise-the waste and energy costs are of particular challenge. Instead of acting on those costs, the government continues to cosset the state monopolies on energy so there is little chance of a reprieve on that cost under this government.)
In fairness there are voices of reason within Fine Gael.
Minister Richard Bruton did say publicly, “Proposals for a statutory sick pay scheme would impact on competitiveness and employment. The evidence of this impact will need to be weighed against the potential for savings in terms of reduced absence due to sickness”
However Minister Bruton should back up his words and publish the the Forfas report he received on the matter in November of last year. It details the potential impact on jobs and competitiveness in the economy and the direct impact on companies to proposals from the Social Protection Minister Joan Burton on sick pay.
The Minister for Agriculture Simon Coveney-another Minister in a Department that’s essential to employment told Newstalk on the 22nd February that, “Many small businesses across the country would struggle to afford to be able to pay a significant sick pay bill. Before we would agree to make any changes in this area we would want to think about it very carefully in terms of its impact on employment. That is why it wasn’t introduced in the last budget even though some people were strongly arguing for it, including Joan Burton.”
Even a Labour Senator knows it’s not on. In the Irish Examiner Tuesday, August 28, 2012 Senator John Whelan warned that such measures could push many small and medium enterprises “over the edge”. He said that the small-business sector and the self-employed were “at the end of their tether” and caution needed to be exercised before any further burdens were imposed on them. He said “They have clung on magnificently and bravely, they’ve scaled back, cut down, put in all the hours — they’ve just nowhere else to go.” He cited Ms Burton’s recent comments to the effect that Middle Ireland could not take more financial pain. “I do hope that Joan Burton keeps her comments in mind when it comes to any changes within the whole area of employers’ PRSI or within the whole area of sick leave in the private sector.”
So there we have it.
I don’t expect any government TD to break ranks on the vote.
I do expect however we will have many sentiments expressed such as those of Minister Bruton and Coveney and Senator Whelan. Minister Burton however isn’t a very good listener when it comes to small business. That is why we are not going to go away on this issue.