Tax savings for employers who re-employ redundant staff

A report this week has highlighted a practice of tax savings being employed by some companies which make staff redundant, and then at a later date apply for a tax rebate on the redundancy payments before re-employing the same staff but at a lower wage.

Some 700 Aer Lingus staff accepted a redundancy package in 2008 worth nine weeks’ pay per year of service. Within weeks all had returned to the company on lesser terms and conditions of up to 20 per cent less pay, according to SIPTU, under a so-called ‘Leave and return’ scheme.

According to a report in this week’s Irish Times, the redundancy payments qualified for generous tax relief from the State for the staff, while Aer Lingus was able to claim a rebate worth €5 million.

“Both Aer Lingus and SIPTU have insisted that the redundancies were genuine,” the reoport said. “Sources put the size of the staff tax rebates at between €20 million and €40 million. Aer Lingus staff received their redundancy payments even though the Department of Enterprise, Trade and Innovation has not yet formally approved the scheme.

“The arrangement was put under the spotlight last October after it emerged that a similar proposal from the Dublin Airport Authority was rebuffed by the Revenue Commissioners.”

 

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