Redundancy payments spread over 3 years for public sector and taxed at standard rate

[patslatt]

The public sector unions' refusal to consider pay cuts will mean that cuts in the huge budget deficit will have to come mostly from compulsory redundancies and to a lesser extent from voluntary redundancies and retirements. That's because the unions' preferred solution of increasing taxes would yield little extra tax revenues and possibly could even reduce them by adding to the economy's downward spiral.

A key problem with a major redundancy programme would be the large upfront cost of redundancy severance payments which would add considerably to the deficit in the short term. This could alarm the bond market which is now paying public sector salaries.

The solution could be twofold. First,redundancy payments could be spread over several years,say 3 to 5 years, with interest paid on the unpaid balances. Second,the payments could be taxed at the standard rate of income tax,which would recover about a fifth of the payments in taxes. In the case of large redundancy payments in excess of a year's pay,the tax could be at the full marginal income tax rate of over 40%.

There is a good argument for using income tax: a redundancy payment of six weeks per year of service makes redundancy very expensive for long service employees eg 30 years of service x 6 weeks = 180 weeks,almost 3.5 years pay and as well there is entitlement to early retirement pensions as pointed out by a poster below. This would heavily bias redundancies against younger civil servants,which would be undesirable according to a civil servant acquaintance who believes many of his colleagues recruited in the late 1970s and 1980s have poor work habits,including long liquid lunches and numerous tea breaks.

As I understand government accounting,the cost of the payments are reported on a cash basis as made. But even if all payments are reported on an accrual accounting basis in the year the redundancy occurs,spreading the payments over several years helps the government's cash flows.

[adamirer]

Part of the concept of a redundancy package is to help tide the person over the initial difficulties of losing their job and give them time to get finances in order. You really do see anyone working for the State as a second class citizen and living in an alternative universe where the same bills, loans, mortgages etc don't exist.

Your posts, which I rarely agreed with anyway, have gotten gradually more and more hysterical over the past two months and virtually all on the sequoia sized chip on your shoulder. You seem, dare I say, obsessive!!!

[kellsangel]

Why not pay pubic sector workers a years salary to emigrate for five years or more.?

Natural wastage is of the order of 3% to 5% in many sectors and would effect reduction of the public service by about 20% over four years through natural wastage.

Those induced to take five years leave or more would be allowed to return to the service after five years or more to take up their original post or a similar one.

The scheme would allow public servants to gain experience in other countries, and would probably be welcomed by the unions.

[adamirer]

Good point!

Redundant workers in the public and private sectors have similar out-goings and financial commitments.

So by your logic, I assume a private sector style of severance package for redundant public servants would be fair and equitable, no?

Say, 6 weeks of basic pay per year of service capped at 52 weeks? (which is what the Dell workers got)

Not disagreeing, just disagree with the concept that the packages should be taxed and/or deferred etc unlike private sector one (it's a moot point, pat is wasting his breathe as those conditions would never fly). A worker is a worker, regardless of the employer.

I'd, personally, have no problems with a 'private sector style of severeance package' or early retirement package. What that package would be is a broader issue. DELL may have got that, but 4-6 weeks seemed common, a cap, less so. Workers with the company my wife worked for got 6 weeks per year of service uncapped.

Any ERP would probably be heavily over subscribed!

[adamirer]

And I've no problem with the State letting workers go in area where they aren't needed. a 10% cut across the board though would be remarkably stupid. You can't cut the number of nurses, cops or teachers - there isn't enough of them as is. The departmental civil service has barely grown at all in 20 years, despite the increased regulation, political and EU demands - as virtually every new position went into quangos like the 350 person Financial Authority.

If there are staff cuts, then the fatter parts should be identified for harvesting.

[kellsangel]

To give some one 30 years x 6 weeks redundancy would cost 180 weeks salary.

Are they then to go on an early pension payment.

Young workers with short service will not be tempted by six months salary to give up a State job particularly if they have bought or want to buy a home in times of recession / depression.

[politicaldonations]

I dont actually think theres too many in public sector sector generally, those that are there are just vastly overpaid versus EU public sectors and Irish private sector.The reality is we are gonna have a lot less billions to spend on public sector pay so tell the unions how much we can afford to pay for next few years, say 15 billion rather than 20 billion or whatever, and let the union headbangers decide how they dish up pay cuts and/or job cuts without affecting service levels. The money is gone and we will be unable to pay such high amounts(20 billion) on public sector pay for decades to come.

[adamirer]

To give some one 30 years x 6 weeks redundancy would cost 180 weeks salary.

Are they then to go on an early pension payment.

Young workers with short service will not be tempted by six months salary to give up a State job particularly if they have bought or want to buy a home in times of recession / depression.

Oh I'm not perscriptive - merely pointing out the pruivate secotr doesn't work in harmony. Her company particularly targeted long standing employees with 30 years service - and while it cost them 180 weeks salary, they also saved 10 years worth of wages, employed younger people at much less cost (well, out-sourced in many cases) and a significant amount of the expense was tax deductable.

Not suggestig a course of action, just pointing out some common practises.

[adamirer]

well the value of any tax free part to the state is a moot point anyway : )

[patslatt]

Part of the concept of a redundancy package is to help tide the person over the initial difficulties of losing their job and give them time to get finances in order. You really do see anyone working for the State as a second class citizen and living in an alternative universe where the same bills, loans, mortgages etc don't exist.

Your posts, which I rarely agreed with anyway, have gotten gradually more and more hysterical over the past two months and virtually all on the sequoia sized chip on your shoulder. You seem, dare I say, obsessive!!!

Some counrties tax redundancy payments eg Canada. If the public sector brings mass redundancis on itself by holding on to wildly overpaid salaries,especially in the top heavy group in the €50,000 to 100,000 a year range,it shouldn't expect any sympathy.