ANALYSIS:Aer Lingus's 'leave and return' scheme could be attractive to employers looking to restructure, writes Martin Wall
IF THE package of proposals agreed between Aer Lingus management and Siptu succeeds in significantly reducing the airline's cost base, it is very likely that it will be examined closely by other employers seeking to restructure their companies.
A core element of the deal involves a "leave and return" arrangement under which Aer Lingus employees would take a severance package and then be re-employed subsequently on inferior terms and conditions.
However, there a number of legal, revenue and public policy issues which have been raised about the deal and which would need to be addressed if this model was to be widely adopted.
A key element in whether such leave-and-return schemes could prove attractive to workers and employers is the question of whether the redundancies involved are considered as genuine by the Department of Enterprise, Trade and Employment and the Revenue Commissioners.
At present companies making staff redundant can apply to the department for a rebate on some of the statutory element of the package given to staff. Also, redundancy payments received by employees receive favourable tax treatment.
However, if employees sign up to an agreement allowing them to take a severance package and subsequently return, would it represent a genuine redundancy under existing legislation?
This very question was considered at a meeting between the Department of Enterprise, Trade and Employment, airline management and Siptu last night. The meeting was also attended by representatives of the Ictu and Ibec.
Industry sources told The Irish Timesthat, although the department could not provide any guarantees until formal applications under the scheme were received, it had indicated, on the basis of the information received, that the proposals would come within the scope of the current legislation.
On Monday night the department asked management and the union to brief Minister for Enterprise, Trade and Employment Mary Coughlan on the plan in advance of yesterday's Cabinet meeting.
The department has declined to comment on the Aer Lingus situation on the basis that it cannot discuss individual cases. However, it said that the meeting on Monday was part of a continuing process.
Siptu and Aer Lingus are both confident that the leave and return proposals come within the Redundancy Payments Acts.
Ultimately, it will be up to the Revenue Commissioners to make a decision on the tax treatment of redundancy payments under any leave-and-return scheme, although there have been some cases of a broadly similar nature in the past.
The respected Industrial Relations Newssaid that the critical issue, based on precedent, was whether the workers who leave and subsequently return could be said to have left the company before reapplying for new positions which involved significantly different work.
It said that three years ago a deal negotiated at Waterford Crystal allowed skilled workers to be redeployed as general operatives. It said that formal Revenue approval in that case meant that these redeployments were treated, for tax purposes, in the same way as redundancies.
The key issue in the Waterford case was that the work being performed by the workers concerned had changed fundamentally.
Under the Aer Lingus deal workers who returned to the airline would have to operate on the basis of full flexibility and mobility within and between departments, buildings and work locations.
Presumably other employers and workers would have to fulfil the same criteria if they wanted any similar arrangements to be approved by the Revenue Commissioners and the Department of Enterprise, Trade and Employment.
For unions, such leave-and-return arrangements, or "insourcing" as they are called, are preferable to alternatives where staff are let go and replaced by personnel supplied through employment agencies.
General secretary of Ictu David Begg said that while the new model might appeal to some employers it would depend on the particular company.
He said unions would be concerned if a large number of employers sought to propose outsourcing arrangements with a view to have the Aer Lingus model as a fall-back.
Ibec director Brendan McGinty said that the Aer Lingus scheme could have advantages for some employers. However, he said that many employers would not be able to afford the scale of redundancy packages required to encourage staff to opt for insourcing arrangements given the scale of changes to work practices involved.
He forecast that the months ahead would see "downward pressure on severance terms" offered to staff.
The emergence of any trend towards such leave-and-return arrangements could also have implications on revenue for the State. Some sources have suggested that the Aer Lingus deal, if accepted by the Revenue could cost €40-€60 million in tax forgone.