On Tuesday, the Irish government signed off on two new benefits for employees to include a mandatory sick pay scheme and a new automatic pension scheme for private sector employees. We have set out the details of the new schemes below.
Sick Leave Bill 2022
To date, Ireland has been in the minority in Europe by not having a mandatory sick pay policy when employees are off work with an illness or injury. Yesterday, the cabinet signed off on the Sick Leave Bill 2022 (the “Bill”) which legislates for a right for all employees in Ireland to be paid sick leave by their employer for the first time.
Once the Bill is enacted, the statutory sick pay scheme will be introduced on a phased basis starting with a requirement that employers pay their employees three days a year of sick leave. This will extend to 5 days in 2024, 7 days in 2025 and finally 10 days in 2026. The rate of sick pay will be 70% of the workers wage up to a daily maximum threshold of €110.
In order to benefit from the Bill, the employee will need to provide a medical certificate and have at least 13 weeks of service with their employer.
In addition to the Sick Leave Bill 2022, the Cabinet has also signed off on draft legislation for a new form of pension scheme known as the Automatic Enrolment (AE) Retirement Savings System (the “Scheme”). The Scheme will automatically enroll private sector employees who do not have an occupational pension into a retirement savings scheme. This will account for about 750,000 employees between the ages of 23 and 60 earning over €20,000. If an employee prefers not to take part in the Scheme, they will have the option to opt out under certain circumstances.
The Automatic Enrolment Overview states that the reasoning behind the scheme is that they found that not enough people have occupational or supplementary pension coverage to sustain a reasonable standard of living during their retirement.
The contributions towards the Scheme will be paid by an employee which will be matched by their employer and the remainder will be topped up by the State. At the outset of the Scheme, employees and employers will contribute 1.5% of their gross annual earnings and the State will contribute 0.5%. However, after ten years the contribution paid by employers and employees will increase to 6% and the State 2%. The employers and the State’s contribution will be capped at €80,000 of an employee’s gross salary but the employee will also have the option to contribute earnings greater than €80,000.
The Scheme is due to come into effect in 2024.