Back to work enterprise allowance, Ireland

About

Country: 
Ireland
Sectors: 
All
Target Groups: 
workers/suppliers

 

The Back to work enterprise allowance is an activation measure aimed at promoting self-employment and acting as a disincentive to the so-called ‘shadow economy’. It is designed to encourage the long-term unemployed to take up self-employment opportunities by allowing them to retain a proportion of their social welfare payment plus other benefits over a two-year period. An evaluation by consultants indicates that the scheme was quite successful in terms of creating employment.

 

Background

Ireland has put in place several measures aimed primarily at encouraging people to take up employment, but which also discourage undeclared work. Such measures include the Back to work enterprise allowance and the Back to education allowance. These activation measures for the unemployed are a potentially important means of discouraging undeclared work as they provide ‘progression paths’ for long-term (three months+) unemployed people into work or training. Many referred for interview leave the unemployed register, suggesting that they may have been involved in undeclared work. In sum, the activation measures are regarded as generating an additional deterrent to undeclared work, alongside the activities of the Labour Inspectorate and Revenue Commissioners summarised in other cases studies.

Objectives

The Back to work enterprise allowance (BTWEA) is designed to encourage the long-term unemployed to take up self-employment opportunities by allowing them to retain a reducing proportion of their social welfare payment plus secondary benefits over a two-year period.

Specific measures

The BTWEA was established in March 1999. From 1 May 2009 the allowance is paid on a reducing scale over a two-year period, i.e. 100% of a person's social welfare payment in year one and 75% in year two. If a person is receiving certain social welfare payments and would like to become self-employed, the BTWEA lets them keep a portion of their social welfare payment for two years.

To qualify, an eligible person must be setting up a business that a Local Area Partnership Company/Integrated Local Development Company or a Department of Social Protection Jobs facilitator has approved in writing in advance, and, getting one of the qualifying social welfare payments for at least 12 months.

An eligible person does not have to pay tax on the BTWEA, but may have to pay tax on income from self-employment. Successful applicants must register as self-employed with the Revenue Commissioners.

Eligible individuals may be entitled to extra supports if starting a business: for example grants for training, market research, business plans or book-keeping and access to loans to buy equipment. They may also get assistance in paying for public liability insurance: either €1,269.74 or 50% of the cost, whichever is lower. Individuals may also receive advice about doing a 'start your own business course' before commencing self-employment.

Actors involved

  • Department of Social Protection
  • Local Area Partnerships/Integrated Local Development Company

Outcome of evaluations: lessons and conclusions

Achievement of objectives

See impact indicators below. More recent evaluation could not be found.

Obstacles and problems

The severity of Ireland’s financial and economic crisis means that there is a far higher number of unemployed people relative to funding/resourcing of the BTWEA than was the case during the ‘Celtic Tiger’ economic boom.

Impact indicators

A study by Indecon Consultants in 2002 presents comparable data on the status of back to work enterprise allowance programme participants prior to joining the scheme. In total, 9,308 (81.4%) were in receipt of long-term unemployment assistance, 1,194 (10.4%) were in receipt of short-term unemployment assistance, and 903 (7.9%) were in receipt of unemployment benefits.

In terms of the evaluation of employment progression of BTWEA participants, the Indecon Report 2002 gives details of the current status of BTWEA participants over the period 1997– 1999: 86.8% of this group had made no social welfare claim since completion of the BTWA scheme, while 5.9% made a short social welfare claim but are not working, and 7.3% are currently on social welfare. This data indicates that the BTWEA scheme was quite successful in terms of resulting employment. However, the Indecon report (http://s3.amazonaws.com/zanran_storage/www.deti.ie/ContentPages/116548968.pdf) was published when the economy was booming. It is not clear what the evaluation of BTWEA is since the Irish economy went into decline post-2008.

Transferability

Not in a position to comment.

Contacts

Bibliography

Indecon International Economic Consultants (2002), ‘Review of active labour market programmes’.

National Employment Rights Authority (2012), ‘NERA review of 2011’.

Revenue Commissioners (2012), Annual report 2011.

Tony Dobbins, Bangor University

 

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