The combination of tax and benefit rules can create financial disincentives for young parents and in particular secondary earners to enter or re enter the workforce. Childcare responsibilities and lack of affordable childcare can add to the challenges that parents face when considering entering or returning to the labour market. In Ireland, the social welfare system adds another layer of complexity to the issue of parental workforce participation as it offers different types of support based on familial circumstances, which can in some cases inadvertently dampen the motivation for parental employment. In 2015, the Irish Government introduced a financial support scheme aimed at incentivising parents on social welfare payments to return to work, called the Back to Work Family Dividend. The scheme provides additional financial assistance to families to ease the transition from social welfare to employment by supplementing their income during the initial stages of employment, thereby encouraging greater workforce participation and reducing dependency on welfare benefits.
Back to Work Family Dividend – Ireland
Abstract
Under the Back to Work Family Dividend, eligible families who were previously in receipt of certain social welfare payments, such as Jobseeker’s Allowance or One‑Parent Family Payment, and who secure employment for a minimum of 19 hours per week can receive continued financial support for two years. During the first year of employment, recipients receive a weekly benefit payment for each child, for up to four children, and half of that amount during the second year, regardless of their earnings. In 2024, the benefit amounted to EUR 46 per week for children under 12 and EUR 54 per week for children over 12.
To qualify for the scheme, individuals must have at least one child under 18 (or a child in full-time education under 22 who lives with them) and must have received social benefits for a minimum of 12 months, of which at least six months in the last year. Additionally, applicants must start working in Ireland within four weeks of leaving the social benefit scheme.
An evaluation of the scheme in 2015 showed that the Back to Work Family Dividend scheme significantly increases the financial incentives for unemployed parents to take up work. Another study from 2018 showed that parental in-work poverty in Ireland was very low compared with the EU average (respectively 5.1% and 11.2% in 2016) and the authors argued that this outcome was largely due to in-work benefits such as the Back to Work Family Dividend scheme (and the Working Family Payment). Ireland has one of the highest rates of children in jobless households, but that the share decreased considerably between 2013 and 2018, coinciding with the introduction of the scheme in 2015. In 2022, 2 678 families in Ireland received payments from the scheme. For context, in that year there were 102 800 Irish households with children in which neither of the parents were employed.
Further reading
[1] Department of Employment Affairs and Social Protection (2018), Review of the Operation of the Working Family Payment, https://www.gov.ie/en/publication/c15d9-review-of-the-operation-of-the-working-family-payment/.
[2] Department of Social Protection (2024), Back to Work Family Dividend, https://www.gov.ie/en/service/93cd55-back-to-work-family-dividend/ (accessed on January 2024).
[4] Houses of the Oireachtas (2022), Social Welfare Eligibility, https://www.oireachtas.ie/en/debates/question/2022-04-26/section/777/.
[3] Savage, M. et al. (2015), Making Work Pay More: Recent Initiatives, https://www.esri.ie/system/files/publications/BP201602.pdf.
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