Contributions

Table of Contents

Insurability

Every person over 16 years of age and under pensionable age (66 years) in insurable employment is an employed contributor. a person over 66 and under pensionable age with reckonable income or reckonable emoluments who is not employed is a self-employed contributor.

Employer and employee PRSI and universal social charge on benefits must be collected by the employer on the taxable value of the benefit. The tax is determined by a reference to a notional payment and is to be deducted from salary in the same period as the benefits provided.

Social insurance and levies have applied to benefits in kind since 2004. The person is deemed to receive a notional payment of an amount equal to the amount, which is the best estimate that can be reasonably made of the amount of income that is likely to be chargeable to income tax in respect of the benefit. The notional pay must be the best estimate that can be made.

The 2013 Act provided for the exchange of information between the Revenue Commissioners and the Minister for Social Protection in relation to such contributions and the payment of income arising from these contributions into the Social Insurance Fund.

The 2018 Act provides for changes to the Social Welfare Consolidation Act to reflect, in respect of PRSI collection, the Revenue Commissioners change from a monthly/annual return system to a “real-time” system i.e. a return to Revenue is required on each occasion a worker is paid. The amendment will take effect from 1 January 2019.

PRSI

Employers are normally liable to remit PRSI contributions deducted in respect of their employees through Revenue’s PAYE system. There were a limited number of circumstances in which PRSI contributions are liable to be remitted directly to the Department of Social Protection under its Special Collection system, e.g. in the case of workers who are temporarily posted abroad and who are still liable to pay Irish PRSI contributions.

The 2014 Act provides for changes to enable functions relating to payment of benefit or assistance and related payment services to be provided under arrangements with selected payment service providers.

In line with the announcement in Budget 2013, the 2013 Act extended liability for PRSI contributions to modified rate PRSI contributors (i.e. PRSI Class B, C and D contributors) who also have income from a trade or profession. This PRSI contribution will be at the rate of 4% of relevant emoluments and income, but will not count towards determining entitlement to social insurance benefits.

The 2011 Jobs Initiative provided for the halving of the lower 8.5% rate of employer PRSI contribution where reckonable earnings in a week do not exceed €356. The lower 8.5% rate comprises a social insurance contribution of 7.8% and National Training Fund Levy of 0.7%. These changes apply to contributions payable from 1st July 2011 to 31st December 2013.

Lower Rates

Under the PRSI system, no employment contribution is liable to be paid where an employed contributor has weekly earnings of €352 or less. Where an employed contributor’s weekly earnings exceed €352, an employment contribution at the rate of 4% is liable to be paid on weekly earnings in excess of €127.

This figure is known as the PRSI-free allowance. The 2012 Act provided for the abolition of the weekly PRSI-free allowance of €127 with effect from 1 January 2013.

The 2012 Act provides for an increase in the minimum rates of the Pay-Related Social Insurance contribution payable by self-employed contributors with effect from 1 January 2013. Generally, self employed contributors with reckonable income over €5,000 pay Class S PRSI contributions at the rate of 4%, subject to a minimum payment.

This minimum payment is being increased from €253 to €500, with effect from 1 January 2013. For those with reckonable income over €5,000 but who have no net liability to tax, a flat rate PRSI contribution of €157 is payable. This flat-rate contribution is being increased to €310, with effect from 1 January 2013.

Earnings Threshold

The 2018 Act provided for an increase in the reckonable earnings threshold for employees from €376 to €386 whereby employer PRSI contributions are paid at the lower rate of 7.8%. The earnings threshold increase of €10, from €376 to €386, is designed to take account of the increase in the minimum wage from €9.50 to €9.80 per hour from 1 January 2019 and will result in the same proportion of employers’ contributions being paid at the lower rate. The amendment took effect from 1 January 2019.

The 2020 Act increases the reckonable earnings threshold for employees from €395 to €398 whereby employer PRSI contributions are paid at the lower rate of 7.8%.The weekly earnings of an employee (employed contributor) determine the rate of employer contributions paid on behalf of that employee. Formerly, employer PRSI was charged at a rate of 7.8% on weekly earnings between €38 and €395. Weekly earnings in excess of €395 attract Employer PRSI at a rate of 10.05%.

The earnings threshold increase of €3, from €395 to €398 was designed to take account of the increase in the minimum wage from €10.10 to €10.20 per hour from 1st January 2021. Employers with employees benefitting from the increase in the minimum wage will continue to attract the lower rate of employer PRSI.

The 2020 Act increased in the reckonable earning threshold for employees from €398 to €410 whereby employer PRSI contributions are paid at the lower rate of 8.8% (includes 1% National Training Fund Levy). The earnings threshold increase is designed to take account of the increase in the minimum wage from €10.20 to €10.50 per hour from 1 January 2022. Employers with employees benefitting from the increase in the national minimum wage will continue to attract the lower rate of employer PRSI. This amendment will take effect from 1 January 2022.

Certain Unearned Income

The exemption from PRSI applying to employed contributors and occupational pensioners under State pensionable age, whose only additional income is unearned income, was abolished with effect from 1 January 2014. The income became liable to PRSI at 4%, provided the person is a chargeable person for Revenue purposes. A chargeable person for Revenue purposes is generally a person who has income in excess of €3,174.

However, a chargeable person does not include a PAYE taxpayer—

who does not have other income, or
who has an element of other insignificant income that is fully taxed through the Revenue Commissioners PAYE system (generally amounts not exceeding €3,174 are regarded as insignificant)

Persons who had reached State pensionable age are not liable to pay PRSI and therefore, were not affected by this measure.

The 2013 Act provided for the implementation of the second element of the Budget 2013 decision to broaden the base on which PRSI contributions are charged so as to—

extend PRSI liability to all employed contributors (including modified rate contributors) and to occupational pensioners aged under 66 years (whether that pension arises from that person’s own employment or the employment of his or her spouse or civil partner) who also have unearned income (e.g. investment income, income from rental properties etc.), with effect from the 2014 contribution year, and
disregard such PRSI contributions in determining entitlement to social insurance benefits.

Seafarers

The 2014 Act clarified the powers contained in the Social Welfare Consolidation Act 2005 enabling the Minister for Social Protection to make regulations providing for refunds of employer PRSI contributions in the case of certain seafarers employed on board vessels that are registered in a Member State of the EU or European Economic Area and are providing scheduled passenger services between ports within those States.

Romania Bulgaria Transitional

Following the accession of Romania and Bulgaria to the EU in January 2007 there was a transitional period, which extended until the end of 2011, during which nationals of those countries were, largely, required to have an employment permit.

The 2016 Act provides that contracts of service in the State involving Romanian and Bulgarian nationals and their family members during the transitional period will now fall within the categories of employments where a person is regarded as an “employed contributor”.PRSI contributions paid by Romanian or Bulgarian “employed contributors” during the transitional period will, consequently, be recognised as valid.

Certain Share Remuneration

PRSI contributions which are due to be paid on gains realised on share options and other share based remuneration are also remitted through the Special Collection system, where the person who realises those gains is no longer working in the company that granted those share options.

The 2014 Act provides that only gains from share option transactions which result in the employee actually receiving shares come within the definition of ‘‘share-based remuneration’’ in order to benefit from the exemption from employer PRSI liability.

The 2017 Act provided for an amendment to the definition of the term “share-based remuneration” to cater for the introduction of a new tax relief, the Key Employee Engagement Programme for qualifying share options granted to employees of qualifying small to medium enterprises. It provides that gains realised on the exercise of a share option by employees of qualifying small to medium enterprises will not be subject to PRSI.

National Training Fund

The 2018 Act provided for an amendment to the National Training Fund Act 2000 to provide for a 0.1% increase (from 0.8% to 0.9%) in the National Training Fund levy payable by employers in respect of reckonable earnings of employees in Class A and Class H employments.

The 2019 Act provided for an amendment to the National Training Fund Act 2000 to provide for a 0.1% increase (from 0.9% to 1.0%) in the National Training Fund levy payable by employers in respect of reckonable earnings of employees in Class A and Class H employments with effect from 1st January 2020.

Covid Supports

The 2020 Act replicates, in respect of the Employment Wage Subsidy Scheme, the Social Welfare Consolidation Act 2005 as respects the Temporary Wage Subsidy Scheme (TWSS). That latter provision provided for an employer contribution rate of 0.5% for employers who qualified for the TWSS. This section also provided for an employer contribution rate of 0.5% in respect of employee earnings under the EWSS scheme.

For the purposes of the Covid-19 employment wage support scheme (EWSS), the employer PRSI contribution rate of 0.5% will cease on 28 February 2022.

The 2020 Act provided for the attribution of paid social insurance contributions. It defines the cohorts to whom contributions may be attributed as those in receipt of the pandemic unemployment payment, Jobseekers Benefit, Jobseeker’s Allowance as well as those on the Temporary Wage Subsidy Scheme (TWSS) or the Employer Refund Scheme who have lost their employment since 13th March 2020 as a result of the public health crisis arising from Covid-19.

It formally provided that those availing of the TWSS as well as the Employer Refund Scheme – employers and employees – are exempted from the requirement to make employment contributions which apply to all employed contributors and their employers. It also formalises the arrangements whereby employers availing of TWSS are required to pay a notional 0.5% rate of PRSI in respect of any top-up payments to the employee.

The amount of the subsidy paid to the employee is exempted from PRSI. It clarifies that PRSI contributions will be attributed rather than paid by the employee. It also clarified that the contribution will be attributed at the same rate previously paid, e.g., Class A if the person is an employee.

66- 70 Years

Social Welfare (Miscellaneous Provisions) Act 2023 amends the criteria relevant to becoming an ‘employed contributor’, (broadly, an employed person in receipt of renumeration), to take account of a person choosing to remain in employment after attaining pensionable age. In this context, from 1 January 2024, the upper age criterion to apply will be 70 years. The effect of this is that an employee born after 1st January 1958 who has not claimed State pension (contributory) between the ages of 66 and 70, may be an employed contributor and PRSI employment contributions are payable by that person and their employer.

Social Welfare (Miscellaneous Provisions) Act 2023 amends provisions which relates to the payment of employment contributions by an employed contributor to take account of a person choosing to remain in employment after attaining pensionable age. In this context, from 1 January 2024, the upper age criterion to apply will be 70 years. The effect of this is that where employees born after 1st January 1958 have not claimed State pension (contributory) between the ages of 66 and 70:

PRSI employment contributions are payable by them and their employer (including on any gain arising on the exercise, assignment, or release of a right granted under section 128 of Taxes Consolidation Act 1997 (i.e., exercise of employee share options)); (b) such employees are enabled to accrue additional contributions which will be taken into account in claims for benefits by them after age 66.