Written Answers. - Job Creation.
Mary Wallace
Question:
141
Miss M. Wallace
asked the
Minister for Finance
if he will give details of all tax and PRSI incentives available under his Department to an employer wishing to employ an additional employee and take him or her off the live register; if he will clarify the exemption ceilings and the contributions payable by a person entering employment at £100 per week taking into account all the various schemes and exemptions applicable to a person coming off the live register; the cost of this employee per week to the employer; the net take-home pay; and if he will give a breakdown of the tax and PRSI payable following all of the exemptions.
[18303/96]
There are various incentive schemes operated by the Departments of Social Welfare and Enterprise and Employment which are designed to facilitate job creation and the take-up of these jobs by the unemployed.
The employer's PRSI exemption scheme exempts employers from paying PRSI for two years where they employ additional workers who have been on the live register for a minimum of 13 continuous weeks. There is no limit to the number of employees that can be recruited but they must be taken on between 6 April 1995 and 5 April 1997. The new employees must represent a net increase in the number of people employed. The net increase must be maintained throughout the two years of the exemption.
The Jobstart scheme provides for a payment of £80 per week for 52 weeks to an employer taking on someone who is at least three years on the live register. The employer is not entitled to receive a PRSI exemption if the Jobstart allowance is being paid. Where appropriate, an employee taken on under Jobstart can qualify for retention of child dependant allowances for a period of 13 weeks after taking up employment and is also entitled to retain a medical card for three years. Because of the nature of these benefits, the monetary value of overall entitlements differs with the individual's circumstances.
Under the back to work allowance scheme — BTWAS — persons who have been on the live register for at least one year and lone parents, are allowed to retain 75 per cent of their social welfare payment for the first year of employment, including self-employment, 50 per cent for the second year and 25 per cent for the third year. In general. BTWAS participants also retain their secondary benefits e.g. medical cards, etc. There is also an incentive for employers to take on BTWAS participants through the availability of a two year exemption from the employers PRSI contributions.
The area enterprise allowance is available to those who are long-term unemployed in a partnership area, that is, an area designated disadvantaged by the EU; there are 38 such areas nationwide. This allows the person taking up employment to retain 100 per cent of their live register entitlements for one year and works on the same principles as the back to work allowance scheme. People on the area enterprise allowance can go on to the BTWAS after AEA time period has elapsed.
The current family income support system is designed to encourage married people with children to re-enter employment by providing cash support to those whose potential income levels are such that as a result of taking up employment, they are only marginally better off than if they were claiming social welfare benefits. Entitlement to FIS is calculated on the basis of of 60 per cent of the difference between gross income and a prescribed income limit set according to the number of children.
Current PRSI ceilings and exemptions are as follows: employee's PRSI ceiling, £22,300 per annum and employer's PRSI ceiling, £26,800 per annum. With regard to PRSI allowance for employees, a weekly, non-cumulative allowance of £80 per week applies to the employee social insurance contribution in classes A, E and H. The allowances for people in classes B, C, D and S is £20 per week. This allowance does not apply to the health contribution or to the employment and training levy. The health contribution, 1.25 per cent and the employment and training levy, 1 per cent, are not applicable to earnings under £188 per week. However, when this threshold is exceeded, all earnings become liable to both.
Income tax exemption limits are: single person, £3,900 per annum; and married couple, £7,800 per annum plus £450 for each of the first two children and £650 for the third and each subsequent child.
What is the cost to an employer of an employee who is earning £100 per week, taking into account any schemes and exemptions applicable to a person coming off the live register? The employer's cost of taking on an individual who earns £100 per week amounts to their liability for employer PRSI plus the gross wage payable; thus, any incentive aimed at the employer would seek to reduce or eliminate the PRSI liability for some period and/or reduce their wage costs. Of the schemes mentioned previously, Jobstart, the back to work allowance scheme, the area enterprise allowance and the general PRSI exemption scheme for employers feature such incentives. For example, an employer who qualifies for a PRSI exemption bears only the actual labour cost, in this case £100. In the case of the Jobstart scheme, the cost to the employer is the labour cost plus PRSI less the grant £100 + £8.50 - £80, that is, £28.50 per week.
What is the current situation for an unemployed person entering employment at £100 per week? The net income position of any individual depends on the interaction of many factors, that is, gross pay less the person's tax and PRSI liability when their particular family circumstances have been assessed and their eligibility for the various schemes mentioned. From an income tax point of view, it should be borne in mind that any tax free allowances are cumulative and, if an individual begins work at any time during the tax year, their tax free allowance will be the same as if the person was working for a full year. This will only be a factor in the person's first or last year in employment.
