Dáil Éireann debate -
Tuesday, 4 Feb 1997

Vol. 474 No. 3

Written Answers. - PRSI Contributions.

Ivor Callely

Question:

228 Mr. Callely asked the Minister for Enterprise and Employment the progress, if any, made with a view to restructuring PRSI contributions and the impact on employment; if he supports the recommendations of the NESC 1993 report; and if he will make a statement on the matter. [2857/97]

Minister for Enterprise and Employment (Mr. R. Bruton)

Significant progress on restructuring PRSI contributions has been made since this Government was formed. The Government recognises the positive impact which a restructuring of PRSI contributions can have on improving employment performance. It agrees with the view expressed by the NESC in the 1993 report that the impact on employment of restructuring PRSI could be maximised if the restructuring were focused on achieving greater reductions at lower income levels. In this respect recent budgetary changes in PRSI have been directed at lower income levels.

In order to direct relief at those on low incomes generally, including those outside the current income tax net, the 1995 budget introduced an allowance of £50 per week for contributors on the full rate of employee's PRSI. This allowance was subsequently increased to £80 per week in the 1996 budget. In addition, a reduction of 1 per cent in the employee PRSI rate for class A and class H contributors, representing over 70 per cent of contributors, was announced in the recent budget. These initiatives have contributed significantly to reducing the PRSI wedge on lower income.

Further progress on restructuring of employer's PRSI contributions at lower income levels was also made in recent budgets. The 1995 budget increased the income threshold below which the lower rate of employer's PRSI of 9 per cent applies from £9,000 to £12,000 per annum. The lower rate of 9 per cent was reduced to 8.5 per cent in the 1996 budget with an increase in the threshold below which this lower rate applies from £12,000 to £13,000. This threshold is being further increased to £13,500 following the recent budget. The object of these reliefs is to target reductions on lower paid employments in order to secure a competitive reduction in non-wage labour changes.

These changes have had a positive impact on the creation and maintenance of employment. A recent survey carried out by IBEC in consultation with my Department found that in the case of firms which had increased employment, 30 per cent of firms considered the recent reductions in employer's PRSI to be either important or very important factors in their decision to recruit staff. Of those firms where employee numbers remained the same, 44 per cent of firms stated that the recent employer's PRSI reductions had helped to maintain job levels. It is my view that the restructuring of PRSI contributions which has taken place to date will continue to have a significant positive impact on future employment levels.