Self-employed people pay PRSI at the class S rate of 4%. This entitles them to benefits such as a State contributory pension and contributory widow's, widower's or surviving civil partner's pension, contributory guardian's payment, maternity benefit and adoptive benefit. A combined PRSI rate of 14.75% is paid in respect of employees, who can access the full range of social insurance benefits. This comprises 4% PRSI payable by employees and 10.75% by their employer, or there is an 8.5% employer PRSI rate for weekly earnings under €356.
The most recent actuarial review of the Social Insurance Fund, published in 2012, stated that the self-employed are obtaining better value for the level of their current social insurance contributions than employees. The review found that a 15% contribution rate would be needed to provide the core full-rate State contributory pension to the self-employed. This compares very favourably with the 4% rate currently paid by the self-employed. In addition, self-employed people with insufficient means can access social assistance payments such as jobseeker's allowance and disability allowance, subject to satisfying the qualifying means criteria.
In June 2011, I established the advisory group on tax and social welfare to examine a number of specific issues including the issues involved in providing social insurance cover for the self-employed. It reported back that during the three year period from 2009 to 20011 nine out of every ten self-employed people who claimed jobseeker’s allowance received payment. Therefore, it was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker’s benefit. However, the group found that extending social insurance for the self-employed was warranted in cases related to long-term sickness or injuries, through the invalidity pension and the partial capacity benefit schemes. In this regard, the group recommended that the rate of contribution for class S should be increased by at least 1.5 percentage points, payable on a compulsory basis only.
At the time, some employers’ groups called for the provision of social insurance benefits to the self-employed on an optional basis. This was addressed by the advisory group which considered that allowing people a facility to opt in or opt out at their own discretion could lead to the selection of bad risks. The whole principle of social insurance is social solidarity where everybody pays in and, if necessary, cover is available. Allowing people to opt in or opt out could result in a negation of the social solidarity contributory principles which underline the system. Any changes in the PRSI system for the self-employed would have to be considered in a budgetary context and, in particular, the funding position of additional entitlements. There are very valuable additional entitlements offered in the advisory group report which I accept, but the issue for self-employed people, or for their organisations, was that it would involve an additional contribution which they did not seem inclined to favour at the time.