Dáil Éireann Debate, Wednesday - 10 November 2004
196 Mr. Kirk asked the Minister for Social and Family Affairs if he will consider introducing a voluntary social insurance scheme for disability benefit for persons who have spent the bulk of their working life as employees and who move to self employment status; and if he will make a statement on the matter. [28264/04]
View answerThe social insurance system in Ireland is generally based on compulsory paid PRSI contributions which establish entitlement to a range of contingency based payments. The contributions to be paid are determined by reference to the nature of work.
Employees and their employers generally pay contributions at PRSI class A and self employed workers pay class S contributions. The contribution paid can determine the range of benefits and pensions to which contributors can build up entitlement.
Self employed workers have been compulsorily insurable under the Social Welfare Acts since 1988 and, subject to their having sufficient contributions, they are eligible for the following payments: widow's or widower's contributory pension: orphan's contributory allowance; old age contributory pension; maternity benefit; adoptive benefit; and bereavement grant. When social insurance for the self employed was introduced, coverage for short-term insurance based contingencies including sickness were excluded, given the difficulties of applying these to self-employed workers and the financial implications associated with this.
The range of benefits to which different groups of workers may establish entitlement reflects the risks associated with the nature of their work and this is reflected in the rate of contributions payable. Self employed workers pay PRSI class S contributions at a rate of 3% and are potentially eligible for a narrower range of benefits than employees who, together with their employers, are potentially liable for a total contribution of 14.05%, which is payable at PRSI class A. An extension of short-term benefits to self employed contributors, as well as having significant administrative implications, would necessitate an increase in the rate of PRSI class S contribution to fund it.
It might be noted that where employees move into self employment they may retain entitlement to short term benefits, such as disability benefit, for a period up to two years after their employment status has changed. This reflects the manner in which qualification for social insurance benefits is calculated. Providing the required number of contributions were paid in the governing contribution year, which is the second last complete tax year before a benefit is claimed, and all other qualification conditions are fulfilled, a person can maintain their entitlement to short-term benefits for the initial period of self employment. In this way a self employed worker, who previously worked as an employee, is cushioned against the risk of illness during the early periods of self employment.
The social insurance system contains provisions for voluntary contributions so as to maintain coverage for some long-term benefits. A worker who is under the age of 66 years who ceases to be covered by compulsory PRSI may opt to become a voluntary contributor, provided certain conditions are satisfied.
Voluntary contributions continue to provide cover for certain long-term benefits such as pensions. These contributions do not, however, give cover for other short term benefits such as unemployment, disability or treatment benefit reflecting their voluntary nature and the rate at which they are collected.
There are no plans at present to extend short-term benefits to self employed persons. Any such proposal would have both administrative and financial implications and would have to be considered in a budgetary context.
