Dáil Éireann Debate, Thursday - 26 June 2014
110. Deputy Michael McGrath asked the Minister for Social Protection her views on the impact on the incentive for persons to take up employment of the poverty trap which exists when employees enter the PRSI net and all of their income becomes liable for PRSI; and if she will make a statement on the matter. [27781/14]
View answerEmployee PRSI is not charged where weekly earnings are €352 or less. Where weekly earnings exceed €352, employees become liable for PRSI and PRSI at 4% is charged on all earnings. As Minister for Social Protection, I am on the record as indicating that one of my key goals is to reform the system of social protection and to put it on a sounder financial footing for the future. The abolition of the PRSI-free Allowance provides very substantial and immediate additional revenue for the Fund. When implemented it was estimated that this measure would yield €265 million in 2013 and €289 million in a full year, which contributes substantially towards supporting the future sustainability of the Social Insurance Fund.
While the effect of paying PRSI on all earnings once the €352 employee PRSI threshold is exceeded, is an issue, the yield from those paying PRSI contributes to keeping workers on lower earnings (below the threshold) outside of the PRSI net. For those with families, Family Income Supplement (FIS) plays a significant role in preserving the incentive for persons to take up employment. The level of FIS entitlement is based on net income after all relevant deductions, including the deduction of PRSI. The payment effectively preserves the incentive to take up or remain in employment in circumstances where the employee might only be marginally better off than if s/he were claiming other social welfare payments, even at levels of earnings which bring the worker within the PRSI net.
