Written Answers - Reduced PRSI Level.
Noel Ahern
Ceist:
100
Mr. N. Ahern
asked the
Minister for Social Welfare
the wage level at which the reduced PRSI level applies; the manner of its application, whether in a weekly or cumulative basis; the similarities or differences with income tax collection; and specifically how a worker on £170 per week wage but receiving quarterly bonus payments of £250 will be assessed.
[12125/95]
Pay-related social insurance contributions are payable on a shared basis between employers and employees. Arrangements were made in this year's budget and implemented with effect from 6 April 1995, to reduce the overall burden of PRSI for both employers and employees, particularly in labour-intensive industries involving low or moderate wage levels.
In the case of employers, PRSI at the reduced rate of 9 per cent is payable where the employee's earnings fall between £30 and £231 per week, increasing to 12.2 per cent for any week in which wages above £231 are paid.
This year, the Government also introduced a new PRSI-free allowance of £50 per week for employees paying PRSI at the Class A rate. A lower allowance of £10 a week applies to workers insurable at the modified rate of PRSI and self-employed people insurable at Class S.
Employees earning £60 or less per week do not pay PRSI. Employees earning more than £60 per week liable for PRSI at 5.5 per cent. An additional 2.25 per cent, comprising health contribution and employment and training levy, is due for any week where the total earnings exceed £178.
The thresholds are applied on a weekly non-cumulative basis. Therefore, liability for PRSI and levies can differ for any week where additional reckonable amounts are payable. A total of 7.75 per cent, which includes the 2.25 per cent levies, is due for any week in which the reckonable income, including any additional payments, exceeds the £178 threshold. For example, an employee normally earning below £178 per week but entitled to a quarterly bonus of £250 would be liable for the levies for each of the four payment weeks in which the bonus payments are made.
Similarly, employers are liable for the full 12.2 per cent PRSI rate for any week in which additional or bonus payments increase the total earnings of an employee to above the £231 threshold.
PRSI and PAYE operate independently of each other. Under the PAYE system, an employee will normally be entitled to tax-free allowances, including a personal allowance of £3,440 per annum at the single rate or £5,940 for a married couple with one earner. Additional allowances and reliefs may be due in certain circumstances.
Income tax at a rate of 27 per cent, calculated on an annual cumulative basis, is payable on the first £8,900 — £17,800 for a married couple — of earnings in excess of the tax-free allowances and a tax rate of 48 per cent applies thereafter.
