Michael Creed
Ceist:481 Mr. Creed asked the Minister for Finance the situation regarding PRSI liability on the minimum wage; and if he will make a statement on the matter. [1528/01]
Written Answers. - PRSI Liability.
With effect from 6 April 2000, employees earning less than £226 per week are exempted from making a PRSI contribution. Therefore, persons who are on the minimum wage of £4.40 per hour and with a normal working week of, say, 39 hours, will have earnings below this exemption limit and consequently are not liable for PRSI. The employer's element of PRSI remains payable as normal.
Richard Bruton
Ceist:482 Mr. R. Bruton asked the Minister for Finance the reason the ceiling for PRSI has not been adjusted to take account of the shorter 38 week tax year. [1529/01]
Given the proposed abolition of the employers and self-employed PRSI contribution ceilings from 6 April next, the question of an adjustment to take account of the shorter tax year does not arise in these instances.
As far as employee PRSI is concerned, the issue is of relevance only to the minority – an estimated 13% – who will have annual earnings above the contribution ceiling of £28,250 which will apply from next April. When annual earnings are in excess of the relevant contribution ceiling, employees have a period in each contribution year in which no contribution is due, sometimes referred to as the PRSI holiday, the duration of which depends on the level of annual earnings and the point in the tax year at which the earnings ceiling is reached. Up to this, PRSI holidays tended to be concentrated mainly in the first quarter of the calendar year in the lead up to the end of the tax year on 5 April.
Prior to the decision to align the tax and calendar years from January 2002, relevant employees could have expected a contribution holiday in the first quarter of 2002. Arising from this alignment, their contribution holiday will be deferred until the final quarter of 2002. Leaving the contribution ceiling intact for the short calendar year does not impose any additional PRSI liability on the employees involved as they will continue to have two PRSI holidays over the two year period from 1 January 2001 to 31 December 2002 as they would have had prior to the changeover; although the second holiday period will now mainly be in the final quarter of 2002.
Finally, I would remind the Deputy, that most employees will benefit from a reduction of 0.5% to 4% in the contribution rate of PRSI, effective from 6 April 2001.