PRSI contributions are paid by employees on a weekly basis. The main rates of employee contribution are 4% — ordinary — and 0.9% — modified, public service. There is a threshold of €287 below which social insurance employee contributions are not payable and there is a fixed ceiling on the amount of contributions an employee has to pay in any year. Contributors are also entitled to a non-cumulative PRSI-free allowance of €127 or €26 per week for standard and modified PRSI employees respectively, which reduces the "step effect" of the contribution threshold.
There is no provision within the present system for contribution liability to be evened out in the manner proposed. The system is designed to reflect the actual weekly earnings situation and the tiered contributions and allowances ensure that the system is largely progressive. It is recognised that the "bunching" of earnings in one week could have an impact on the aggregate amount of PRSI contributions in any year although the relatively low rate for modified PRSI employees coupled with the PRSI-free allowance could limit the amount of this effect for many public servants. The application to public servants of pay increases is primarily a matter for the Minister for Finance having regard to the relevant national wage agreement reached between the social partners.
It is recognised that the social insurance system is complex, catering as it does for varied sectors of employees with differing insurance coverage needs and different earnings levels, but that this is primarily the result of efforts to target reductions at low-earnings employees. The complexity of the system has been considered from time to time by my Department and has also been discussed in the tax strategy group and is kept under review. However, there are no proposals to substantially change the structure of the system at this point in time.
