Mary Hanafin (Dún Laoghaire, Fianna Fail)

Under the PRSI system, social insurance contributions are compulsorily payable by employers and employed and self-employed workers. In the case of employees' contributions, the amount payable is determined by reference to reckonable earnings in a weekly period and is subject to a range of thresholds and an annual ceiling.

The PRSI exemption on low earnings stands at €352 per week. In other words, incomes at or below that level are exempt from PRSI. In the case of workers who earn above this level, their total income, up to the annual ceiling, is chargeable to PRSI. However, they are entitled to a PRSI-free allowance of €127 per week. Approximately 76% of workers pay PRSI class A and class H at the rate of 4% and accrue entitlement to a range of benefits and pensions under various social insurance schemes.

The employee PRSI ceiling is reviewed annually in accordance with the legislative stipulations of the Social Welfare (Consolidation) Act 2005. The legislation requires that changes in the average earnings of workers, as recorded by the Central Statistics Office, be taken into account in this regard. In the 2009 budget, the employee ceiling was increased by €1,300 from €50,700 to €52,000, in line with projected increases in earnings for 2009.

The Actuarial Review of the Social Insurance Fund 2005 report, published last year, found that paying social insurance contributions represents good value for money in almost all circumstances. In particular, the report stated that those on lower incomes fare considerably better than those on higher incomes, with persons earning less than the gross average industrial wage paying 35% of the contributions but receiving 66% of the benefits. This finding demonstrates the solidarity principle of the social insurance system whereby contributions paid by insured persons are not actuarially linked to benefits but are instead redistributed to support contributors who are more vulnerable. It is an expression of solidarity between both earning groups and generations.

Any future changes to the PRSI ceiling must be considered in a budgetary context.

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