Seán Sherlock (Cork East, Labour)

Access to certain social insurance payments, which are based on PRSI contributions, differ between employees and the self-employed. While employees and the self-employed are liable to PRSI at the rate of 4%, employers also make a PRSI contribution of 10.75% in respect of employees, bringing the PRSI payment in respect of employees to a combined 14.75% rate per employee under the full class A rate. As a result, ordinary employees can build entitlement towards the full range of social welfare benefits based on the higher level of contribution. Class S self-employed contributions provide cover for long-term benefits, such as the State contributory pension, widow's or widower's pension or surviving civil partner's contributory pension.

I am keenly aware of the very difficult financial position self-employed people are now in. We have all heard cases in our clinics and advice centres, in particular small business owners who find themselves in a very precarious financial position. However, we have to strike a balance between contributions made and benefits received. PRSI coverage is related to the risks associated with employment or self-employment, the annualised system of contributions for self-employed people and the practicalities of administering and controlling access to short-term payment for self-employed people.

A system of separate arrangements for employed and self-employed workers within the social insurance context, such as this, is common in other European social protection systems. In this context, it should be noted that self-employed workers generally achieve better value for money by paying social insurance compared with employees. The 2005 actuarial review of the social insurance fund found it favours the self-employed over the employed when employer and employee contributions are included in respect of the employed person.

For example, a male married self-employed contributor earning gross average industrial wages had a value for money index of 10.3 compared with an index of 3.1 for an equivalent employee. In basic terms this means that, with regard to benefits, the self-employed contributor can expect to receive over ten times what he or she contributes to the social insurance fund compared to the employee who, even with access to a broader range of benefits, only gets three times what he or she and his or her employer contributes.

The analysis demonstrates that, despite the fact that they are eligible for a narrower range of benefits, self-employed persons can gain substantially more from the fund than employees. It should be noted that the State contributory pension increased in excess of inflation and earnings growth in the period up to 2010 while annuities offer CPI linked increases at best. The market cost of an inflation linked annuity with €12,000 a year in initial benefits is in excess of €300,000, without any associated survivor's benefits.

Any changes to the PRSI system in order to provide access to short-term benefits such as social insurance illness-related benefits would have significant financial implications and would have to be considered in the context of a much more significant rise in the rate of contribution payable. The Minister for Social Protection, Deputy Joan Burton, established the advisory group on tax and social welfare earlier this year to meet the commitment made in the programme for Government. It will examine and report on issues involved in providing social insurance cover for self-employed persons in order to establish whether it is technically feasible and financially sustainable.