Wednesday, 15 June 2016
Social Insurance Rates
I thank the Cathaoirleach for selecting this Commencement matter, and I thank the Minister for attending the House to deal with this important issue. The matter has been spoken about over the last number of years. If affects many people within the Department and the Civil Service. The class K PRSI contribution is paid by a large sector of society with no benefit to them. They qualify neither for pension purposes nor for any benefits. During the last Seanad election it also came to light that a large number of full-time councillors, in particular, do not receive any benefit or pension from paying this class K contribution on their annual allowance. The wording of this important matter speaks for itself. The class K contribution does not confer any benefits on a large sector of society who pay it, particularly councillors, who are working hard, and especially those who are working as councillors full-time, are young and have not yet retired. They depend on the councillor salary for their livelihood. I believe they are entitled to some benefits and I hope the Minister can address this in the next budget or the next social welfare Bill.
As this is my first time in the new Seanad, I would like to take the opportunity to congratulate all the Senators on their election, particularly those who are serving for the first time in the Oireachtas. I also congratulate the Cathaoirleach on his return and his election as Cathaoirleach.
I thank Senator Burke for raising this very important matter, which has been raised with me on a number of occasions and which I know is of real importance to councillors and to Senators.
PRSI class K contributions are paid by a number of different categories of contributor. Since 1 January 2011, public officeholders pay PRSI at the class K rate of 4% on their income as officeholders, provided that income exceeds €5,200 per annum. All public officeholders are liable to pay the contribution regardless of their age. Public officeholders include the President, members of both Houses of the Oireachtas, members of the Judiciary, the Attorney General, the Comptroller and Auditor General, and city and county councillors. Payment of class K PRSI does not contribute towards the establishment of a social insurance entitlement - in short, a person gets no benefits from it. Prior to the introduction of the class K contribution, all public officeholders were exempt from PRSI on their income as public officeholders. Then, as now, they could establish and protect their social insurance entitlements based on their non-officeholder activities, or through the payment of voluntary contributions. When the class K PRSI charge on the income of public officeholders was introduced in 2011, it was done on the basis that public officeholders had been identified as a group that were not paying PRSI on their income as officeholders. The charge was therefore introduced as a measure of solidarity, allowing them to contribute to social insurance at a time when extensive curtailment of social insurance entitlements to other public and private sector employees was introduced.
Since the introduction of the class K contribution for public officeholders, further measures to charge class K PRSI have been introduced. Since 2013, class K PRSI at 4% is charged on the non-employment income of certain Civil Service and public sector workers who pay modified rates of PRSI, classed as B, C and D, where they also have income from a trade or profession. Payment of class K PRSI by this group does not give cover for a range of benefits and pensions, such as the State pension, jobseeker's benefit and illness benefit. In 2014, employees and pensioners under the age of 66 whose only other source of income is unearned became liable to pay class K PRSI at 4% on that unearned income where they are paying tax on that income.
I am currently examining whether changes are required to the basis upon which class K is charged, particularly regarding the position of local authority members.Most councillors already have cover under the PRSI system through their other employment or activities. A minority of full-time councillors do not have cover. Any changes to the current class K arrangements will need to have regard to the social insurance and occupational position of the officeholders generally and I will have to consult with other relevant Ministers in this regard.
I thank the Minister for his reply, but it still does not clarify the position. I hope the Minister, in the run-in to the social welfare Bill for the budget, will address the issue because it is one that needs to be addressed. It can only be addressed in the context of the budget. This issue involves more than simply giving benefits to one group or another. I hope the Minister will address it in the budget.
I am definitely keen to do something. The issue has been going on for a long time and I have the opportunity now to do something about it. I intend to make some change in the forthcoming budget or, more particularly, in the forthcoming social welfare Bill, which will come before this House in the winter.
The situation as it stands is unfair. Local authority members pay 4% PRSI and get no benefits in return for it, which is a uniquely unfair position, and that applies to other public officeholders also. However, it is different for us in the sense that we have severance and pension arrangements but councillors do not. Therefore, they are in a uniquely unfair position and one which needs to be dealt with. I think all councillors know that but what they may not know or realise is that local authorities - which are not technically but which are effectively their employers - do not pay employer's PRSI. If one were to change the situation and make them, for example, class A contributors like everyone else who works for the councils, the councils would then have to pay employer's PRSI and that would have an impact on the councils' budgets. That needs to be borne in mind. Another potential option is to treat them in the same way as those who are self-employed and move them to class S contributions. A further option would be to raise the minimum threshold below which one does not have to pay anything. In that way they would not have to pay anything, but they still would not get any benefits.
There are a number of options and I will be meeting representatives of the Association of Irish Local Government in the coming weeks to discuss those options and to decide on the best option. As is always the case with these things, there are knock-on consequences. I want fairness for councillors but I am not in favour of special treatment. Whatever the case, we do should bring them in line with other workers or other self-employed people. However, it must be something that is fair and not something that creates special treatment or a special class or privilege and, in fairness, I do not think they are looking for that.