Seán Ryan (Dublin North, Labour)
Link to this: Individually | In context

Question 45: To ask the Minister for Social and Family Affairs if his attention has been drawn to the fact that the failure to increase the cut off wage level for PRSI payments means that many minimum wage earners have not benefited as much as they should have from the recent increase in the minimum wage; if his attention has further been drawn to the fact that an employee earning €298.35 per week now finds that their pay exceeds the €287 minimum level for PRSI exemption; his views on whether this effectively cancels out the bonus they receive via the increase in the minimum wage; if he will address this situation; and if he will make a statement on the matter. [23029/05]

David Stanton (Cork East, Fine Gael)
Link to this: Individually | In context

Question 374: To ask the Minister for Social and Family Affairs if, in view of the recent increase in the minimum wage, he intends to increase the cut off level for payment of PRSI; and if he will make a statement on the matter. [23532/05]

Séamus Brennan (Dublin South, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 45 and 374 together.

The National Minimum Wage Act 2000 provides that the minimum wage rate for an experienced adult employee from 1 May 2005 is €7.65 per hour. The national minimum wage continues to have a significant impact on the earnings of many thousands of low paid workers. This was the fourth increase in the national minimum wage and was agreed between the Government and the social partners under the mid-term review of Sustaining Progress.

The level of the PRSI contribution payable in any week is for the most part determined by the level of reckonable earnings in that week and by the appropriate PRSI rate. The rate at which the PRSI is due can vary significantly depending on the level of earnings. The system of PRSI contributions, which includes payment of the health levy where appropriate, operates using a range of tiered contribution rates which vary for employer and employees corresponding to weekly non-cumulative thresholds and a weekly non-cumulative PRSI allowance, subject to an annual cumulative ceiling on employee contributions.

These tiered PRSI contributions and allowances link the percentage of PRSI payable to the level of reckonable earnings in a given contribution week so as to ensure that the system is largely progressive up to the value of the annual ceiling. The tiered system also enhances employment incentives for low earning employees so as to ensure they do not bear a financial disadvantage from the payment of social insurance contributions.

From an employee point of view, a key PRSI threshold currently stands at €287 per week, which is the level above which the modified employee PRSI rate of 0.9% or standard employee PRSI rate of 4% is payable. At this threshold point, the employee rate becomes operable for all earnings, although contributors are then entitled to a PRSI free allowance of €26 or €127 per week, as appropriate, which reduces the "step-effect" of the threshold.

There are no provisions under social welfare law to exempt earnings paid at the minimum wage from liability for social insurance contributions. Any changes in the PRSI free allowances, thresholds and ceilings are considered in a budgetary context. It is worthwhile noting that workers in the circumstances that the Deputy sets out received an increase of over 6% on their previous earnings despite the application of PRSI. The Deputy can be assured that every effort is made to ensure that low paid workers and other vulnerable workers do not suffer undue hardship from the operation of the PRSI system.