Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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Question 131: To ask the Minister for Social and Family Affairs his views on whether the employee PRSI ceiling is regressive as those over the ceiling pay a smaller proportion of gross income in PRSI than those under the ceiling; and if on this basis, he will consider its removal. [24839/06]

Séamus Brennan (Dublin South, Fianna Fail)
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Under the PRSI system social insurance contributions are compulsorily payable by employers and employed and self-employed workers. In relation to employee's contributions, the amount payable is determined by reference to the reckonable earnings in a weekly period, subject to a range of thresholds and an annual ceiling. The PRSI contribution which is due, which may include payment of the health contribution where appropriate, is based on a tiered contribution system, with weekly non-cumulative thresholds, a non-cumulative PRSI-free allowance and is subject to an annual cumulative ceiling on employee contributions. The employee PRSI ceiling is reviewed annually in accordance with the legislative stipulations of the Social Welfare (Consolidation) Act, 2005. I would point out that the ceiling does not apply in respect of the health contributions.

The employee ceiling is currently set at €46,600 per annum, and is likely to rise in line with earnings for 2007. The benefits which accrue on foot of the paid contributions are for the most part paid on a flat-rate basis. The flat-rate payment system, as opposed to a pay-related benefits system, is based on the policy of directing available resources towards those most in need by increasing the basic rate of payment, rather than through pay-related supplements. This is in line with the views expressed in 1986 in the Report of the Commission on Social Welfare which recommended that pay-related benefits be phased out as basic payment rates were increased.

I am satisfied that the policy of having an annual employee ceiling is appropriate in present circumstances and will monitor the need for any amendments to the current policy in a budgetary context.