Pat Deering (Carlow-Kilkenny, Fine Gael)
Link to this: Individually | In context | Oireachtas source

To ask the Minister for Social Protection if she will examine the social welfare system for self-employed, including payment of PRSI contributions, as the fear of not being entitled to any social welfare payments is a deterrent to many entrepreneurs who are afraid to take the risk of starting a business or working for themselves. [41724/12]

Joan Burton (Dublin West, Labour)
Link to this: Individually | In context | Oireachtas source

Self-employed persons are liable for PRSI at the Class S rate of 4% which entitles them to access long-term benefits such as State pension (contributory) and widow's, widower's or surviving civil partner's pension (contributory). Ordinary employees who have access to the full range of social insurance benefits pay Class A PRSI at the rate of 4%. In addition, their employers make a PRSI contribution of 10.75% in respect of their employees, resulting in the payment of a combined 14.75% rate per employee under full-rate PRSI Class A. (For employees earning less than €356 per week, the rate of employer’s PRSI is 4.25%).

Any changes to the PRSI system to extend the full range of social insurance benefits to self-employed persons 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 recently published Actuarial Review of the Social Insurance Fund as at 31 December 2010 looked at the break-even contribution rates required to provide invalidity pensions and jobseeker’s benefit for self-employed workers. The report found that the effective annual rate of contribution, or the required contribution as a percentage of salary, needed to provide the core full-rate State pension (contributory), which is the benefit currently available to self-employed contributors, is approximately 15%. This compares favourably with the 3.7% effective rate currently paid by the self-employed. An incremental increase in contribution rates from approximately 15% to 16% would be required if jobseeker’s benefit in addition to core State pension (contributory) is provided. The average contribution rate required for the core State pension (contributory) plus the invalidity pension and jobseeker’s benefit is estimated to be in the region of 17.3%.

I established an Advisory Group on Tax and Social Welfare last year and one of the issues that the Group is currently considering is the issue of providing social insurance cover for self-employed persons in order to establish whether or not such cover is technically feasible and financially sustainable. The Advisory Group’s overall method of working is based on producing modular reports on the priority areas identified in the Terms of Reference. Where possible, the aim is to provide recommendations that can be acted upon in time for the annual budget, estimates and legislative cycle and to allow the Government to best address its commitments under the EU-IMF Programme of Financial Support. The Group has been considering the issue of social insurance coverage for the self-employed and will submit its report once its examination of the various questions has been completed.

Any proposals to extend additional cover to the self-employed will have to be considered in a budgetary context, taking account of the finding of the Actuarial Review that the self-employed achieve very good value for money compared with the employed – when the comparison includes both employer and employee contributions in respect of the employed person.

Self-employed individuals may, however, establish entitlement to assistance-based payments such as the means-tested jobseeker’s allowance if they are on low income as a result of a downturn in demand for their services. In general, their means will take account of the level of earnings in the last twelve months in determining their expected income for the following year and, in the current climate, account is taken of the downward trend in the economy. As in the case of a non-self-employed claimant for assistance-based payments, the means of husband/wife, civil partner or co-habitant will be taken into account in deciding on entitlement to a payment.