Written answers

Tuesday, 3 February 2015

Department of Social Protection

Social Insurance Payments

Photo of Seán KyneSeán Kyne (Galway West, Fine Gael)
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229. To ask the Minister for Social Protection her plans to alter the tax collection structure in a manner which would enable self-employed persons to make contributions that would provide income support in the event of business failure in view of the fact that the current social insurance system does not provide non-means tested support in the short term in such instances. [4690/15]

Photo of Joan BurtonJoan Burton (Dublin West, Labour)
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In general, PRSI contribution classes are decided by the nature of a person’s employment.

Social insurance contributions paid under Pay Related Social Insurance (PRSI) by employers, employees, the self-employed and voluntary contributors are collected primarily through the income tax system and are paid into the Social Insurance Fund (SIF).

In general the current system of social insurance operates on a mandatory basis and therefore contributors pay PRSI contributions at the rate appropriate to their PRSI class.

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 pay 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 8.5%)

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) as well as guardians payment (contributory), maternity benefit and adoptive benefit.

Self-employed workers may access social welfare supports by establishing eligibility to assistance-based payments such as jobseeker’s allowance and disability allowance. In the case of jobseeker’s allowance they can apply for the means-tested jobseeker’s allowance if their business ceases or if they are on low income as a result of a downturn in demand for their services. In assessing means from self-employment, income from the previous twelve months is used as an indicator of likely future earnings. Given the variety of self-employment situations, the means assessment procedures are applied in a flexible manner to ensure that any circumstances that would be likely to lead to a significant variation, either upward or downward, in the level of a person’s income from one year to the next are taken into consideration. It is recognised that the downturn in the economy had an impact on many self-employed persons and the consequent reduction in their income and activity levels. This may be reflected in any assessment of their means from self-employment for jobseeker’s allowance purposes. As in the case of a non-self-employed claimant for jobseeker’s allowance or disability allowance, the means of husband/wife, civil partner or co-habitant will be taken into account in deciding on entitlement to a payment.

In September 2013, I published the report of the Advisory Group on Tax and Social Welfare on Extending Social Insurance Coverage for the self-employed. The Group was asked to examine and report on issues involved in extending social insurance coverage for self-employed people in order to establish whether or not such cover is technically feasible and financially sustainable, with the requirement that any proposals for change must be cost neutral.

The Group found that the current system of means tested jobseeker’s allowance payments adequately provides cover to self-employed people for the risks associated with unemployment. In this context, the Group noted that almost 9 out of every 10 self-employed people who claimed the means tested jobseeker’s allowance during the three-year period from 2009 to 2011 received payment. Consequently, the Group was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for jobseeker’s benefit.

On the basis of the findings of the report of the Advisory Group I am satisfied that the self-employed have access to income support in the event of business failure and I do not propose to make any changes to the PRSI system at this time. I will keep the situation under review.

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