Written answers
Wednesday, 4 November 2015
Department of Jobs, Enterprise and Innovation
x
Dara Calleary (Mayo, Fianna Fail)
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17. To ask the Minister for Jobs, Enterprise and Innovation if he has examined the effect on employment creation of the adjustment to the minimum wage in 2016; and the measures introduced in budget 2016 with regard to employers Pay Related Social Insurance; and if he will make a statement on the matter. [37993/15]
Gerald Nash (Louth, Labour)
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At all times the Governments policy choices are considered in the context of the impact on jobs. This is at the heart of the Action Plan for Jobs process and has been a central feature of successive Budgets and The Pathways to Work programme. This level of policy focus has helped create an environment where 126,000 extra people are at work, all regions are increasing employment and our economy is the fastest growing in the EU. In the context of the above enterprise and jobs performance it should be noted that one of the first decisions this Government made was to reverse the €1 cut in the national minimum wage implemented by the previous Government.In respect of the minimum wage, the report from the Low Pay Commission which supported the Commission’s recommendations regarding the appropriate rate for the National Minimum Wage (NMW) stated that research indicates that moderate increases in the NMW are unlikely to have a significantly adverse effect on employment.
The Commission recommended that anomalies in relation to PRSI which could adversely affect employer costs should be addressed, and I believe that the adjustments to PRSI which have been provided for by my colleague, Minister Noonan, in the recent Budget, will assist employers in reducing costs, thus ensuring a continuing positive climate for job creation.
PRSI changes (New PRSI relief of €12 per week for employees and increase in employer threshold)
Application where someone earns the new NMW of €9.15 per hour (39 hour week = €18,556 per annum)
The maximum PRSI relief is €12 a week, applied on wages of €352 a week. So instead of paying €14.08 a week PRSI the person will pay €2.08 a week.
The PRSI relief is gradually reduced as wages rise to €424 a week - for every €12 rise in weekly wage the relief is reduced by €2.
Weekly wage | Hourly rate | Old PRSI | Relief | New PRSI | Old Annual PRSI | New Annual PRSI | |
---|---|---|---|---|---|---|---|
352.00 | 9.03 | 14.08 | 12.00 | 2.08 | 732.16 | 108.16 | |
356.85 | 9.15 | 14.27 | 11.19 | 3.08 | 742.04 | 160.16 | NMW |
364.00 | 9.33 | 14.56 | 10.00 | 4.56 | 757.12 | 237.12 | |
376.00 | 9.64 | 15.04 | 8.00 | 7.04 | 782.08 | 366.08 | |
388.00 | 9.95 | 15.52 | 6.00 | 9.52 | 807.04 | 495.04 | |
400.00 | 10.26 | 16.00 | 4.00 | 12.00 | 832.00 | 624.00 | |
412.00 | 10.56 | 16.48 | 2.00 | 14.48 | 856.96 | 752.96 | |
424.00 | 10.87 | 16.96 | - | 16.96 | 881.92 | 881.92 |
Annual PRSI Cost to Employee on new NMW (working 39 hours p.w.) without the proposed change would be €742.04 (€18,556 * 4%), giving a saving of €581.88 even with the new payment of €160.
Employer impact - increase in threshold for change of rate from 8.5% to 10.75% from €356.01 to €376.01
Weekly NMW | PRSI rate | Weekly cost | No of weeks | Annual Cost | |
---|---|---|---|---|---|
356.85 | 8.50% | Increase of rate to €376 before 10.75% applies | 30.33 | 52 | 1,577.28 |
356.85 | 10.75% | Cost to employer prior to Budget change | 38.36 | 52 | 1,994.79 |
Difference | 8.03 | 52 | 417.51 |
Annual PRSI Cost to Employer without the proposed change would be €1,994.79, giving a saving of €417.51.(There is an additional saving to Employer also for employees earning up to €9.64 per hour/€376 p.w., who previously would have invoked the 10.75% rate - annual saving to the employer of €439.92 for an employee earning €376 per week).
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