Terence Flanagan (Dublin North East, Renua Ireland)
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72. To ask the Minister for Jobs, Enterprise and Innovation to outline the position regarding the increased minimum wage (details supplied); and if he will make a statement on the matter. [39690/15]

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 the context 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.

Budget Documentation available at the following link gives the example (Example 6 page B.22) of an individual earning the minimum wage of €8.65 for a 39 hour week in 2015. The minimum wage increase will mean an additional €1,014 per annum for this person, taking their gross income to €18,556 in 2016. Their income tax liability will increase from €208 per annum to €411 per annum due to their additional earnings. They will have a PRSI liability of €160. USC liability reduces from €374 to €317. The net gain for this person is €708 per annum or 4.2%.

Due to the budget changes introduced the employer will pay PRSI at 8.5% and not move to the previously higher rate of 10.75% when paying the additional €1,014 per annum. This reduces the additional PRSI paid by an employer to €86.19 per annum.

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.

Employer impact - increase in threshold for change of rate from 8.5% to 10.75% from €356.01 to €376.01

^1.(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).