Tuesday, 1 December 2015
Department of Finance
Universal Social Charge Application
212. To ask the Minister for Finance the reason fortnightly-paid workers who have a 27th payment date for the universal social charge in 2015 are being charged at a higher rate without the application of the lower rates and credits; the basis for this apparent overcharging on this specific payment; if the affected workers will receive a refund or a credit for having paid an additional universal social charge in this period; and if he will make a statement on the matter. [43042/15]
The Deputy may be aware that I brought forward amendments to Finance Bill 2015 at Report Stage in the Dáil to address this issue, whereby an employee may suffer a fall in net income in their last payment of the year in a 'week 53' or 'fortnight 27' year. These amendments were passed by the Dáil.
USC rate bands for employees are divided equally across the year, assuming a 52-week or 26-fortnight year. However a calendar year consists of 52 weeks and 1 day, or 52 weeks and 2 days in a leap year. As a result, once every 5 to 6 years for weekly-paid employees the additional day will be a payday, resulting in 53 paydays falling within the calendar year. Similarly, once every 10 to 12 years a 'fortnight 27' arises for fortnightly paid employees. As no USC rate bands remain for that year, the full amount of the pay is liable to higher rates of USC, resulting in a lower net income for the employee in that week or fortnight.
The same issue arises for income tax purposes, and regulations provide for an additional set of credits and rate bands to be allowed in a 'week 53' or 'fortnight 27' year. The amendments that were made to the Finance Bill will provide for additional USC rate bands to cater for the additional payday which falls within the calendar year, so that individuals will not have a larger USC liability solely because of the weekday on which their salary payment falls. This will bring the application of USC into line with that of income tax.
The amendments also ensure that those who are exempt from USC due to low income do not become liable to USC on all of their income solely as a consequence of the additional day in the calendar year being a payday. It similarly provides that those who benefit from the exemption from the higher rates of USC, including those over 70 and medical card holders whose income does not exceed €60,000, will not inadvertently become liable to higher rates of USC as a consequence of the additional payday falling within the calendar year.
These amendments will come into effect for the current year which means that individuals affected by this issue who are due to be paid on 31 December this year will benefit from the changes. In cases where payroll providers do not implement the changes within sufficient time for the benefit to be provided to employees in their last salary payment of this year, the relevant refund may be claimed back from the Revenue Commissioners.