Dara Calleary (Mayo, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

20. To ask the Tánaiste and Minister for Social Protection the projected increase in the yield from employer's pay related social insurance, further to the increase in the minimum wage; and if she will make a statement on the matter. [3467/16]

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

The minimum wage was restored to €8.65 per hour shortly after this Government came into office. Employer PRSI was payable at the lower 8.5% rate where, for example, an employee worked a 39 hour week at the minimum wage.

The Low Pay Commission was established by this Government in early 2015 and was a key commitment in the Statement of Priorities agreed by the Taoiseach and myself in 2014.In particular, the Commission makes recommendations to the relevant Minister regarding the level of the national minimum hourly rate of pay without, inter alia, creating significant adverse consequences for employment or competitiveness.

The Commission reported last July on this issue and the Government was pleased to implement its recommendation of an increase in the hourly minimum wage to €9.15 with effect from this January. In making this recommendation the Commission was concerned that, without an adjustment in employer PRSI, an increase in the minimum wage rate would have a major impact, particularly on small business costs as the employment of a minimum wage worker for a 39 hour week would now attract the higher Employer PRSI rate of 10.75% (the higher rate commenced at earnings of €356 per week).

In Budget 2016, it was announced that, from 1 January this year, the upper threshold for paying the 8.5% Class A rate of employer PRSI would be increased from €356 to €376 per week and this was provided for in the Social Welfare and Pensions Act 2015 enacted in December 2015. The increase in this threshold addresses the concerns highlighted by the Low Pay Commission on this issue and ensures that employers with employees benefiting from the increased minimum wage continue to attract the lower 8.5% rate of employer PRSI.

This measure is estimated to cost circa €17 million in a full year and will benefit employers by between €8.01 to €8.46 per week in respect some 88,000 employments. It is important to note that the measure benefits all employers with employees currently earning between €356 and €376 per week including those who are not necessarily on the minimum wage e.g. employees working for less than a full week but at hourly rates in excess of the minimum wage.

It is not possible to estimate the projected increase in the yield from Employers PRSI in respect of those benefiting from the minimum wage as PRSI and earnings data reported by employers does not include the number of hours worked by, or the hourly wage of, an individual employee.

In addition to the above changes to Employer PRSI, the Government also decreased the PRSI liability for employees earning between €352 and €424 per week through the introduction of a new PRSI credit. This can benefit some employees by up to €12 per week.

The employer and employee PRSI changes outlined above were enacted by the Oireachtas in December and came into effect in January.