In Budget 2016 some changes to PRSI were announced that will take effect from January 2016. The main reason for the changes are to try and remove the sudden jump in PRSI when gross income goes above the threshold (which is currently €352 a week or €18304 a year).
The main reason for introducing this was probably the rise in the minimum wage which comes into force in January 2016. Without this PRSI credit – a chunk of the pay rise would have been lost to PRSI.
Currently someone on €350 a week pays no PRSI – but someone on €352 gross a week would pay 4% PRSI on all their pay – which is €14.08 a week. That results in a lower take home pay for some people whose gross pay increases.
The new PRSI rules mean that a “tapered relief” will be applied to Class A , E and H . In plain English that means the PSRI will not rise straight from zero to €14.08 a week. The changes only affect people on incomes from €352 a week to €424 a week (18304 to 22048 annually)
The figures in detail
The maximum PRSI relief is €12 a week – and that is 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 €6 rise in weekly wage the relief is reduced by €1 a week.
€ Weekly Wage € Old PRSI New PRSI
352 14.08 2.08
356 14.27 3.08
376 15.04 7.04
400 16 . 00 12.00
412 16.48 14.48
424 16.96 16.96
Someone on the current minimum wage working 39 hours a week earns €337 a week which is under the PRSI threshold so they pay no PRSI.
In January the same person on the new minimum wage of €9.15 per hour will have a gross pay of €356 a week. Without the PRSI credit they would pay €14.64 PRSI out of a gross weekly pay rise of €19.50 – but the tapered credit means they will now pay €3.08 PRSI instead. USC Reductions in Budget 2016 will also mean some extra take home pay – see the details here.
More here about New Minimum Wage and Deductions
The changes will also benefit many part time workers who may be earning more than the minimum wage but work few hours .
Someone who is on €352 a week will be €624 a year better off because of reduced PRSI.
Someone on €20k a year will pay €340 less PRSI in 2016.
Overall – the government estimate that this will reduce PRSI payments by €17 million a year for about 88,000 people on lower income. (Average €193 a year better off per person affected)
€ Mthly Wage €2015 PRSI € PRSI 2016
1525 61 9
1577 63 20
1629 65 31
1733 68 52
1758 71 63
1837 73 73
Its not clear whether this applies to employed people or self-employed people or both
It’s employees only
How will this be calculated for monthly paid
Just adjust the figures upwards (multiply by 52 and divide by 12) . We will add monthly figures to the article soon.