Part 6: Ireland Individual Business Employment
Issues
6.1 Ireland Individual Business Employer Responsibilities
The duties and responsibilities of individuals in
business as regards employing people
Employers who pay EUR8 per week (equivalent to EUR36 per
month) to an employee with only one employer; or EUR2 per
week (equivalent to EUR9 per month) to an employee with more
than one employer are obliged to administer PAYE and PRSI
for their employees. (NB: businesses are generally required
to register as an employer and pay PAYE/PRSI on the pay of
their directors, even if there are no other employees.)
PAYE, or Pay As You Earn requires the employer to calculate
and deduct the income tax due each time a wage or salary payment
is made to an employee. Employers are also obliged to calculate
and deduct any liability to Pay Related Social Insurance (PRSI)
– the obligation for which kicks in at the same level as for
PAYE -- and income levies. Employers pay PRSI for each employee
at a rate of 10.75% (reduced to 8.5% if the employee's income
is less than EUR356 per week). A variable rate (depending
on earnings) health contribution has traditionally been payable
(within the PRSI payment) by employers, employees, and the
self-employed, although the austerity budget
delivered in December 2010 introduced sweeping changes in
this area; see below.
The PRSI contribution is calculated according to the contribution
class that the employee belongs to (usually determined by
the type of employment, and designated by letters: A, B, C,
D, E, H, J, K, M, P, and S), and by the subclass that applies
within the primary contribution class (designated by the codes:
0, X, L, 1, and 2, so for example, the full designation could
be A1, or DX).
A full explanation of the contribution classes can be found
here: http://www.welfare.ie/EN/Publications/SW3/Pages/26HowtodecidetheSocialInsurancecontributionclass.aspx#26
A link to the contribution rates system can be found here:
http://www.welfare.ie/EN/Publications/sw14_apr09/Pages/EarningBandsandSubclasses.aspx
, with 2010 updates available here: http://www.welfare.ie/EN/Publications/SW14/SW14_10/Pages/MainPRSIChangesfor2010.aspx
.
Updated in December 2010
In the 2010/11 budget, it emerged that
employed and self-employed workers would both pay a 4% PRSI
rate from 2011; previously, the self-employed paid 3% and
employees 4%. In addition, the budget unveiled a new ‘universal
social contribution’, in place from January 2011, which replaces
the health levy and the income levy.
Under the universal system, contributions are necessary on
various new sources of income, including rental income, investments
and share options (unearned income).
The budget also removed the EUR75,036 threshold at which
employees pay no further PRSI contributions, made employee
pension contributions subject to PRSI and the Universal Social
Charge, and reduced employer PRSI relief on pension contributions
made by their employees by 50%.
With regard to pension provision, an employer is not obliged
to provide an occupational pension scheme for their employees,
although since 2003, they must allow employees to contribute
to a Standard Personal Retirement Savings Account (PRSA) via
the payroll, if required. This entails entering into a contract
with at least one PRSA provider, informing employees of the
availability of the scheme, making deductions, and advising
the employee of their total contribution. Records of these
contributions must be maintained by the small business and
provided to the Pensions Board on request.
Beyond the compulsory withholding of PRSI contributions,
businesses in Ireland have no obligation to provide healthcare
schemes for their employees. Unemployment benefits are also
provided based on PRSI contributions.
In November 2009, the Revenue Commission announced that it
was extending
the rules granting small businesses permission to file returns
and make payments regarding Employers PAYE/PRSI and VAT less
frequently than their larger counterparts, to newly eligible
small entities, from January 2010.
The reduction in the frequency of tax returns and payments
for smaller businesses was introduced during 2006 and 2007,
and meant that:
- Businesses making total annual PAYE/PRSI payments of up
to EUR28,800 became eligible to make their payments on a
quarterly rather than monthly basis;
- Businesses making total annual VAT payments of less than
EUR3,000 became eligible to file VAT returns and make their
payments on a six-monthly basis; and
- Businesses making total annual VAT payments of between
EUR3,000 and EUR14,400 became eligible to file VAT returns
and make their payments on a four-monthly basis.
The new regime was designed to boost cashflow to SMEs, and
to reduce their administration costs. These simplified arrangements
were further extended to include newly eligible businesses
from January 1, 2010.
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