Budget 2013 Social Protection: Abolition of employee’s PRSI allowance will hit 1.1m workers

More than 1.1m people will be hit with extra charges through the abolition of the employee’s PRSI weekly free allowance, and will see workers, many low-paid, having to pay at least €264 each per year.

This is one of the biggest revenue earners for the Government in the budget. Workers’ PRSI free allowance of €127 will be dropped and instead 4% in PRSI will apply on that amount. The €5 extra weekly charge will affect more than 1m people

Crucially, it will apply only to those earning over €352 a per week and therefore will hit those earning just over €18,000 a year and over.

While the Government last night played down the PRSI change, there were questions as to why the extra payment would be the same for the low paid as well as millionaires.

Trade union Mandate, which represents workers in retail and pubs, said the PRSI measure was a “smash and grab” on middle and lower income families.

Union assistant general secretary Gerry Light added: “The fact that Ryanair boss Michael O’Leary and other ‘high-rollers’ will also be paying an extra €264 per year in PRSI shows just how regressive this measure will be.”

Social Protection Minister Joan Burton said the extra money, which finances welfare payments for the unemployed, would go towards plugging a €2.2bn gap in the social insurance fund.

She said that if the hole was not filled the welfare system could become “unsustainable”.

Changes to PRSI payments overall will raise an extra €339m for the exchequer.

Other changes announced yesterday include an increase in the minimum level of annual PRSI contribution for the self-employed earning over €5,000, which is being doubled from €253 to €500.

Changes are also being made to PRSI schemes for a limited number of workers in the civil and public sectors, including those in trades and with rental income. Their PRSI allowance is being abolished, and all such income, including from a trade, will be liable to PRSI at the rate of 4% from next year.

The Government says that the changes mean that all levels of income will now be subject to PRSI.

Other changes — to be introduced in 2014 — will see PRSI payable on income generated from wealth such as rental income, investment income, dividends and interest on deposits and savings.

Fianna Fáil’s Michael McGrath described changes in PRSI as “income tax through the back door” which would have the “greatest impact on low-income families”.

The party’s finance spokesman said a worker on €20,000 per year and a worker on €200,000 would see the same increase in PRSI.