In the recent 2016 Budget, Minister Michael Noonan announced significant changes in the calculation of Class A PRSI which take effect from January 1st 2016. Class A is the most common PRSI class for employees in the private sector aged over 16 and under 66 years of age.
The main changes in Class A are as follows:
1) The weekly threshold above which the 10.75% high rate of Employer PRSI applies will increase from €356 to €376. This €20 increase in the threshold gives employers a saving of 2.25% on those earnings between €356.01 and €376.00 where total gross earnings do not exceed €376.00
2) A new tapered weekly PRSI credit will apply to employees earning between €352.01 and €424.00 per week.
Calculation of the Weekly PRSI Credit:
The maximum weekly PRSI Credit of €12.00 applies at gross weekly earnings of €352.01.
For earnings between €352.01 and €424.00, the PRSI credit is reduced by one-sixth of the excess of weekly earnings which are over €352.01.
e.g. if an employee earns €390 per week:
PRSI @ 4% = €15.60
Less Credit of €12.00 minus ((390.00-352.01) divided by 6) = €12.00 – (37.99/6) i.e. €12.00 – €6.33 = €5.67
Weekly Employee PRSI = €15.60 minus €5.67 Credit = €9.93.
This will have a significant positive impact on employees earning between €352.01 and €424.00 per week.
No credit applies once weekly earnings exceed €424 per week and the full Employee PRSI rate of 4% becomes payable.
What needs to be done?
Employers should review the impact of this change on their payroll cost, particularly those with large numbers of part-time employees who may be affected.