PRSI Earning Bands
Employers should be aware of an anomaly caused by the earnings thresholds on PRSI Class A contributions.
Class A is the most common PRSI class and covers employees under the age of 66 in industrial, commercial and service-type employment who have reckonable pay of €38 or more per week from all employments as well as Public Servants recruited from 6th April 1995. The earnings bands operate as follows:
The anomalies arise where employees cross the €352 and €356 weekly pay bands. This is because when the weekly pay bands are exceeded, the higher contribution rates apply on all pay not just the amount in excess of the weekly pay band. It should also be noted that contributions are calculated on a week by week and not on a cumulative basis.
The following table illustrates the problem:
So an increase in gross pay from €352 to €355 means an employee is significantly worse off because they now pay 4% Employee PRSI on the full €355 and not just the amount over €352.
Similarly, when gross pay increases from €355 to €357, the Employer PRSI contribution jumps from 8.5% to 10.75%, again on the full €357 and not just the amount over €356.
Where an employer has a number of employees in these earning brackets, particular attention should be paid to ensure that neither employees nor the employer are disadvantaged by these anomalies. This can be achieved by careful rostering of employee hours.
If you require further information, why not contact us.