The self-employed get fantastic value from PRSI

Hi Sarenco

Thanks for reminding me of that. I had made a few contributions to that thread, but I got confused by all the discussion back and forward.

I might be missing something.

But for 4%, a self employed person gets the full contributory old age pension ( Cost to the state in in 2014: €5.5 billion)

For an extra 10.75%, the employed person gets €1.7 billion in illness, invalidity and jobseekers.

I don't know what the solution is, but I think that the benefits should be brought into line with the costs.

Put the 4% paid by the self employed into a fund, and pay them a pension out of what they have accumulated.

Charge those who qualify for Jobseekers a premium for it. It would be a lot less than 10.75%.

Brendan

Of course a self-employed barrister earning €500k, pays €20k into the fund.

A PAYE worker earning €20k a year, has €3k paid into the fund on his behalf.

The PAYE worker gets more benefits.

Brendan

Brendan Burgess said:

Of course a self-employed barrister earning €500k, pays €20k into the fund.

A PAYE worker earning €20k a year, has €3k paid into the fund on his behalf.

The PAYE worker gets more benefits.

Brendan

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The higher your tax contribution the lower the relative value of return you get. That's hardly a news.

Brendan Burgess said:

Hi Sarenco

Thanks for reminding me of that. I had made a few contributions to that thread, but I got confused by all the discussion back and forward.

I might be missing something.

But for 4%, a self employed person gets the full contributory old age pension ( Cost to the state in in 2014: €5.5 billion)

For an extra 10.75%, the employed person gets €1.7 billion in illness, invalidity and jobseekers.

I don't know what the solution is, but I think that the benefits should be brought into line with the costs.

Put the 4% paid by the self employed into a fund, and pay them a pension out of what they have accumulated.

Charge those who qualify for Jobseekers a premium for it. It would be a lot less than 10.75%.

Brendan

Click to expand...

Hi Brendan

No, I don't think you're missing anything and the previous thread covered a number of different issues so is understandably difficult to follow.

My point is really that the self-employed and employees pay PRSI at the same rate - 4 per cent - and qualify for various benefits, the most valuable of which is clearly the contributory OAP. Employees qualify for various additional benefits but they don't pay any additional PRSI for these benefits - their employer (who may well be self-employed) pays for these additional benefits.

I certainly wouldn't argue that the rate of employer PRSI contributions is commensurate with the value of the additional employee benefits but I think your figures are somewhat misleading. Bear in mind that the vast majority of individuals qualifying for the contributory OAP are former employees and not retired self-employed individuals.

In the US, social security contributions are evenly split between employers and employees. The self-employed have to make double the contributions of employees but this is deductible for tax purposes in such a manner that employees and the self-employed ultimately make the same level of (net) contributions for the same level of benefits.

I personally have no problem with a high earner, whether an employee or self-employed, being a net contributor to the social fund (taking less out in benefits than they contribute by way of PRSI payments). It is social insurance at the end of the day!

Sarenco said:

Employees qualify for various additional benefits but they don't pay any additional PRSI for these benefits - their employer (who may well be self-employed) pays for these additional benefits.

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Of course the employee is paying for it. It is taken out of their wages before their pay slip is printed but it is income foregone. If the tax wasn't there then employers would have more money to pay staff and so the market would demand higher wages.

Purple said:

Of course the employee is paying for it. It is taken out of their wages before their pay slip is printed but it is income foregone. If the tax wasn't there then employers would have more money to pay staff and so the market would demand higher wages.

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If employers did not have to make PRSI contributions on behalf their employees, there would certainly be more resources available to pay staff. Equally, there would be more resources available to hire new employees or to re-invest in the business or to simply distribute additional profits to the business owners. All else being equal, employers will pay their staff no more than the market demands but I don't follow the argument that the market will demand increased wages simply because an employer has additional resources available to meet such demands. An employer's primary obligation is to maximise profits for the owners of a business - not to maximise the remuneration of employees of that business.