Key Post: PRSI Explained - 2008 version

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Brendan Burgess

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This is Ireland’s most complicated tax. I think I have it right, but I am open to correction. You can read the Department of Social Welfare's PDF here or their Employers Guide.

The Department of Social Welfare has a calculator on its site. This link is for 2007 and will be updated when the 2008 version is published.

This post covers only Class A employees i.e. most private sector employees.

The generic name is PRSI which is comprised of
A Social Insurance Contribution and
A Health Contribution

Note: All the figures given here are for those paid weekly. For those paid monthly, different figures apply. If someone wants to reproduce this post with the monthly figures, that would be a great help.


If your salary is less than €352 in any week
You pay nothing

If your salary is between €352.01 and €500 in any week
First €127: 0% (Employee’s PRSI-Free Allowance)
Balance: 4%

If your salary is over €500 in any week
First €127: 0%
Balance: 6%

(If your earnings for the year are less than €26,000, you will be able to apply for a refund of any Health Levy paid. You pay the Health Levy of 2% in any week, where your earnings are over €500)

Earnings over €50,700 per annum
First €127 per week: 2%
> €127.01 6%
When your annual earnings exceed €50,700 the rate drops to 2%
However, if your weekly earnings exceed €1,925 at any time, you pay either 6.5% or 2.5%

(If your weekly earnings exceed €1,925 you will pay the additional .5% Health Levy. However, at the end of the year you will be entitled to a refund, if your total salary is less than €100,100)




Another way of looking at it just to confuse you
The PRSI contribution of 4% is payable on all income over €127 per week up to a ceiling of €50,700 annually.

The Health Levy of 2% is payable on all income in excess of €500 per week up to €1,952
And 2.5% on incomes above that.

Clarifications and complications:
PRSI/Health Levy is calculated on the weekly or monthly pay. So if you are paid €351 one week and €1,000 the next, the €351 is exempt from PRSI as it is below €352 whereas you pay 6% on the €1,000.


PRSI/Health Levy is cumulative in the sense that if you earn over €50,700 in any year the rate is reduced to 2%

Subclass A2 who earn more than €500 per week pay 4% up to €50,700 and nothing on the balance i.e. they pay no Health Levy
( medical card holders and people getting a social welfare Widow's Widower's, Pension, One-Parent Family Payment or Deserted Wife's Benefit Or Allowance)


Weekly pay is the employee's money pay plus notional pay (if applicable).

EMPLOYERS PRSI ( No change since 2005)

10.75% on the whole salary except:

For salaries up to €356 per week( €1543 per month), the rate is 8.5% of the whole salary
 
Re: PRSI Explained

If your salary is less than €352 in any week

If your salary is between €352.01 and €500 in any week


If your salary is over €500 in any week

Maybe I've missed something Brendan but just to clarify, are these figures gross or after tax?
 
Re: PRSI Explained

Prsi is calculated on the Gross taxable salary - e.g. gross less pension contributions that qualify for tax and PRSI/health levy relief.
 
Re: PRSI Explained

sorry, but am still confused about this..

i'd be in the earning > 500 and < 1925 per week category...so do i just calculate the first €127 at 2% and then the balance at 6%?

but where does the 50700 threshold come into it?
 
Re: PRSI Explained

The Health Levy of 2% is payable on all income in excess of €500 per week up to €1,952

It might be cleared to say:

Health Levy is not payable if you earn less than €500 a week.
But if you earn greater than €500 a week, the full amount of your income is subject to Health Levy at 2%, up to the €1,952 tax band.

An annualised example:
If you earn €25,999, health levy = 0
If you earn €26,001, health levy = €500
 
Re: PRSI Explained

sorry, but am still confused about this..

i'd be in the earning > 500 and < 1925 per week category...so do i just calculate the first €127 at 2% and then the balance at 6%?

but where does the 50700 threshold come into it?

No need to apologise, it is very confusing. Many of the Budget Commentaries in the press and from the accountancy firms make small errors in it.

If your salary is over €500 in any week
First €127: 2%
€127.01 to €1925: 6%
Balance::6.5%

So if you earn €1,000

127@2% = 2.54
873@6% =52.38
Total: 54.92

They are weekly thresholds, but when your earnings excedds 50,700 in any year, the total rate is reduced to 2% (i.e. they stop charging the 4% social insurance contribution)
 
Re: PRSI Explained

I stand to be corrected on this, but i think the essence is that Health Levy is paid if you earn more than €500 a week in the pay period, but is only payable if you earned greater than €26,000 in the year.

so if you work 20 weeks @ €600 = €12,000,
You will have paid Health levy of €240, as you earned more than €500 a week.

but you are below the annual threshold of €26,000, so you are due a refund of this amount.
 
Re: PRSI Explained

Hi Noman

I have reprhased it.

It is almost impossible to explain because of the interaction of weekly and annual thresholds.

Do you understand it now?


Brendan
 
Re: PRSI Explained

If your salary is between €352.01 and €500 in any week
First €127: 0% (Employee’s PRSI-Free Allowance)

Balance: 4%

...

Earnings over €50,700 per annum
First €127 per week: 2%
> €127.01 6%

...

Another way of looking at it just to confuse you
The PRSI contribution of 4% is payable on all income over €127 per week up to a ceiling of €50,700 annually.

This is not 100% correct. If you are paid weekly then the employee PRSI free allowance is €127 p.w. (€6,604 p.a.) but if you are paid monthly it's €551 p.m. (€6,612 p.a). I've had at least one experience with an employer's accountant getting this wrong and multiplying €127 x 4 for monthly salary etc. I guess I've met another accountant here who doesn't know the rules. :)
 
Re: PRSI Explained

This is not 100% correct. If you are paid weekly then the employee PRSI free allowance is €127 p.w. (€6,604 p.a.) but if you are paid monthly it's €551 p.m. (€6,612 p.a). I've had at least one experience with an employer's accountant getting this wrong and multiplying €127 x 4 for monthly salary etc.

I thought it was clear that all of the above figures are assuming that people are weekly paid. I have put in a note to this effect.

I have left out the monthly figures as it's complicated enough with one set of figures.
 
Re: PRSI Explained

I thought it was clear that all of the above figures are assuming that people are weekly paid.
It wasn't clear to me!
I have put in a note to this effect.
This is still wrong
Note: All the figures given here are for those paid weekly. If you are paid monthly, the monthly figure is got by multiplying by 52 and divding by 12.
At least this is not correct for the weekly/monthly PRSI "exemption" of €127/€551 since the annual figures are €6,604/€6,612 respectively.
I have left out the monthly figures as it's complicated enough with one set of figures.
I thought that the point of the thread was to tackle the complexity of PRSI head on!? :confused:
 
Re: PRSI Explained

I've read this thread twice and am still confused (but must admit I always have been by PRSI!), so can somebody tell me how much PRSI I will be earning €53k per year and being paid weekly.

Also, is this an increase/decrease on what I have been paying?

Thanks,
Confused
 
Re: PRSI Explained

www.taxcalc.eu ?

€53K p.a. is €1019 p.w. (rounded for simplicity)
This means €127 @ 2% (health contribution) = €2.54
€1019 - €127 = €892 @ 6% (PRSI + health contribution) = €53.52
Total PRSI/health contribution = €56 p.w.
Except in the last few (three?) weeks of the year when you will have exceeded the €50,700 employer PRSI ceiling and will stop paying 4% PRSI on anything above that.
 
Re: PRSI Explained

I thought that the point of the thread was to tackle the complexity of PRSI head on!? :confused:

Absolutely not. I am not trying to tackle complexity.

I am trying to simplify and explain it for the vast majority of people.

Brendan
 
Re: PRSI Explained

www.taxcalc.eu ?

€53K p.a. is €1019 p.w. (rounded for simplicity)
This means €127 @ 2% (health contribution) = €2.54
€1019 - €127 = €892 @ 6% (PRSI + health contribution) = €53.52
Total PRSI/health contribution = €56 p.w.
Except in the last few (three?) weeks of the year when you will have exceeded the €50,700 employer PRSI ceiling and will stop paying 4% PRSI on anything above that.

Thanks .... using Mac OS9 at work, and Karl's calculators don't work on it.
 
Re: PRSI Explained

I have moved the bit about claiming refunds into a new thread here:

http://www.askaboutmoney.com/showthread.php?t=69727

I think that this is very important and maybe Askaboutmoney could highlight this in January and flood the Revenue with claims. It might encourage the Minister to simplify the system.

Brendan
I would imagine that the number of people who qualify for PRSI/health levy refunds would be limited - particularly among AAM users.
 
Re: PRSI Explained

At least this is not correct for the weekly/monthly PRSI "exemption" of €127/€551 since the annual figures are €6,604/€6,612 respectively.

I would suggest that the €551 is just a rounded figure, used to make the calculations slightly easier (€551 instead of €550.333...) When you throw 'insurable weeks' into the mix, you can see that the monthly calculation is a bit of a shoe-horn.

I doubt the welfare wish to discriminate between monthly and weekly paid people.

I am trying to simplify and explain it for the vast majority of people.

You certainly have your work cut out for you. Remember as well that we are only dealing with Class 'A' here.
 
Re: PRSI Explained

Odd - it's Java based so should work on any platform.

Sorry for going O.T. Nope ... all I get is his page explaining the calculator. Scripting problems are very common on OS9, and have crippled dozens of sites at this stage, although there always were problems with many sites not running properly on Mac.
 
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