Is my bonus an Employee or Employer contribution?

A

Attride12

Registered User
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I receive a bonus every 6 month which varies from 5k to 15 k roughly
This bonus is not set out in my contract of employment and varies year to year
Basically if i ask for this bonus to go into my PRSA pension is it considered employee or employer contributions and then further more will it be subject to USC ?
Thank you
 
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Employee contribution, otherwise it would be salary sacrifice. You will get income tax relief but will have to pay PRSI and USC.
 
Steven Barrett said:
Employee contribution, otherwise it would be salary sacrifice. You will get income tax relief but will have to pay PRSI and USC.
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What if i was already maxing my pension contributions ? and its gone into my PRSA already would i owe income tax then at the end of the year or how do Revenue find out ?
 
Attride12 said:
What if i was already maxing my pension contributions ? and its gone into my PRSA already would i owe income tax then at the end of the year or how do Revenue find out ?
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Revenue's usual treatment of salary sacrifice is to treat the contribution as if it was salary which then was paid as an employee contribution. So they'd charge your employer the employer PRSI and you the Income Tax, PRSI and USC. You could claim back the Income Tax relief on the PRSA contribution. If you're already maxed out then you could claim the tax relief against next year, or possibly last year if you weren't maxed out for 2022.

You should talk to your employer's accountant about this if it's already been done.
 
LDFerguson said:
Revenue's usual treatment of salary sacrifice is to treat the contribution as if it was salary which then was paid as an employee contribution. So they'd charge your employer the employer PRSI and you the Income Tax, PRSI and USC. You could claim back the Income Tax relief on the PRSA contribution. If you're already maxed out then you could claim the tax relief against next year, or possibly last year if you weren't maxed out for 2022.

You should talk to your employer's accountant about this if it's already been done.
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Thanks for the reply
See my confusion is its already done and iv paid my USC and PRSI (But not income tax as my employer put it straight into my prsa) on the bonus and its now sitting in my prsa but ill be over the limit of 15 % this year .
My questions are
1.How do revenue know iv contributed too much to my prsa this year. And if they do know how will they tax me on this bonus added
2. I under contributed last year so how do i inform them that this is for last year to claim tax relief

Sorry for he questions
 
You can do this using myaccount on the revenue website. You can go back to 2022 and submit some of your comtributions. You will get a refund for 2022.
If you have overclaimed for 2023 this will show when you request a statement of liabilities on myaccount after the end of the 2023 tax year. Revenue will either bill you or reduce your tax credits for a few years to recoup the tax shortfall.
 
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I'm a bit confused when you say you've already paid USC and PRSI. Since the start of 2023, employer contributions to a PRSA are not a Benefit in Kind and they don't attract USC or PRSI. It sounds like your employer has treated this like an employee contribution, i.e. notionally paid it to you in salary, deducted the pension contribution and paid it over to the PRSA. If that's what they've done then you don't need to worry about salary sacrifice at all. The issue would be that if you don't think you're entitled to any more tax relief for this year, then it's wrong that your employer effectively gave you tax relief through payroll. I think you need to clarify exactly what your employer has done here.
 
LDFerguson said:
The issue would be that if you don't think you're entitled to any more tax relief for this year, then it's wrong that your employer effectively gave you tax relief through payroll. I think you need to clarify exactly what your employer has done here.
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Yes the employee treated my bonus as an employee contribution which you have clarified is correct
But this is the main issue above is that i dont think im entitled to anymore tax relief ? So if they gave me tax relief from payroll and its now in my PRSA what happens next ? will revenue contact me to say i overpaid into my prsa at the end of the year ?
 
What will possibly happen here, and you will need to check with their employer / payroll department, is you may not automatically get tax relief on pension contributions later in the year. Most modern payroll systems will be configured to stop giving tax relief once you've reached contribution limit, but it may be based on annual salary rather than just year to date amounts.

If you do overcontribute to your pension this year, you can carry that over and claim tax relief on it next year.
 
S class said:
You can do this using myaccount on the revenue website. You can go back to 2022 and submit some of your comtributions. You will get a refund for 2022.
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But i wouldn't get a refund because the relief was given to me by my employer of the bonus?

As per the revenue site below
Amount paid between 1/1/2023 and 31/10/2023 for which relief has not already been granted and for which relief is being claimed for 2022
 
RedOnion said:
What will possibly happen here, and you will need to check with their employer / payroll department, is you may not automatically get tax relief on pension contributions later in the year. Most modern payroll systems will be configured to stop giving tax relief once you've reached contribution limit, but it may be based on annual salary rather than just year to date amounts.

If you do overcontribute to your pension this year, you can carry that over and claim tax relief on it next year.
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Now this sounds great
You see i only started maxing contributions in February ( told me employer a month late) when the new rules came into effect in 2023 so i could give the full 15%

And in January i got my full bonus 15 k for 2022 which i only contributed 8% so in theory i should be fine anyway

But thanks all for the advice as i was abit worried
 
I'm a bit confused about this salary sacrifice concept. Consider the following two scenarios:

1. My employer decides to give me a €10k bonus. I say no, I'd prefer you put it into my PRSA. Employer happy to do this. This is a salary sacrifice and I appear to be liable for PRSI and USC. Is this correct?

2. My employer decides to put €10k into my PRSA. I have no choice of a cash or bonus alternative. This is not a salary sacrifice and I do not appear to be liable for PRSI or USC on the payment. Is this correct?

If the implications of both scenarios set out above are correct, where exactly is the boundary between salary sacrifice and employer ex-gratia payment? And how do Revenue know in practice and what is their general approach to this? It all seems kinda vague. Or am I missing something?
 
Right Winger said:
I'm a bit confused about this salary sacrifice concept. Consider the following two scenarios:

1. My employer decides to give me a €10k bonus. I say no, I'd prefer you put it into my PRSA. Employer happy to do this. This is a salary sacrifice and I appear to be liable for PRSI and USC. Is this correct?

2. My employer decides to put €10k into my PRSA. I have no choice of a cash or bonus alternative. This is not a salary sacrifice and I do not appear to be liable for PRSI or USC on the payment. Is this correct?

If the implications of both scenarios set out above are correct, where exactly is the boundary between salary sacrifice and employer ex-gratia payment? And how do Revenue know in practice and what is their general approach to this? It all seems kinda vague. Or am I missing something?
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I’m curious about this too, my employer was going to do Option 2 later this year for me.
 
"Any arrangement under which : an employee waives an entitlement to remuneration, or accepts a reduction in remuneration, in return for a corresponding payment by the employer into a pension scheme, is considered to be an application of the income earned by the employee rather than an expense incurred by the employer. Such arrangements are subject to the taxing provisions under section 118B TCA 1997, detailed in this manual. "

It's likely that the bonus will be in your contract of employment so you're waiving your right to it.

If there are but, but..... scenarios you should probably get advice from a tax professional who can review the contract of employment.


Gerard

www.prsa.ie
 
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GSheehy said:
"Any arrangement under which : an employee waives an entitlement to remuneration, or accepts a reduction in remuneration, in return for a corresponding payment by the employer into a pension scheme, is considered to be an application of the income earned by the employee rather than an expense incurred by the employer.

It's likely that the bonus will be in your contract of employment so you're waiving your right to it.

If there are but, but..... scenarios you should probably get advice from a tax professional who can review the contract of employment.


Gerard

www.prsa.ie
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There is no bonus at all mentioned in my contract, so Option 2 above should mean I wouldn’t be salary sacrificing if it’s employers decision I’d hope?
 
Hi, piggybacking on this thread rather than starting a new one, because my question is related....

I may be changing jobs in the next few months from one PAYE role to another. The new one is with a small company and, without going into the details, I expect there will be significant leeway for me to make changes to the standard employment contract before signing it. Am I right in saying that inserting a clause along the lines of 'Employer may elect at its discretion to pay annual bonus to miser as a cash payment through payroll or as a contribution to employee's PRSA' would suffice to demonstrate to Revenue that salary sacrifice is not in play here?

Now, I would run the risk that my new employer could ignore the clause and just pay bonus as cash anyway, or elect to make a PRSA contribution on my behalf in a year where I'd actually prefer to have the cash to change my car, go on holiday, fix my house etc.... but I would think that the employer might be persuaded on an annual basis as to where to pay the bonus....

And having said all that- I'd still need to perform well enough and get a few slices of luck to earn the bonus in the first place:)
 
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