Why should my Employer contribute to my PRSA

H

Happy Girl

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I am in the process of taking out a PRSA and I have asked my employer if the company would be in a position to contribute to it. He has asked me to put together a proposal outlining why the company should contribute to this for me so that he can argue my case to the Board of Directors. Any ideas/suggestions.
 
Because you're worth it?

Might be worth mentioning that any contributions that they make would be exempt from employer PRSI of 10.75% so even if they paid part of your salary as an employer pension instead then they could top it up by 10.75% at no cost to them and at a small benefit to you.
 
ClubMan said:
Because you're worth it?

Might be worth mentioning that any contributions that they make would be exempt from employer PRSI of 10.75% so even if they paid part of your salary as an employer pension instead then they could top it up by 10.75% at no cost to them and at a small benefit to you.
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Sorry Clubman. Don't understand this. Can you explain in more detail please.
 
Say you are paid €40K p.a. This costs the employer €40K @ 10.75% = €4,300 in employer PRSI. If instead they restructured your remuneration package so that they paid you €35K and made a €5K employer contribution to your pension then their employer PRSI bill would be €3,762.5. They could top the employer pension contribution with their employer PRSI "saving" i.e. €4,300 - €3,762.50 = €537.50 making a total contribution of €5,537.50 at no additional cost to them. Just a small bonus that might help in some situations. The same employer PRSI saving should also apply to your own personal contributions if I recall correctly. I convinced an employer to do this a few years ago in order to top up the pension contributions for me and my colleagues. There may be other issues (e.g. pension tax relief funding limits) that I am ignoring here for simplicity.
 
OR

If the Employer paid €25 per month and the Employee paid €200 per month, the net cost to the employer would be €0.37 per month.

Assumption

€25 - €3.13(tax relief @ 12.5%) - PRSI Relief €21.50 (10.75% of €200) = €0.37.
 
F. Kruger said:
€25 - €3.13(tax relief @ 12.5%) - PRSI Relief €21.50 (10.75% of €200) = €0.37.
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Sorry ... can you explain this in more detail please? :confused:

Where does 12.5% come from and why is the PRSI relief being subtracted from the tax relief. Maybe I'm just being dumb but I don't understand the formula... :eek:
 
This is flawed - the employee will save PRSI on the employee contribution (of €200)...but the employer will not!

I presume the 12.5% is the rate of corporation tax, but you could apply that logic to salary payments also?
 
CapitalCCC said:
This is flawed - the employee will save PRSI on the employee contribution (of €200)...but the employer will not!
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OK - my mistake so. Sorry. I think what happened in my case a few years back is that the employer was matching employee contributions up to some limit (5-6% maybe) and I mentioned to them that they could supplement this with their employer PRSI saving at no extra cost to the company so they did this.
 
Club - I agree with you on that point - I was disagreeing with the F Kruger calc but I am not sure whether or not I am right to disagree with him - I certainly don't agree with the Corp Tax reference!
 
So just to clarify - I was mistaken earlier when I suggested that the employer might save employer PRSI on any pension contributions made by the employee?
 
I don't know - I would not have thought that the employer should benefit from any such decision made by an employee - the salary is the salary and PRSI should be paid on the salary I would have thought...
 
Employer saves prsi at 10.75% of employee prsa contribution as long as the prsa is deducted from employee's salary.So 'ee contributes 100, 'er does not have to pay prsi on 100,thereby saving 10.75 so 'er could contribute 10.75 to prsa at no additional cost.
 
Thanks - upport. I'll do another U turn and declare that I was correct at the start so! :) But seriously - informing an employer that they could redirect such employer PRSI "savings" into your pension at no extra cost to them can be useful.
 
Ok folks tks for that. Can anyone provide a web page where I can confirm that employers will benefit from MY contributions to the PRSA. Seems v unfair.

Any other suggestions to encourage them to contribute to my PRSA.
 
Happy Girl said:
Ok folks tks for that. Can anyone provide a web page where I can confirm that employers will benefit from MY contributions to the PRSA. Seems v unfair.
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Why? You are getting tax (20% or 41%) and PRSI (4%)/health levy (2%) relief on such contributions. They are just getting employer PRSI (10.75%) relief on them. And if you can get them to put this "saving" into your fund then you are benefiting third time over.
Any other suggestions to encourage them to contribute to my PRSA.
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Explain to them in detail why exactly your contribution to the company's bottom line merits an increase in remuneration in the form of pension contributions and how such a benefit would be a good retention mechanism.
 
"Why? You are getting tax (20% or 41%) and PRSI (4%)/health levy (2%) relief on such contributions. They are just getting employer PRSI (10.75%) relief on them. And if you can get them to put this "saving" into your fund then you are benefiting third time over".

This is exactly what I am looking for exact confirmation on. Basically if I just contribute say 100 pw to my PRSA and my employer contributes nothing then do they get the saving with regard to Employer's PRSI. I am getting conflicting view on this. Basically if I net 500 pw and contribute 100 to prsa pw then my taxable salary will be 400. Does it work the same for my employer. Basically will they only have to pay 10.75% on the 400.
 
Happy Girl said:
I am getting conflicting view on this.
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You mean becuse of my flip flopping above? If so then I am pretty sure (again) that the employer avoids employer PRSI on the employee's contribution if the contributions are made via payroll (i.e. before any statutory deductions are made). See this thread.
 
Clubman how could you even think like that!!!! The attached is a quote from “one stop PRSA” [broken link removed] and the following extract has left me confused (which is not too difficult to do at times I might add)
“If you contribute to your employees’ PRSAs, you are not liable to Employer’s PRSI on the contributions you make, whereas you are normally liable to Employer’s PRSI on any salary increases to your employees”.
I take from this that they do not pay PRSI only on the contribution (if any) they make and not on my contributions. So therefore there would be no PRSI saving for them if I am the only one making contributions. Am I reading this wrong?
 
Happy Girl said:
I take from this that they do not pay PRSI only on the contribution (if any) they make and not on my contributions.
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The extract does not explicitly state that and I still suspect that the employer does not pay employer PRSI on any employee pension contributions made via payroll. Perhaps somebody with access to a payroll software package could check?
 
Good News!!

I just checked my pay slip (today is pay day and all!) - my Employer has not paid ER PRSI on the part of my salary that I put in to the pension plan.

Club - you are correct.

Happy Girl - the ER does not pay ER PRSI on that part of your salary that you put into pension.

Have a nice weekend :)
 
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