PRSI increases could be on the cards in the next few years, with the proposed programme for government saying consideration would be given to increasing this charge to help pay for higher benefits and replenish the social insurance fund.
PRSI is paid by employees, the self-employed and also by companies at different rates. The programme for government agreed between Fine Gael, Fianna Fáil and the Greens says that "consideration will be given to increasing all rates of PRSI over time" to replenish the social insurance fund, out of which welfare and State pension payments are made, and to help pay for possible improvements in the State pension and in benefits such as short-term sick pay, parental leave, pay-related jobseekers' benefit and treatment benefits in areas like medical and dental services.
The issue is likely to be examined by a commission on welfare and taxation to be established by the new government, as well as a separate commission on pensions. This latter commission will look at the pension age issue, as well as the possibility of tying pension payments more directly to contributions.
Asked about the issue of increasing PRSI on Tuesday morning, Taoiseach Leo Varadkar said the new government would be "open to across-the-board increases in PRSI [in] all classes, but in return for that you get increased benefits. For example, more parental benefit, better sick care arrangements – so it is very much the new social contract. You pay in but you also get out ."
The programme promises not to increase income tax or USC rates – the other two main charges on people’s incomes. From 2022 on, when it is hoped that pay will be on the rise again after a post-Covid-19 recession, the programme promises to index tax bands and credits to ensure that people getting higher pay do not automatically end up with a heavier tax burden. This did not happen in the term of the last Government and the Taoiseach said that writing it into this agreement was vital for Fine Gael.
Most employees pay PRSI at 4 per cent on all earnings, provided they earn over €352 week. The annual employee PRSI bill on a salary of €45,000 would be €1,800. Employers pay at a rate of 11.05 per cent on earnings over €386. International surveys show that social insurance contributions here , particularly for employers , are well below many other EU countries. However the benefits attached to payments vary from country to country.
