THE GOVERNMENT is considering the removal of the ceiling on Pay Related Social Insurance (PRSI) contributions, which could cost higher-paid workers earning over €52,000 hundreds of euro annually.
A number of position papers have gone to the Cabinet on the issue from the Minister for Social and Family Affairs, Mary Hanafin, sources have told The Irish Times.
The abolition of the ceiling was a key commitment of the Government in the Programme for Government, although it intended to reduce the rate at which it was charged – leaving just the highest-paid worse off.
However, the economic situation has deteriorated significantly since then, and the Cabinet has been given figures showing the impact of changes to both the upper and lower PRSI thresholds.
In the last budget, the Minister for Finance, Brian Lenihan increased the PRSI ceiling by €1,300 to €52,000 – a move that will cost the average PRSI contributor €52 a year.
Workers earning less than €352 gross per week do not pay social insurance, although their employers do, while those earning between €352 and €500 per week pay a 4 per cent contribution on the amount over €127.
However, the fact that the position papers have been produced does not mean that it is certain that PRSI changes will form part of the April 7th budget.
Replying to Fianna Fáil TD Michael McGrath recently, Ms Hanafin said the abolition of the €52,000 ceiling “would yield some €223 million additional income in a full year”.
PRSI payments are paid into the Social Insurance Fund and used to pay for Jobseekers’ Benefit – the welfare payment made to those who are out of work for up to 15 months. The fund, blessed by the contributions of years of growing employment, is still in the black to the tune of €3.4 billion, but the rapidly-rising dole queues will have that consumed by the end of this year or next year.
The fact that the fund will by then be in the red is not unusual in leaner economic times, but it does mean that the shortfall will have to be made up directly by the social welfare budget, thus increasing pressure on current spending.
Speaking to the Dáil Public Accounts Committee earlier this month, the Department of Social and Family Affairs secretary general, Bernadette Lacey said the fund would “definitely” be in deficit by next year.
The scale of the demand on the fund is illustrated by the fact that a recent study estimated then that its surplus would not be eaten up until 2016.
