A brief guide to PRSI and the Heath Levy
PRSI stands for “pay related social insurance” and it is a charge towards the cost of social insurance benefits & pensions such as, unemployment benefit, maternity benefit, old age pension, etc. PRSI is payable by both employees and self employed individuals aged between 16 & 66 with income over certain limits.
PRSI is broken down into two separate groups – employees and self employed individuals with different rates and conditions for each group.
For an employee the rate at which PRSI is payable is determined by reference to the amount of salary earned per week/per month and the nature of the work involved. Most employees in Ireland pay PRSI at Class A rate. This class of contribution entitles the individual to full social insurance based benefits subject to specific conditions.
There are other classes of social insurance such as C, D, E, H, J, S, K, M and P. An employee paying PRSI under any of these classes will be paying a lower rate of PRSI than the Class A rate of 4% and therefore will not be entitled to the full range of benefits.
The rates of PRSI for Class A1 for the 2010 tax year are as follows:
Employee contribution 4% up to an income ceiling of €75,036*
Employer contribution 8.5% where employee’s income is less than €356 per week
10.75% where employee’s income exceeds €356 per week
*Employee’s are exempt from PRSI on the first €127 per week.
Self employed contributions
Self employed individuals are liable to PRSI where they have income of €3,174 or more in a tax year from all sources. The rate at which they pay PRSI is 3% on all income with no ceiling. Clearly this rate is lower than the rate for an employed contributor. This is due to the fact that a self employed individual cannot avail of full social insurance benefits such as unemployment benefit, disability benefit, etc.
Another point to note is that self employed contributors are subject to a minimum annual contribution of €253.
The PRSI situation for directors is more complex than for a regular employee. Some directors will pay PRSI at the employee rates whilst others will pay at self employed rates depending on several factors including shareholding, level of control, etc.
The health levy is a charge payable by all individuals aged between 16 & 70 towards the cost of health services in the State. For many years the health levy was charged at a rate of 2% however the rates for the 2010 tax year are now as follows:
Employed & self employed contributors
4% on income up to €75,036
5% on income over €75,036
An employee or a self employed contributor will be exempt from the health levy where his/her income for the year does not exceed €26,000. Also, holders of a full medical card are exempt from the health levy.
Where an employee is assigned to a foreign country to work for a temporary period (generally less than 5 years) it may be possible to remain in the Irish social insurance system. This will ensure continuity in their PRSI record and will exempt them from social insurance in the foreign country. In order to do this the employer must obtain an E101 (postings within Europe) or a Certificate of Coverage (postings outside Europe) on behalf of the employee. If successful the PRSI due from both the employer and the employee will be paid to PRSI Special Collections Section on a quarterly basis rather than through the PAYE/PRSI system. In addition to the payment there are various forms/returns which must also be completed and filed on a quarterly and annual basis.
If you have any queries regarding the above please do not hesitate to contact us.