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The two most relevant PRSI classes to a business are Class A and Class S. The A rate applies to standard PAYE workers, while the S rate applies to business owners/Shareholders and most Directors. The rates are listed at the end of the article. PRSI is not TAX. It is Pay Related Social Insurance. The reason for paying it is to give you benefits such as eye tests, dental checkups, unemployment benefits etc. As to its fairness and overall benefit to each person, that is a political debate that wont be raised here. For now it just has to be paid. So knowing how much you are paying and how it is calculated is important to ensure that you minimise the amount you have to pay. Your PRSI subclass can change from week to week when your wage increases and you go beyond the upper threshold for your current subclass. So if your wage is €339 per week and your new wage is €340 per week, your subclass will change from AO to AX. IMPORTANT: You may come home with less pay despite an increase in your wage Why?
Because PRSI is charged not from the next step up, but calculated from 127.01. Example 1:
Employee gets an increase and comes home with less money. | Weekly Wage | Class | Subclass | Prsi Rate | Prsi amount | | 339.00 | A | AX | 0% on All | 0.00 | | 340.00 | A | AL | 0% on First 127
4% on balance | 8.52 | In this example a 1 Euro increase resulted in a decrease in take home pay | | Old Wage | New Wage | Inc/Dec (+/-) | Yearly Gross Old Wage | Yearly Gross New wage | | Gross | 339.00 | 340.00 | +1.00 | 17628 | 17680 | | Tax | 0.00 | 0.00 | | | | | Ee Prsi | 0.00 | 8.52 | -8.52 | | | | Net Pay | 339.00 | 331.48 | -7.52 | | | | The new wage actually leads to a decrease in take home pay | | | Before taking or giving an increase, calculate what the new net pay will be. This can also affect overtime pay. If an employee is near the top of the threshold on one PRSI rate and overtime pushes her into the next PRSI rate, the overtime pay may be severely reduced and may not make it worthwhile for the employee to do the overtime. Example 2:
Effect of changes in PRSI subclass on an employer and how it increases costs more than you think. The employer pays either 8.5% (on up to 356 gross per week) or 10.75% (over €365) Employer's PRSI on the Gross Salary including beneift in kind. The important amount is €356.00. Once over this amount is paid as gross salary (356.01 or more) the rate of 10.75% applies on the whole amount and not just the amount over the 356.00. | Weekly Wage | Class | Subclass | Employer Prsi Rate | Prsi amount | | 356.00 | A | AX | 8.5% on All | 30.26 | | 359.56 | A | AL | 10.75% on All | 38.65 | In this example a 1 Euro increase resulted in a decrease in take home pay | | Old Wage | New Wage | Inc/Dec (+/-) | Yearly Gross Old Wage | Yearly Gross New wage | | Gross | 356.00 | 359.56 | +1.00% | 17628 | 17680 | | Er Prsi | 30.26 | 38.65 | | | | | Total Cost to employer | 386.26 | 398.21 | +3.09% | 20085 | 20707 | | A 1% increase in gross wage actually leads to a 3.09% increase in the cost to the employer. | | | How to keep PRSI to a minimum Prsi is calculated on the weekly gross. Rather than increase a persons annual wage, pay them a bonus. Perhaps spread it over a number of weeks to prevent them from going into the next Employee or Employer PRSI subclass. If you keep below the thresholds you can keep PRSI to the lower rate. Plan any wage increases. Examine each persons rate. Use your payroll program to calculate what would happen if you changed a persons weekly wage. Sometimes a decrease in a wage could lead to more take home pay. If you look at example 1 above in reverse, reducing the wage by one euro would increase the employee's take home pay For more information on PRSI rates goto www.welfare.ie and search for PRSI CLASS A and CLASS S Employee and Employer Rates | Private and Public sector employments | | Rates of contribution from 1 January 2007 | | CLASS A | This covers employees in industrial, commercial and service-type employment who have reckonable pay of €38 or more per week from all employments and Public Servants recruited from 6 April 1995. | | Weekly pay is the employee's money pay plus notional pay (if applicable). | | Subclass | Weekly Pay Band | How much of weekly pay | First €48,800 | Over €48,800 | | | EE | ER | EE | ER | | AO | €38 - €339 inclusive | ALL | Nil | 8.5% | Nil | 8.5% | | | | | | | | | | AX | €339.01 - €356 inclusive | First €127 | Nil | 8.5% | Nil | 8.5% | | Balance | 4.00% | 8.5% | Nil | 8.5% | | | | AL | €356.01 - €480 inclusive | First €127 | Nil | 10.75% | Nil | 10.75% | | Balance | 4.00% | 10.75% | Nil | 10.75% | | | | | | A1 OR | More than €480 | First €127 | 2.00% | 10.75% | 2.00% | 10.75% | | €127.01 - €1925 | 6.00% | 10.75% | 2.00% | 10.75% | | Balance | 6.50% | 10.75% | 2.50% | 10.75% | | | | A2* | More than €480 | First €127 | Nil | 10.75% | Nil | 10.75% | | Balance | 4.00% | 10.75% | Nil | 10.75% | | * Subclass A2 applies to medical card holders and people getting a social welfare Widow's Widower's, Pension, One-Parent Family Payment or Deserted Wife's Benefit Or Allowance. See note below. | | Self Employed | | Rates of contribution from 1 January 2007 | | CLASS S | This covers self-employed people, including certain company directors. | | | | Subclass | Weekly Pay Band | How much of weekly pay | All Income | | | | S0 | Up To €480 | ALL | 3.0% | | | | S1 | More Than €480 | First €1,925 | 5.00% | | Balance | 5.50% | | | | S2* | More Than €480 | ALL | 3.0% | | * Subclass S2 applies to medical card holders and to people getting a social welfare Widow’s or Widower’s Pension, One-Parent Family Payment or Deserted Wife’s Benefit or Allowance. Please see note below. | article:100017 (c) Nilsson Denver Ltd 2007 |
