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Tuesday 12 December 2017

Self-employed hit with 28pc hike in PRSI contributions

Pay-related social insurance (PRSI) payments shot up 28pc last year among those who work for themselves
Pay-related social insurance (PRSI) payments shot up 28pc last year among those who work for themselves

Charlie Weston Personal Finance Editor

THERE has been a surge in social insurance payments made by the self-employed following changes in the system.

The revelation has sparked an angry reaction from employer body ISME, which said those working for themselves had got nothing extra for paying higher taxes.

Pay-related social insurance (PRSI) payments shot up 28pc last year among those who work for themselves, Minister for Social Protection Joan Burton confirmed.

The total PRSI paid by the self-employed was close to €400m last year, compared to €310m in 2012, Dail answers given to Fianna Fail's Michael McGrath reveal. The change amounts to a 28pc rise.

In the Budget announced in December 2012, the minimum amount of PRSI to be paid a year by the self-employed was increased from €250 to €500. More people have also set up businesses.

Chief executive of ISME Mark Fielding said the self-employed were paying more, but getting nothing extra in return.

"This is just an extra tax on those who are risk takers. They are getting nothing additional in return for paying more tax," he said.

Self-employed people pay PRSI at the same rate as employees, yet they are denied access to jobseeker's benefit if their business fails. And they do not get disability or illness payments.


Mr Fielding said the imposition of PRSI at 4pc on the self-employed, along with income tax and universal social charges, meant the marginal tax rate for self-employed people earning over €100,000 was 55pc.

Last year an expert group advising Ms Burton proposed a huge increase in social insurance rates paid by the self-employed, so that they would be eligible for an invalidity pension and partial capacity benefit for the first time.

The expert group called for PRSI to rise by more than a third to 5.5pc for those who work for themselves.

But the ISME boss said this could not be afforded.

Deputy McGrath said the increase in the minimum social insurance payable by the self-employed and a recovery in incomes for those who work for themselves had resulted in the sharp rise.

But he added: "There have still not been any changes in the social welfare benefits that a self-employed person gets if their business fails."

He said that compared to other European countries the safety net provided here for someone whose business fails despite their best efforts was entirely inadequate.

Ms Burton's response to the Dail question reveals that an extra €521m was paid by employers, employees and the self-employed in PRSI in 2013, compared with the previous year.

The total PRSI contributions amounted to €7.3bn.

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