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Publication - Advance Notice of PRSI Changes For Computer Users 2004

Information Services
Department of Social and Family Affairs
Oisin House
212-213 Pearse Street
Dublin 2.
Telephone (01) 704 3000

This notice contains rate changes announced in the December 2003 Budget.
Changes are effective from 1 January 2004.

Benefit-in-kind changes

From 1 January 2004, PRSI and income tax must be collected by employers on the taxable value of benefit-in-kind (notional pay), subject to certain exceptions. The taxable value of the benefit must be added to the money salary in the pay period that the benefit is provided and PRSI and income tax calculated on the total. Examples of taxable benefits can include private use of a company car, free or subsidised accommodation, preferential loans, various vouchers and payment by the employer of his employee's medical insurance or club subscriptions etc.

Employees annual earnings ceiling

The employees annual earnings ceiling (above which they pay no social insurance contributions) has increased from €40,420 to €42,160.

Employee's PRSI-Free Allowance

The PRSI-Free Allowance for employees in Class A and H with weekly earnings of more than €287 remains at €127 per week and €26 per week for all employees in Classes B, C and D.

The allowance does not apply to the Health Contribution or the employer's share of PRSI. In other words, in Class A it applies to calculating the 4.0% employee social insurance deduction, but not to their 2.00% Health Contribution. The allowance only applies for weeks of insurable employment in which PRSI is paid. Remember that this allowance does not affect the gross reckonable weekly earnings threshold which decides the appropriate contribution subclass.

For employees paid other than weekly, alternatives to the weekly PRSI-Free allowance are:

Health contribution

The weekly earnings limit up to which people in ALL classes are exempted from paying the 2% Health Contribution remains at €356.

Employer's PRSI

The weekly earnings limit up to which employers pay Class A at the lower PRSI rate of 8.5% remains at €356.
The standard rate of Employer's PRSI of 10.75% applies on all earnings in any week where an employee's earnings are more than €356.

Earnings bands and subclasses

* This threshold only applies to Class A employees, whose total earnings in each week of the fortnight or month are at least €38.

Subclasses A1, A2, A4 and A5

Self-Employed PRSI

• The minimum annual contribution for Class S remains at €253.

• PRSI and income tax must be collected by employers on the taxable value of benefit-in-kind (notional pay), subject to certain exceptions. Examples of taxable benefits include, private use of a company car, free or subsidised accommodation, preferential loans, various vouchers and payment by the employer of his employee's medical insurance or club subscriptions etc. The taxable value of the benefit must be added to the money salary in the pay period that the benefit is provided and PRSI and income tax calculated on the total
   
• The annual earnings ceiling for PRSI has increased from €40,420 to €42,160 for employees in classes A,B, C, D and H, effective from 1 January 2004.
   
• For people employed under a contract of service, the  earnings threshold of €38 from all work decides whether Class J or A applies.
   
• Class A employees earning between €38 and €287 inclusive per week should be recorded under Subclass A0. Class B, C, D and H employees earning €287 or less per week should be recorded under Subclass B0, C0, D0 or H0.
   
• Employees earning between €287.01 and €356 per week should be recorded under Subclass AX, BX, CX, DX or HX.
   
• In all other cases, people earning €356 or less per week should be recorded under the Subclass 0 that is J0, S0 or M (for people within Class K) as appropriate.
   
• All people earning more than €356 per week should be recorded under Subclass 1 or 2 in other words A1/A2, B1/B2, C1/C2, D1/D2, H1/H2, J1/J2, K1/M or S1/S2 as appropriate.
   
• Community Employment Participants earning €287 or less per week should be recorded under Subclass A8. Subclass A9 applies when earnings are more than €287.
   
• Medical Card holders and people who get a Social Welfare Widow's or Widower's Pension, Deserted Wife's Benefit or Allowance or One-Parent Family Payment do not have to pay the 2.00% Health Contribution in any week that the reckonable earnings are more than €356. Where earnings are more than €356, record under Subclass 2 that is A2, B2, C2, D2, H2, J2, S2 or Class M (for people within Class K).
   
• Everyone aged 70 or over qualifies for a Medical Card and do not have to pay the 2% Health Contribution, regardless of whether or not they have a medical card.
   
• The Class J contribution normally relates to people with reckonable earnings of less than €38 per week (from all jobs). However, a small number of employees are insurable at Class J regardless of earnings for example employees over age 66 and people in subsidiary employment.
   
• For employees taken on under the Employer's PRSI Exemption Scheme, Subclass A6 is applied for employees earning €287 or less per week, normally insurable at Subclass A0. Subclass A7 is for those earning between €287.01 and €356 inclusive per week normally insurable at Subclass AX. In any week where earnings exceed €356, Subclass A4 applies to exempted employees who would normally be insurable at Subclass A1 and Subclass A5 applies for those who would normally be insurable at Subclass A2 (medical card holders, widows/widowers etc.)

This leaflet is intended as a guide only and does not purport to be a legal interpretation.