Workers and employers are to be hit with five consecutive PRSI increases in the coming years.
The Government has signed off on increases to PRSI each year between 2024 and 2028, which will see the average employee pay an extra €46 a year from next October alone.
Ministers have agreed to the tax changes which will begin with two 0.1% increases, first next October and then again in 2025. PRSI will jump by a further 0.15% in 2026 and 2027 followed by a 0.2% increase in 2028. Minister Heather Humphreys brought the PRSI roadmap to Cabinet on Tuesday morning.
A Cabinet source said: “The changes will bring in several billion over a number of years so it’s not insignificant.”
It is understood that the first 0.1% increase will work out at an extra 90c a week for the average worker, meaning an extra €46.80 a year from next October. The overall increase is expected to raise an additional €240m in a full year. The PRSI changes will also apply to both employers and people who are self-employed.
Increases to PRSI had been flagged ahead of last month’s Budget as a way of ensuring that the pension age could be kept at 66 and to allow for the rollout of pay-related benefits for people who are made redundant. She added: “We have seen a number of redundancies recently where you had workers on salaries of possibly €800 or €900 and they found themselves on a flat rate payment of €220, which is the payment for everybody across the board.”
The changes will allow anyone who has made at least five years of PRSI payments able to receive a maximum of €450, or 60% of their prior income, for the first three months of unemployment. This will then fall to a maximum of €375, or 55% of prior income, for the next three months. A final maximum rate of €300, or 50% of their previous income, will be payable for a final three months, before an application must be lodged for the basic Jobseeker’s Allowance.
Further reform to the pension system will also come into effect next January, as people will be permitted to defer their pension beyond 66 to receive higher payment rates up to 70. There will also be changes introduced, as part of the Social Welfare (Miscellaneous Provisions) Bill 2022, to provide long-term family carers with additional pension
This means that any person who has provided care for 20 years or more will be able to receive pension entitlements for that time.
On employer PRSI increases, Kieran Horgan of HTH Accountants said: “The changes in employer PRSI represent an additional cost for employers and is likely to be unpopular with SMEs in particular as businesses continue to face additional cost challenges.”