Understanding PRSI. Overview PRSI. In general:

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1 Understanding PRSI

2 About the Author Margaret Sheridan is an AITI Chartered Tax Adviser (CTA). She has worked for many years in practice specialising in personal tax and employment tax. She is a former Council member and lectures extensively for the Institute. About AITI Chartered Tax Advisers (CTA) AITI Chartered Tax Advisers (CTA) are the experts in providing commercially focused tax advice to business and individuals. They also possess in-depth knowledge of all taxes operating in Ireland as well as the incentives and reliefs available. Only holders of the AITI (Associate of the Irish Tax Institute) qualification who are current members of the Irish Tax Institute can use the title AITI Chartered Tax Adviser (CTA). For more information visit

3 3 Understanding PRSI Overview PRSI stands for pay related social insurance. The most common rate of PRSI is currently 4%. PRSI contributions are paid into the State s Social Insurance Fund, and the money collected is used to fund various social insurance payments. PRSI In general: all employees, whether full time or part-time and self-employed workers with an income of 5,000 or more a year, from all sources who are aged between 16 and 66 years of age are liable to pay PRSI contributions. In return, they are covered for a range of social insurance benefits and pensions. Exceptions to this general rule apply in the case of certain Family Employments. This term is used to describe a situation in which a self-employed sole trader/businessperson either employs, or is assisted in the running of the business by a spouse or by other family member(s). The website of the Department of Social Protection, can provide you with more details of PRSI on family employments in their Publications section. Payment of self-employed (Class S) PRSI is made through Revenue. Those who pay their tax direct to the Collector-General will pay their PRSI with their income tax. They will be liable for a social insurance contribution of 4% of ALL income or 253, whichever is the greater. However, where a self-employed person is deemed by Revenue to have no net tax liability (NNL), PRSI is not collected. Cases classified as NNL by Revenue are referred to the Department of Social Protection to determine if a PRSI liability exists. In order to be liable to pay the NNL rate of PRSI, which is taken into account when determining pension entitlement, it is necessary to have an annual income of 5,000 other conditions also apply. For more information on these conditions please go to Under EU Regulations, a person is insurable for social insurance purposes in one EU Member State only. In certain circumstances, employees who are posted from Ireland to work in another Member State may remain under the Irish Social Security System.

4 4 PRSI rates and thresholds For people in employment in Ireland, social insurance contributions are divided into different categories, known as classes or rates of contribution. The type of class or rate that you pay is determined by the nature of your work and pay level. For example, an employed person earning less than 38 per week is insured under Class J. If that person earned over 38, they would be insured under Class A. In fact, most employees in Ireland pay Class A1 PRSI. This class of contribution may entitle you to the full range of insurance-based benefits that are available from the Department of Social Protection once you have paid a minimum number of contributions. Full details of available benefits and conditions attaching are available on The other classes of social insurance are classes B, C, D, H, J, K, M, P and S. If you are insured under one of these classes, you are paying insurance at a lower rate than Class A1 (4%) contributors, which means that you are not entitled to the full range of social insurance benefits. This is because you pay less towards social insurance than a Class A1 contributor. The main PRSI rates and thresholds are set out below: From 1 January 2012 onwards Subclass Weekly pay band How much of weekly pay Contributors Rate of PRSI A1 All Employer 10.75% More than 500 First 127 Nil Balance 4% J1 More than 500 All All Employer 0.5% Nil C1 All Employer 1.85% More than 500 First ,443 Nil 0.9% Balance 4% S1 More than 500 All Self-Employed 4% Summary of PRSI Classes Class A covers employees who have reckonable pay of 38 or more per week from all employments and Public Servants recruited from 6 April s paid 38 to 352 inclusive in any week are recorded under Subclass A0. s paid to 356 inclusive in any week are recorded under Subclass AX. A Guide to PRSI

5 5 s paid to 500 inclusive in any week are recorded under Subclass AL s paid more then 500 in any week are recorded under Subclass A1. Participants in Community Employment earning 352 or less in any week are recorded under Subclass A8. In any week that the pay is more than 352 the class is Subclass A9. Community Employment supervisors and employees on apprenticeship schemes are insurable at Class A in the normal way. Class J relates to people with reckonable pay of less than 38 per week (from all employments). However a small number of employees are insurable at Class J no matter how much they earn, such as employees aged 66 or over. Class C covers commissioned Army Officers and members of the Army Nursing Service recruited before 6 April Class S covers self-employed people, including certain company directors and people with income from investments and rents. The Class S minimum annual contribution for year 2011 and 2012 is 253. Main Recent PRSI/Health Levy Changes In Budget 2011, changes were introduced for both self-employed persons and employees. The employee PRSI ceiling of 75,036 was abolished, with the result that, from tax year 2011, employee PRSI is payable on all employment income. The rate of PRSI for the selfemployed was increased from 3% to 4%. The health contribution was abolished with effect from tax year Problems arising The pay threshold to determine the amount of PRSI payable can be viewed as unfair for those who border on the threshold as there can be a substantial impact on their PRSI liability. Individuals who earn marginally above the threshold inevitably pay a greater amount than those just below it. This is an issue that could be addressed by introducing some form of marginal relief. There is also an issue in relation to self-employed persons. Self-employed persons are not covered for short term benefits such as Jobseeker s and Illness benefit.

6 6 Commonly asked Questions Q: I am being posted by my employer to a subsidiary company in Germany for two years. I know the Social Security payments in Germany are expensive. How will this impact on my PRSI contributions? A: A person is insurable for Social insurance purposes in one EU Member State only. An employee, who is posted from Ireland to work in another EU State, may be entitled to apply for an E101 Certificate under EU Regulations. This certificate exempts you and your employer from paying social insurance in the country where the work takes place and keeps you covered under the Irish system. This means that your rights to Irish social insurance benefits are being preserved while you are temporarily working abroad. An E101 Certificate is valid for any period up to twelve months, but in certain circumstances it is possible to extend this period normally up to five years. Q: I am an employee paying Class A PRSI. What rate of PRSI do I pay on my investment / rental income? A: You are classed as an excepted self-employed contributor and as such you are not liable to PRSI on your investment /rental income. This exemption applies to employed persons whose only source of non-employment income is passive income (i.e. income other than from a trade or profession). Q: I am a director of a company. What rate of PRSI do I pay? A: This is a complex area. If you employed under a contract of employment, you will normally be subject to Class A PRSI. If you are not, a number of factors such as, your shareholding in the company, how your remuneration is determined and whether or not you are under the control of the board, must be considered before this question can be answered. A Guide to PRSI

7 7 Irish Tax Institute. While every effort is made to ensure that the information outlined in this leaflet is accurate, the Irish Tax Institute can accept no responsibility for loss or distress occasioned to any person acting or refraining from acting as a result of this material. Where appropriate, professional advice should be sought from an AITI Chartered Tax Adviser (CTA). See for more information and the AITI Chartered Tax Adviser (CTA) listing. The information in this leaflet is subject to change. March 2012

8 8 Irish Tax Institute South Block Longboat Quay Grand Canal Harbour Dublin 2 Tel.: Fax: A Guide to PRSI