PRSI changes are being rolled out, thanks to Ireland’s new law that came into effect on 1st January 2024. There will be a change in rates and also in the way that older workers are classified.
UPDATED 16th September 2024
What are the changes in PRSI rates?
From 1st October 2024, the rate of PRSI (employee and employer) will increase by 0.1%. Self-employed individuals will also see a similar increase in their PRSI rate by 0.1%.
In addition to the increase in rates, the class AL weekly earnings threshold will increase from €441 to €496.
The increase in rates from Oct 1st, 2024 will be the first in a series of incremental employee and employer rate changes until 2028. In total, these changes will see an increase in rates by 0.7% come 2028.
These increases will be used to boost the Social Insurance Fund from which welfare and state pension payments are made.
Do Zellis payroll users need to do anything?
In accordance with a recent notice issued by our Communications Team, Zellis HCM Cloud and Resourcelink SaaS clients had their test environments updated on Sept 10th and live environments updated on Sept 13th with the new PRSI rates and threshold change, in readiness for processing of payrolls paying on or after Oct 1st.
As part of the recent notice, on-premise clients were issued with instructions to apply the PRSI rates and threshold change to their systems
The government is taking action to address a future shortfall in the Social Insurance Fund. Further initiatives are expected to come in the form of the planned introduction of pension auto-enrolment, increases to PRSI rates beyond 2028, incentives for employees to remain working beyond the current retirement age of 66 and, in due course, an increase to the retirement age.”
Seán Murray, Director of Product Services Ireland, Zellis
Previously, employees and self-employed workers aged 66-70 who weren’t drawing a State Pension Contributory (SPC) didn’t pay PRSI on income.
From the start of 2024, anyone who enters this bracket and isn’t drawing down the pension is subject to PRSI. This is under class A or S, depending on whether they’re self-employed or not. It lasts until the age of 70, when all employees become PRSI-exempt.
Why are these PRSI changes happening?
The change of the upper limit for PRSI exemption as embodied in the new legislation is to align with the shift of the compulsory retirement age in Ireland from 66 to 70. It applies to both the employee and employer PRSI liabilities.
Are there any exceptions?
Those employees who have already reached 66 years of age by 1st January, 2024 (born before 1st January, 1958) who were previously exempt from PRSI continue to be exempt. According to estimates from the Central Statistics Office, this cohort currently comprises about 110,000 employees.
For anyone in receipt of the State Pension, attained on or after reaching 66 years of age, the earnings are not subject to PRSI. Also, the change doesn’t impact the current provisions for occupational pensions, which are exempt from PRSI.
What are the PRSI changes for workers aged 66 and over?
If currently in Class A:
For people born before 1st January 1958, the new PRSI class (once they reach age 66) will be J.
For those born after 1st January 1958, the new PRSI class is A (where SPC is not drawn down) or J (where SPC is drawn down, or they are aged 70 and over).
If currently in Class S:
For people born before 1st January 1958, the new PRSI class (once they reach age 66) will be M.
For those born after 1st January 1958, the new PRSI class will be S (where SPC is not drawn down) or M (where SPC is drawn down, or they are aged 70 and over).
How should PRSI classifications happen now?
The Department of Social Protection and the Irish Revenue Commissioners are planning to automate the process of informing employees about the correct PRSI class. This is likely to be through Revenue Payroll Notifications (RPNS) later in 2024.
What do employers need to do to be compliant?
As of1st January, employers need to make the above determinations themselves when it comes to PRSI classifications for people entering the 66–70 age bracket in 2024.
“The amendment to the age exemption criteria from the Department of Social Welfare came into effect from 1st January, 2024, and notice of this change has been late coming. We would therefore strongly urge employers to review the age profile of their current employees, establish current PRSI classes, and make an assessment as to which employees may require a class change and when. The same scrutiny should apply to new hires who are approaching retirement age, thus avoiding any non-compliance pitfalls.”
Seán Murray, Director of Product Services Ireland, Zellis
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