PRSI Changes: What You Need to Know

Happy 2024! Any new year can bring changes to taxation and payroll, and in 2024, there are notable  PRSI changes. So, we’re going to take a closer look at what you need to know about these changes in our first post of the year.

PRSI Changes and Exemptions

Up until the 31^st December 2023, employees aged 66 or over were exempt from paying PRSI on their income. However, their employers paid PRSI Class J PRSI at 0.50%.

However, since 1^st January 2024, the upper age limit for PRSI exemption has now been changed via legislation from 66 years to 70 years. This applies to the PRSI liability of the employee, the employer and the self-employed.  

The change will apply to all employees, except for the following two groups:

·         Those born before 1 January 1958.

·         Those who have been awarded State Pension Contributory (SPC) upon reaching 66 years. Once they are in receipt of their SPC, their earnings are not subject to PRSI.

Employees who turn 66 on or after 1^st January 2024, will remain on PRSI Class A up to the age of 70 or until they are awarded their SPC if earlier. From that date on, Class J will apply to any income they earn.

Class S contributors (e.g. self-employed, certain company directors etc.) will remain on Class S up to the age of 70, or until they are awarded their SPC if earlier. After that date, PRSI Class M will apply to any income they earn.

 

What Employers Need to Know about PRSI Changes

To allow them to apply the correct PRSI class, from 1 January 2024, employers need to know whether their employee who is aged between 66 and 70 and born after 1 January 1958 has been awarded SPC.

In fact, the letter from the Department of Social Protection to a person awarded their SPC, advises them that if they continue to work, they must inform their employer that they are in receipt of SPC. This important action will ensure that they do not pay PRSI.

State Pension Contributory (SPC)

Since 1^st January 2024, a person can claim the State Pension Contributory at any age between 66 and 70. Employees who defer claiming their SPC beyond their 66^th birthday will continue to pay PRSI Class A up to the age of 70 or the date they are awarded SPC if earlier.

The aim of this change is to make the SPC more flexible and provides an opportunity for people to continue to work and pay PRSI. Doing so may improve their PRSI contribution record before they decide to draw down their SPC.

Employees who are already claiming their SPC prior to the 1^st January 2024, are not affected by this change and continue to be exempt from PRSI. However, their employers pay PRSI Class J PRSI at 0.50%. You can find out more here about the State Pension Contributory.

The Strata Financial View

You need to be aware of these significant changes as PRSI is a substantial cost to all employers. If you apply an incorrect PRSI class to the income of any employee, it can be costly. Also, additional costs may be incurred in correcting an employee’s PRSI record. This is because all Social Welfare benefits including the SPC are based on PRSI contributions.

At Strata Financial, our specialist team have extensive experience in taxation, payroll, and SPC contributions.

If you have employees aged over 66 and want to check the correct PRSI class, we can help. Just contact our expert, Helena Holdwright at hh@stratafinancial.ie to assist with your query.

For general enquiries, email contact@stratafinancial.ie