SELF-EMPLOYED people will face a large PRSI hike in the budget in
return for enjoying the safety net of social welfare benefits if the
Government adopts a proposal from an expert group.
The
self-employed pay social insurance contributions at 4 per cent in order
to be eligible for their limited entitlements, while employers and
employees together pay 14.75 per cent, enabling employees to obtain a
greater range of benefits.
Minister for Social Protection Joan
Burton will be advised to raise the PRSI contribution of self-employed
people by the advisory group on tax and social welfare, with an increase
from 4 per cent to 17.3 per cent among the options expected to be
presented.
Due to the recession, large numbers of previously
self-employed people have attempted to access social welfare supports
for the first time only to discover their entitlements are limited
compared to those available to people who have been employed by others.
Self-employed
people cannot access jobseeker’s benefit and illness cover, although
they get the same State contributory pension provisions as employees.
Ms
Burton asked the group to explore whether providing social insurance
cover for self-employed people was “technically feasible and financially
sustainable”. The group based its discussions on an actuarial review of
the social insurance fund carried out by KPMG.
The review found
that the annual rate of social insurance contribution required from the
self-employed to cover the cost of the State contributory pension would
be 15 per cent. Close to 16 per cent would be necessary if jobseekers
benefit was included with the State contributory pension, while the
figure rose to 17.3 per cent if invalidity pension was also factored in.
Extending
benefits to the self-employed would entail a significant additional
cost to the exchequer, increasing the State’s spend on each scheme by
some 12 per cent, according to the review. It said the self-employed and
those on lower incomes got “excellent value for money” from the social
insurance system, while those on higher incomes generally got back less
than they paid in. In 2011, 4.6 per cent of the total financing of the
social insurance fund came from the self-employed.
In May Ms
Burton said any changes to the PRSI system extending the full range of
social insurance benefits to self-employed people “would have
significant financial implications and would have to be considered in
the context of a much more significant rise in the rate of contribution
payable”.
The group’s report is due to be delivered to Ms Burton soon.
It
has already advised the Minister to introduce a two-tiered system of
child benefit, with a flat rate and top-ups for low-income families, in a
report on family income supports submitted in March. In another report
to be delivered shortly, it will propose ending the practice of paying
disability allowance directly to under-18s and giving a domiciliary care
payment to parents or guardians instead.
The self-employed pay
what is known as “class S” PRSI, whereas employees pay an “A-rated” PRSI
contribution. So-called “class A” employees also pay PRSI at the rate
of 4 per cent, but their employers make a contribution of 10.75 per
cent, resulting in a combined payment of 14.75 per cent.
Self-employed
workers can apply for means-tested jobseeker’s allowance if their
business ceases or they are on a low income as a result of a downturn in
demand for their services. Other benefits available to the
self-employed include maternity benefit and a widow or widower’s
pension.
http://www.irishtimes.com/newspaper/ireland/2012/1010/1224325096531.html
No comments:
Post a Comment