summary of the key changes for Employers & Employees due to Budget 2011:
We have outlined
below some of the key changes to payroll that both Employees and Employers will
need to consider from the 1stJanuary 2011.
2011 & the 4 Year National Recovery Plan
on the recent 4-year national recovery plan published by Government, it is
intended to base the Income Tax system at approximately 2006 levels by a
reduction of 16.5% in the value of the tax credits and tax bands by 2014. The
proposed reduction is to be staggered as follows: 2011 (10%), 2012 (2.5%), 2013
(2%) & 2014 (2%).
hoped that the majority of the tax increases and the respective reduction in
employees take home pay and employee’s costs will take place in 2011. This
front-loading of tax increases in 2011 shall hopefully lead to less severe
reductions in employees take home pay from 2012 onwards.
course of this Plan it is intended to fundamentally reform the Income Tax system.
This will involve bringing more of the workforce into the tax system. In 2010
approximately 45% of the workforce were exempt from tax. We reached a
point in 2010 whereby just 8% of tax payers (earning €75,000 or more) were paying 60% of all Income Tax, while almost 80% (earning €50,000 or less) contributed just 17% of all Income Tax.
of how Budget 2011 will impact on your take home pay:
included below examples of the impact that Budget 2011 will have on an employees net
take home pay versus 2010.
As can be
seen from the examples below the average reduction in net pay in 2011
will be approximately 1.5% to 3% versus 2010 depending on that individual’s
personal circumstances or the equivalent of €33 to €140 per month in the case
of the following scenarios:
click here to view more detailed calculations for the above.
you would like us to provide you with a guide as to the change in your own
personal take home pay in 2011 please contact us on 021-4641400 or email us on firstname.lastname@example.org and we will be
happy to assist you.
we would suggest browsing the links below should you wish to estimate your new
net pay and see the comparison between 2010 and 2011.
changes to consider from the 1st January 2011:
As you may be aware, there have
been significant changes to the PAYE/PRSI system as part of Budget 2011. This
may affect your business and your employees in a number of ways. Below are a
few basic points of note to be aware of from the 1st January 2011:
receive their net pay by standing order/direct debit, will need to have the
standing order/direct debit reduced accordingly.
Review monthly P30
liabilities, as they may increase due to higher PAYE/PRSI contributions by
employees as a result of the changes in Budget 2011.
Payroll Software -
ensure that up-to-date versions of your payroll software are installed
correctly prior to running the first week’s payroll for 2011. Failing to do so
could lead to incorrect payroll information, which in turn could lead to
increased liabilities at the payroll year 2011.
It is advisable
that for all employees, you have an agreed gross (before tax) hourly/weekly or
monthly wage in place. Please note that the total wages cost for the employer
can be calculated 2 ways, (Gross wage + employers PRSI) or (Net wage + PAYE +
PRSI + Income Levy/Universal Social Charge (USC) + all other deductions).
processing the first pay run in 2011 that you have updated the reduced 2011 tax
credits and standard cut off point for your employees. If the 2010 tax credits
are used, employees will be overpaid. This may, in turn, lead to incorrect
returns to revenue and could then result in interest and/or penalties.
Below are a few of the
changes in the Budget and how they will impact on your payroll:
While there have been no changes to the standard (20%)
or the higher rates (41%) of Income Tax in 2011, Personal Tax Credits have been
reduced and Standard Rate Cut-Off Point (SCROP) has been lowered by 10%.
view the amendments to the Personal Tax Credits and the SCROP for 2011 please
What This Means
Employees will pay more PAYE on their gross pay – This
will result in increased deductions from employee’s gross pay therefore less
net pay for employees and increased P30 liabilities due to Revenue by
PRSI & Health Levy
In 2010 PRSI contributions were made up of 2 different
parts: PRSI Contribution and a Health Levy.
The Health Levy (this was included in the total PRSI
deduction) has been abolished. The Health Levy will now be combined with the
Income Levy and it will now be called a Universal Social Charge (USC).
Also the upper ceiling for PRSI (annual income of €
75,000 p.a) has now been abolished.
What This Means
Employee’s PRSI contributions will decrease as a result
of the Health Levy now being included in the Universal Social Charge instead of
being part of the PRSI contribution. This maybe rebalanced by the inclusion of
the Income Levy in the Universal Social Charge. As a result of the PRSI ceiling
being abolished Employees will pay PRSI on their total gross pay rather than
previously up to an income limit of € 75,000 p.a.
The National Minimum wage has been reduced from € 8.65
per hour in 2010 to € 7.65 in 2011. This reduced rate will not apply to existing employees
as a reduction in their wages would be a change to their terms
and conditions of employment.
What This Means
New employees hired must be paid € 7.65 or above per
hour provided they meet the criteria to qualify for the minimum wage.
For 2011, relief for employee PRSI for pension contributions will
be abolished. The annual earnings cap for employee/personal pension
contributions is to be reduced from €150,000 to €115,000. Employers will still
obtain relief from Employer PRSI in respect of 50% of any employee pension
What This Means
Employees with a pension contribution that is being
included in payroll will not have as much relief in 2011. This will result in
slightly increased deductions from employee’s gross pay.
is proposed that over the following 3 years (2012 to 2014) of the National
Recovery Plan the rate of Income Tax relief on pension contributions will be
reduced from 41% to 34% in 2012, to 27% in 2013 and 20% in 2014.
Maternity and Adoptive Benefit has been reduced by € 8
meaning the maximum payment of €270 is to be reduced to €262.
What This Means
If employers pay employees while on Maternity Leave, it
will cost the employer more to bring employees up to their regular pay.
Tenants who pay rent to landlords for private rented
accommodation are entitled to claim tax relief at the 20% rate in respect of
such rent. The maximum amount of rent upon which tax relief is available has
been reduced by 20%, as follows:
Single & under 55 years of age
Married/Widowed & under 55 years of age
Single & over 55 years of age
Married/Widowed & over 55 years of age
This tax relief is being withdrawn for
current tenants on a phased basis over the next 7 years.
Claimants who were not renting
at 7 December 2010 and who subsequently enter into a rental agreement after
this date will not be able to claim this relief.
Current Child Benefit rates are being
reduced by €10 per month to €140 for the first and second child and by €20 per
month to €167 for the third child and by €10 per month to €177 for the fourth
child and subsequent children.
Local Authority Service Charge Tax Credit
People who paid a Local Authority Service charge can
claim in full (up to a Maximum of €400) the tax credit in 2011; however this
will be abolished in 2012.