Paycheck Plus - Making Payroll Easy

The month of August starts with a new location for the team at Paycheck Plus.  Moving from our starter space in Clogherhead we are now resident in the IDA Enterprise Park in Dunleer, Co Louth.  Our new offices will allow for continued growth and development of the business.  We look forward to welcoming clients and suppliers to Unit 9.  Thanks to everyone who helped with the move and for the good wishes.

A Judgment of the High Court on Thursday 7th July 2011 means that all of the seventeen Employment Regulation Orders (EROs) ceased to have statutory effect from that date and cannot be enforced.
It has been declared that the relevant provisions of the 1946 and 1990 Industrial Relations Acts are unconstitutional because they allowed for an impermissible excessive delegation of law-making power concerning pay and conditions to the Labour Court in the absence of any guiding policies or principles.

Employers are not obliged to comply with any ERO when offering terms and conditions to new employees as of the 08th July 2011. However, employers must pay their employees in accordance with existing employment legislation such as the National Minimum Wage Act.

Please note that this court ruling has no direct effect on the wages and terms and Conditions of existing employees. An employer may not reduce the current wages unless they have written agreement from the employee.

Where prosecutions for non-compliance with an ERO have been commenced these will have to be withdrawn. No further prosecutions can be initiated in relation to compliance with EROs that were in place prior to 7th July 2011. NERA also informed us that any ongoing inspection that commenced prior to the decision will no longer consider the applicability of ERO rates.

Subsequent to the ruling the Department of Enterprise examined two possibilities: enacting emergency legislation to provide temporary protection for workers pending enactment of comprehensive reforms, and appealing the judgment that would likely have the result of providing a stay on its effects.
As a result of these consultations, it was made clear that neither option is viable.

Minister Bruton has informed us that legislation will be introduced to the Dáil very early in the next term with prioritised enactment thereafter.

Employers PRSI rate has been halved from 8.5% to 4.25% from 2^nd July 2011.

 All employees earning less than 356 Euro per week will be eligible for the new Employers PRSI rate.

The minister announced a reduction in the employer PRSI rate from 8.5% to 4.25% to assist in job creation. This will reduce employer costs in the creation of new jobs. This new rate will apply from 2^nd July 2011 until the end of 2013. This is a welcome move which will hopefully assist businesses in these difficult times.

Employer contributions to PRSAs – Income Tax, PRSI and USC

The purpose of this eBrief is to clarify for employers and payroll practitioners how employer contributions to an employee’s Personal Retirement Savings Account (PRSA) are to be treated for Income Tax, PRSI and USC purposes.

Benefit-in-kind (BIK)

An employer contribution to an employee’s PRSA is treated as a taxable BIK for the employee. However, for the purposes of obtaining tax relief on pension contributions, the employee rather than the employer is deemed to have made such a contribution to the pension fund (section 787E(2) Taxes Consolidation Act 1997). The effect of this provision is that the tax relief on the contribution negates the taxable BIK on the benefit provided. This treatment only applies where the employer contribution does not exceed certain limits based on the age of the employee.

Section 985A of the Taxes Consolidation Act 1997 provides that an employer is not obliged to operate PAYE on contributions to a PRSA for an employee.

Income Tax

It should be noted that while employer contributions to a PRSA are a taxable benefit in the employee’s hands, these same contributions qualify for full tax relief subject to certain age-related limits. They are not subject to PAYE. It is the employee’s responsibility to contact Revenue where such contributions exceed the tax allowable limits to ensure the correct tax is paid on any excess contributions.

Employers should maintain appropriate records of their contributions to an employee’s PRSA. Employers may choose to put the contributions through payroll for the purposes of record-keeping. However, if this is done it should be cost-neutral (for Income Tax and PRSI ) to the employee and the employer.

The employer should return these contributions on form P11D when requested by Revenue to do so.

PRSI

This eBrief addresses the treatment of employer contributions to an employee’s PRSA. Since 1 January 2011, employee contributions to a PRSA are chargeable to PRSI – fully chargeable in the case of the employee and 50% chargeable in the case of the employer.

In general, PRSI is only charged on emoluments that are taxed under the PAYE system. While employer PRSA contributions are a taxable BIK, they are not taxed under PAYE and are thus not chargeable to PRSI (both employer and employee share).

Where employer PRSA contributions have been put through payroll and PRSI has been deducted, employers should make the necessary adjustment to payroll.

Universal Social Charge (USC)

Since 1 January 2011, USC is chargeable on the taxable BIK of an employer contribution to an employee’s PRSA.

VAT – 9% rate on certain goods and services from 1 July 2011

Finance (No.2) Act 2011 introduced a second reduced VAT rate of 9% to apply in respect of supplies of certain goods and services for the period 1 July 2011 to 31 December 2013.

The 9% rate applies to certain goods and services previously liable at the 13.5% rate, including restaurant and catering services; hotel and holiday accommodation; admissions to cinemas, theatres, certain musical performances, museums and art gallery exhibitions; fairgrounds or amusement park services; the use of sporting facilities; hairdressing services; printed matter such as brochures, maps, programmes, leaflets, catalogues and newspapers.

From 1 January 2014 the rate on these goods and services will revert to 13.5%.

See information leaflet: Rate change – 9% on certain goods and services from 1 July 2011.

With school holidays on the horizon you might be considering employing school children or young people during the summer months. Be aware that under the Protection of Young Persons (Employment) Act 1996, if you are employing individuals under the age of 18 years there are certain statutory obligations in relation to hours of work, breaks, rest periods and payment of wages.   Although the minimum wage is being reversed to €8.65 per hour from 1st July 2011, the rate applicable to those under the age of 18 is less.

A number of these provisions however, do not apply in the context of employment of close family members. Where such family members are employed PAYE should be operated in the normal way, which involves applying to the tax office for a tax certificate for the individual concerned.

For more information contact our Payroll Team at info@paycheckplus.ie

Finally, the wait is over and the result is in!  After much debate in the Payroll sector, the Department of Social Protection announced at the IPASS Annual Payroll Conference on May 19th that Employers are not liable for Employer PRSI on the Employer contribution to a PRSA.

The employee will be liable to USC on the Employers contribution to a PRSA but not PRSI.

Save Tax as you Save The Environment:    Employees can save on PAYE, PRSI and USC under the cycle to work scheme.

The Cycle to work scheme introduced in January 2009, allows for employers to provide a new bicycle or pedelec (bicycle equipped with an auxiliary electric motor) and associated safety equipment to employees who agree to use the bicycles to travel to work. They will be treated as a tax-exempt benefit-in-kind.

This tax exemption may only apply once in every 5-year period in respect of any one employee/director. There will be a limit of €1,000 on the amount of expenditure an employer can incur in respect of any one employee/director.

The cost must be incurred directly by the employer. It is not permitted for the employee to purchase a bicycle and then seek reimbursement from the employer.

The scheme may also be implemented via salary sacrifice arrangements, whereby an employee agrees to forego part of his or her salary to cover the costs associated with the purchase of the bicycle and associated safety equipment. Where such salary sacrifice arrangements are implemented they must be completed over a maximum period of 12 months. In such circumstances, the employee will not be liable to tax or PRSI or levies on the salary sacrificed. The maximum amount of salary that can be sacrificed is €1,000.

Minimum Wage:

Employers should note that the incoming Government has committed to reversing the recent reduction in the minimum wage back to €8.65 from the current rate of €7.65.  An announcement will be made in the coming weeks.