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Budget Changes: what they mean if you are an employee

National minimum wage
From 1 Jan 2016, the   statutory national minimum wage for an adult will increase by 50c to €9.15   per hour.

Paternity benefit scheme

The Government announced that it will legislate to introduce two weeks paternity leave for fathers from September 2016. Paternity leave is normally available for fathers, around the time of birth of their child and we believe it should also be available to fathers who are adopting a child.
Under the scheme, fathers will, for the first time, have the option of applying for 2 weeks’ leave in respect of births from September 2016. This will be paid at a rate of €230 per week, based on the same PRSI contributions as required for Maternity Benefit.The Tánaiste sees this as a support for families in the workplace and, in particular recognises the important role of fathers in bringing up their children.
We hope the measures to support child care, a key labour activation measure, will make it easier for parents, especially women, to remain active in the workforce.

Taxation and PRSI

The changes to the tax system, reductions in the Universal Social Charge and PRSI rate changes, will have the effect of increasing the take-home pay of employees by the equivalent of 1.8%, or a full week’s pay, according to the Minister for Finance. This will be benefit employees and reduce the pressure for pay   increases on employers. Overall the changes will bring the higher rate of tax to below 50% for middle income earners.
Specifically, from 1 Jan 2016 the entry point at which employees pay the universal social charge (USC), will be raised by nearly €1,000 to €13,000, and the Government estimate that over 700,000 income earners will not be liable to USC at all from next year.   The Government will also reduce the three lowest rates of USC. The lowest rate of USC on the first €12,012 of income will be reduced from 1.5% to 1%.  The 3.5% has been reduced to 3% on income from €12,012 up to €18,668. The current 7% rate will reduce to 5.5% on income in excess of €18,668 up to €70,044.
A new tapered PRSI Credit for Class A employees earning between €352.01 and €424 a week will reduce the weekly PRSI bill for over 88,000 employees. The lower 8.5% Class A rate of employer PRSI is being extended from January to weekly earning up to €376 (up from €356), and will help to compensate for the increase in the national minimum wage. Finally, participants on Community Employment, Rural Social Scheme, Tús, Gateway and similar schemes will receive a top up payment   of €2.50 per week towards meals and travel costs.

Pensions

The government confirmed the ending of the pension levy on pension funds, currently charged at a rate of  0.15%, at the end of 2015 and it will not continue in 2016. The 9% VAT rate which the levy funded is deemed to be self-financing.

Economy

Ireland is currently the fastest growing economy in Europe, with a forecast growth at 6.2% this year and a projection of 4.3% in 2016. Importantly, unemployment is forecast to drop further to 8% by the end of 2016, down from 9.4% now.

Additional pro-jobs taxation measures announced are:

Reduced Capital Gains Tax rate of 20% for successful entrepreneurs
Income tax credit of €550 for self-employed people, with improvements in future years
Knowledge Development Box – globally ‘best in class’ and first OECD-compliant scheme, competitive rate of 6.25% on qualifying income, benefits for SMEs, in place from 1st Jan 2016
Extension of tax relief for start-up companies
Employment and Investment Incentive scheme to increase availability of investment finance for business.