Budget 2017- Key Developments for Employers

Minister for Finance, Michael Noonan announced Budget 2017 on 11thOctober 2016. Some of the most notable aspects for employers include:

1.    Reduction in the Universal Social Charge (USC) Rates

  • The budget introduces cuts to the three lowest rates of USC – 1% rate cut to 0.5%; 3% rate cut to 2.5%; 5.5% rate cut to 5%
  • The income ceiling for the newly reduced 2.5% USC rate has also increased from €18,668 to €18,772

2.    Increase in Social Welfare Payments

  • There will be a €5 increase in all maximum weekly benefits and allowances including; Maternity/Paternity /Adoptive Benefits, Illness Benefit, Blind Pension, Carer’s Benefit, Carer’s Allowance, Disability Allowance, Invalidity Pension, One Parent Family Payment, Jobseeker’s Benefit, Jobseeker’s Allowance and Farm Assist with proportionate increases for people in receipt of reduced rate payments.
  • It includes increases in employment programmes such as CE, TÚS and Rural Social Scheme
  • The State pension will also increase by €5 a week

* The above increases will come into effect from March 2017 and are subject to the passing of the Social Welfare Bill.

3.    New Benefits for Self-Employed and PRSI Contributors

  • Invalidity Pension is being extended to self-employed workers from December 2017
  • Dental and Optical Benefits and the Medical Appliances scheme (hearing aids) will be extended to self-employed workers from March 2017.
  • Dental Benefit will be expanded in October for all insured employees and the self-employed.
  • Optical Benefits will be expanded in October for all insured workers including the self-employed to cover the cost of glasses or a contribution towards the cost, depending on customer choice
  • Jobseekers taking up self-employment will be able to access the Back to Work Enterprise Allowance after 9 months, down from 12 months
  • Rate of Class S PRSI unchanged in 2017.

4.   Proposed New Employee Share Schemes

  • Minister for Finance, Michael Noonan announced that the Government is developing a new share based incentive arrangement for SMEs, to be introduced  in budget 2018
  • Share based incentive arrangements can be used as a key tool for attracting and retaining employees and encouraging growth

*The Scheme is subject to it having received approval from the European Commission under state aid rules.

5.    Special Assignee Relief Programme(SARP)

  • The SARP programme will be extended to 2020
  • The initiative provides relief from income tax (excluding PAYE and PRSI), to certain employees who are assigned or transferred by their employer to work in Ireland
  • The aim of the scheme is to offer specific reliefs to attract key talent and overseas workers to Ireland.

6.     Foreign Earnings Deduction (FED)

  • FED is being extended until the end of 2020
  • Qualifying countries are being extended to include Colombia and Pakistan
  • The minimum number of days for travel is being reduced from 40 days to 30 per annum
  • It provides a relief from income tax, but not USC or PRSI, for individuals who perform their employment duties in certain foreign countries.

7.     Proposed Reform of the PAYE System

  • Another key announcement in the budget affecting employers is the proposed reform of the PAYE system, to take affect from 1 January 2019
  • The Government is currently operating a consultation period, with submissions to be made by 12 December 2016
  • This is the first step towards the implementation of real time PAYE/tax reporting for employers and it appears to aim towards adopting a similar system to that which operates in the UK. 

For more information on the recent changes contact Marc Fitzgibbon, Partner in our Employment Law Group.