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Proposed cut in Employer’s PRSI rates will drive down wages – Doherty

15 April, 2011 - by Pearse Doherty TD


Sinn Féin Finance Spokesperson Pearse Doherty has said the Government’s proposed cut in the lower rate of Employer’s PRSI will act as a massive incentive for employers to drive down wages.

Deputy Doherty said the Government’s new rates of Employer’s PRSI will punish workers and create a new poverty trap.

He said:

“The Government’s announcement to cut the lower rate of employers PRSI by 50% will provide a huge incentive for employers to drive down wages.

“The Government has decided to cut the lower rate of Employer’s PRSI from 8.5% to 4.25% for those earning a maximum of €356. While this will result in a saving for employers in relation to their employer’s PRSI it will also provide a massive incentive to drive down the wages of those currently earning above €356 and will act as an obstacle to anyone who could possibly earn more than that in the future.

“For example, an employer would make a total saving of €41 a week by reducing an employee’s wages by just €16 from €372 to €356 as he would save €25 on his Employer’s PRSI Bill on top of the €16 from his employee’s wages. This equates to a saving €2,132 per year per worker.

“Similarly, an employer would save a total of €61 a week by reducing an employee’s wages by just €34 from €390 to €356 as he would save €27 on his Employer’s PRSI Bill on top of the €34 from his employee’s wages. This equates to a saving of €3,172 per year per worker.

“The Government’s decision clearly provides an incentive for employers to employ people on or below the €356 figure and to reduce wages of those earning over that level.

“This proposal will create a new poverty trap and hit workers hard. It will have a negative effect on the economy as people will have less money to spend while the state will also bring in less from this charge.” ENDS

Note to editor:
Under the new Employer’s PRSI proposals the Government will apply a PRSI Rate of 4.25% (50% reduction on the old 8.5%) on incomes up to €356 and somebody earning €356.01 and above will be subject to an employers’ PRSI rate of 10.75% on the full amount. The margin between the new proposed rates will be 6.5% and the margin between the existing rates is 2.25%.

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