PRSI Rate Increase Effective from 1st October 2024: What Contractors Need to Know

As part of Budget 2024, it was announced that PRSI (Pay-Related Social Insurance) contribution rates will increase from 1st October 2024. This adjustment will impact employers, employees, and self-employed individuals, including those in the contracting industry. Here’s a breakdown of what to expect and how these changes could affect your finances as a contractor.

PRSI Rate Changes from October 2024

From 1st October 2024, all PRSI contribution rates will rise by 0.1%. For contractors, this applies to both employee and self-employed rates. Here’s how the rates are structured:

• Before 1st October 2024:
  • Class A1 (Most employed persons): Employer – 11.05%, Employee – 4%
  • Class S1 (Self-employed/Proprietary Directors): Employer – 0%, Employee – 4%

• After 1st October 2024:
  

  • Class A1: Employer – 11.15%, Employee – 4.1%
  • Class S1: Employer – 0%, Employee – 4.1%

While this increase may seem small, it contributes towards a more sustainable social protection system, which includes improved benefits for contractors and employees alike.

Example Calculations

Example 1: Class A Employee

Let’s look at how these changes will affect a Class A payer earning €400 per day, working 20 days a month.

1. Gross Monthly Earnings: €8,000
2. Management Fee: €110
3. Employer PRSI Charge Calculation: €7,890 @ 11.15% = €791.48
4. Earnings Subject to Tax: €7,098.52
5. Employee PRSI Charge Calculation: €7,098.52 @ 4.1% = €291.04
6. Other Tax Calculation: PAYE, €1,826.91 & USC, €276.45
7. Net Income: €4,704.12

Example 2: Class S Self-employed

Let’s look at how these changes will affect a Class S payer earning €400 per day, working 20 days a month.

1. Gross Monthly Earnings: €8,000
2. Management Fee: €155
3. Earnings Subject to Tax: €7,845
4. Employee PRSI Charge Calculation: €7,845 @ 4.1% = €321.65
5. Other Tax Calculation: PAYE, €2 125.50 & USC, €336.17
6. Net Income: €5,061.68

Do Contractors Need to Take Action?

The good news is that contractors and clients don’t need to take any specific action regarding this change. The adjustment will be automatically reflected in our payroll and tax systems from 1st October 2024.

Why Are PRSI Rates Increasing?

The 0.1% PRSI increase is designed to support the long-term sustainability of Ireland’s social protection system. This increase will help fund social welfare benefits, ensuring better coverage for maternity/paternity leave, jobseeker’s benefits, illness benefits, and securing the retirement benefits of future generations.

What if I have further questions?

If any of our contractor clients have questions on this change, feel free to reach out to your dedicated account manager directly, email info@iconaccounting.ie or contact us on 01-8077106.