PRSI Query | What is the max annual payment?

Hi

Can someone help me with a minor query on PSRI calcs? My understanding was that up to 30/4/09 PRSI was charged at 4% with an income ceiling of €52,000 and from 1/5/09 the ceiling increased to €75,036 - in both cases the first €127 weekly / €551 monthly pay are excluded.

I would have thought that the max PRSI payable for the year for someone paid monthly is €2,736.96 [(€75,036-12*€551)x4%] but every calculator I've looked at (taxcalc.eu, E&Y, PWC etc.) show a slightly different increasing amount - not huge - for different incomes above €76k i.e. the PRSI calc. is not capped. PRSI for someone paid €75k is actually slightly higher than for someone paid €80k on taxcalc.eu (per row 20 of the simple net pay calc sheet).

I did a search of other posts but didn't see the exact query being addressed, could someone clarify this for me? thanks

I wrote the Excel spreadsheet- it doesn't seem correct that a lower income gives rise to a higher PRSI liability so there may be a formula error. Additionally, I think you're correct that the max PRSI in 2009 should be capped at €2736.96. If required I'll upload a corrected version and PM you later if I find anything.

In the meantime, you can use the detailed method of that spreadsheet - I checked it against a commercial payroll program and got identical results in the various tests I performed. Despite its name, it's not difficult to use- you can ignore the 'Detailed method' sheet and enter a gross monthly income in cell D3 of the 'Detailed net pay calculations' sheet. The PRSI etc should be computed automatically and you can get a total of the PRSI for the year by adding up the values in row 21. That should confirm your understanding that PRSI is capped (but I'll check it later too in case there's an error somewhere there too).

Thanks deadlyduck. I had checked other online calculators - E&Y and PWC both split out PRSI from the health levy and both show PRSI payable increasing for a range of incomes above what I thought was the cap. I assumed there was more to this than met my eye.

There is a quirk in the system that needs to be into account. The PRSI allowance is a weekly allowance - you only get allowance for the weeks that you pay PRSI. If your income reaches the PRSI ceiling at some stage during the year, you stop paying PRSI and you no longer get the PRSI weekly allowance for the rest of the year.

That's the bit I was missing, thanks noel 2006.

Noel is correct in that different people earning the same gross pay can end up paying a different amount of PRSI in the year. {Note that this still doesn't resolve the possible error in my Excel spreadsheet- that will be tested by me later tonight or tomorrow when I'm free}

For example, if your income is received in an even manner over the year at a rate of €6500 per month, you'll end up paying €2737 in PRSI (excluding Health Levy) on a grosss of €78000. If however, you received a trio of large lump sums (€26000 x 3 months) then you'll only end up paying €2014 in PRSI on the same gross- odd but true!

What's even crueller, however, is that a person whose annual salary is slightly below €26000 but then receives a payrise which brings them slightly above €26000 will actually see their net pay REDUCE due to the liability arising on the Health Levy..... incredibly unfair. Such a person has 3 possible options:

1. Refuse the pay increase- not a great option, there are better possibilities listed below
2. Pay enough into a pension scheme so that their annual income is brought below €26000 eg if I am earning €25,500 and then receive an increase to €26500, I'd pay 500+ per annum into a pension scheme to ensure that my 'reckonable income' is brought below the magic number of €26000. This way, you'll totally avoid the Health Levy, create a small pension asset and see your monthly income increase marginally. This appears to be the most profitable method.
3. Ask for the pay increase to be paid in a single lump-sum (pehaps in December for Christmas?). That way you'll only pay the Health Levy in that particular month but your net won't be as good as option 2.

Also, if your income is above the €75k PRSI ceiling you will pay slightly more PRSI than someone earning €75. You will reach the ceiling earlier in the year so you will have fewer weeks in which you can claim the PRSI allowance.

I've found the source of the error (actually 2 separate errors...) and have uploaded a corrected version of the spreadsheet to taxcalc.eu/monthlyss.

It now shows the max PRSI to be correctly capped at €2736.96 for 2009.

Brian