PRSI Threshold

Brendan Burgess

Brendan Burgess

Founder
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>>How employees PRSI is calculated

This is how it works for higher paid employees

The first €6604 is charged at 2%
The next €37576( 44180 - 6604) is charged at 4%
The balance is charged at 2%

To make it a bit more complicated, the €6604 is really €127 per week. If you don't work in that week, you lose that exemption.



Brendan
 
Re: Can someone check these figures please?

The first €6604 is charged at 2%

...

To make it a bit more complicated, the €6604 is really €127 per week.

...

I knew it was 127 per week, but I just assumed a 52 week year.

Careful now! It is only €127 per week if you are paid weekly (or €254 per fortnight if paid fortnightly). If you are paid monthly then it's €551 per month. Note that 52 x €127 = €6,604 while 12 x €551 = €6,612 so somebody paid monthly gets slight more PRSI relief (€8 x 4% = €0.32 :) ) than somebody who is paid weekly or fortnightly. You have to use the appropriate figures for the relevant payment frequency in order to get the correct answers. Simple really! :p

P.S. I found this out myself when I couldn't reconcile my calculations with my payslips earlier this year until I realised that I was using the weekly PRSI exemption figure while our accountant was correctly using the monthly one. I managed not to fiddle with myself in excitement during all of this though.
 
PRSI Exemption is not an annual exemption

I had looked into this earlier this year when I got my P60 and it showed according to my own calculations of my tax bill that I was overpaying by €60 on PRSI. On further investigation I found out that the PRSI threshold is applied per payment period and not as an overall annual exemption.

Thus if you earn 80,000 it takes about 6.5 months to have your cumulative salary over the PRSI threshold but because the threshold is spread over each payment period you end up paying PRSI for the other 5 months although you may reckon that you have reached the threshold and have no more liability for the 4% PRSI.

I've not really explained this correct but it's the jist of it.
 
Re: PRSI Exemption is not an annual exemption

Thus if you earn 80,000 it takes about 6.5 months to have your cumulative salary over the PRSI threshold but because the threshold is spread over each payment period you end up paying PRSI for the other 5 months although you may reckon that you have reached the threshold and have no more liability for the 4% PRSI.

I don't understand this explanation - but in any case note that the recent discussion here has been in relation to the weekly/fortnightly/monthly PRSI free "exemption" of €127/€254/€551 respectively (on which only the 2% health levy and not also 4% PRSI is charged) and not the PRSI employee contribution ceiling above which only the health levy is charged.

Confused ... you will be...! :(
 
Re: PRSI Exemption is not an annual exemption

Apologies for the previous attempt at an explanation but I was in a rush. Anyhow from the way it was explained to me by our Salary adminstrator once you reach the PRSI threshold, for all subsequent months after this you do not receive credit for the €551 that you are allowed earn free of the 4% PRSI. So effectively you have an opportunity cost of the missed out credits which explains why you pay higher than the reckoned maximum of €1,503 (€1,422 for 2004) that you would pay assuming the €6,612 exemption was applied as a cumulative annual amount against your annual salary.

I have uploaded an excel sheet which depicts somewhat what happens.
[broken link removed]
 
Re: PRSI Exemption is not an annual exemption

for all subsequent months after this you do not receive credit for the €551 that you are allowed earn free of the 4% PRSI. So effectively you have an opportunity cost of the missed out credits

But once you have exceeded the employee PRSI contribution ceiling then you don't pay 4% PRSI on any further income so the weekly/fortnightly/monthly PRSI exemption is irrelevant and I don't see how there is any opportunity cost involved.

So effectively you have an opportunity cost of the missed out credits which explains why you pay higher than the reckoned maximum of €1,503 (€1,422 for 2004) that you would pay assuming the €6,612 exemption was applied as a cumulative annual amount against your annual salary.

Hmmm ... I understand what you're getting at now but need to crunch the numbers to see what happens in practice. It is correct to say that the weekly/fortnightly/monthly PRSI exemption amount should only be applied for each payment period up until the employee PRSI contribution ceiling and not as a cumulative annual amount to annual earnings as has been done above and in the Irish Times etc. Misapplication of the PRSI exemption can lead to subtle inaccuracies in the calculations as I mentioned earlier.

Update: clicking on that link did not work for me, I had to get the properties and copy and paste the whole URL into the browser address field to access the spreadsheet.
 
Re: >>How employees PRSI is calculated

Can we revisit this in light of the above posts lads!!! I'd like to know once and for all what it means.
Lets say as above you were being paid 80,000 euro a year, and paid monthly(6666.67 a month gross). So in January assuming the full 6666.67 is subject to PRSI and no pension contribution etc, I calculate PRSI Class A as:
551@2% = 11.02
6115.67@4% = 244.63 --> total PRSI for Jan as 255.65

I thought this would apply up to and including the pay period that breaches the employee ceilign limit, i.e. you pay that much PRSI for the first 7 months or 46666.69 worth of salary as you, I think only take into account the ceiling limit on the next pay check after you broke the limit???


So now lets fastforward to November. At this stage the employee contribution ceiling has been broken.
So I thought, basing this on http://www.welfare.ie/publications/sw14.html#classa that we had:
6666.67@2% = 133.33

But reading the above posts, what does "for all subsequent months after this you do not receive credit for the €551 that you are allowed earn free of the 4% PRSI. So effectively you have an opportunity cost of the missed out credits" actually mean??? I'd love to know just to satisfy curiosity if nothing else...

is this issue arising because instead of calculating the PRSI as 551 @2% + balance @ 6%, there is a different way to do it using a 4% and different amounts at the 4%???
 
Re: >>How employees PRSI is calculated

How is PRSI calculated if you are paid 4 weekly ( every 4 weeks) ?
 
Lads,
http://www.askaboutmoney.com/showthread.php?t=7311 is still driving me nuts and its more for my own satisfaction i want to confirm it.

if in your first 4 months say you earn 10k a month.....and you will get 10k as well in the fifth month. How would PRSI work out on that based on my post(the second last post) in the above link.

Is that full 10k liable for full PRSI or does the first 4180 have a higher percent...think what i am trying to ask, is does the threshold kick in during a pay period, or is only after the pay period it kicks in? I.E. do you split the same pay packet into 2 to calculate PRSi above and below the threshold...anyone can help me for sure I'd appreciate it for general satisfaction!
 
PRSI should really be calculated by insurable weeks. The 'monthly' thing is a bit of a shoe-horn. (Some months have five weeks and others only have four weeks). Figures have been provided for monthly PRSI, and that's where the complication sets in.

Really, the PRSI should be split according to number of weeks. The same should apply if you are leaving a company. If you leave a company mid-month, the PAYE will work itself out (on the cumulative basis), but you could end up paying too little or too much PRSI if calculated on a purely monthly basis.

www.payback.ie
 
ok, but lets say you got paid 10k a week. In the week that causes you to breach the threshold, part of your pay packet is below 44180, part of it is above.

so what would the PRSI payment on your week of pay where your earnings were 10k, and it was week 5 so that your cummaltive is now 40,001 to 50,000.

Is it:
551 @2%
4418 @6%
balance(5582) @2%

or because this was the packet that tipped you over the limit, i,e the first cent of the pay packet was below the threshold is it:
551@2%
balance(9449) @6%

I am assuming its the first example above???

Its making my Spreadsheet incredibly hard to work out for PRSI!!!

=IF(((($A47*$B3)/12)*J6)>$F2, ($F1*$H1) + (($F2 - (($A47*$B3)/12) * I6 ) * $H2) + ((((($A47*$B3)/12)*J6) - $F2) *$H1),(($F1*$H1)+((($A47*$B3)/12-$F1)*$H2)))

Is my current formula to give me the first example above!!!!
 
legend99 said:
Is it:
551 @2%
4418 @6%
balance(5582) @2%

or because this was the packet that tipped you over the limit, i,e the first cent of the pay packet was below the threshold is it:
551@2%
balance(9449) @6%

I am assuming its the first example above???
Click to expand...
As far as I know the first approach is correct and is the one that I have used in the past to double check my employer's payroll figures.
 
thanks clubman....its driving me nuts..should never have put any thought into the fecking thing..
 
OK - I've merged the two threads so since they are all on the same issue. As ever, please don't duplicate queries as per the .
 
=IF(((($A47*$B3)/12)*J6)>$F2, ($F1*$H1) + (($F2 - (($A47*$B3)/12) * I6 ) * $H2) + ((((($A47*$B3)/12)*J6) - $F2) *$H1),(($F1*$H1)+((($A47*$B3)/12-$F1)*$H2)))
Click to expand...

Brave attempt! - Have you accounted for different sub-classes, FAS schemes, medical card holders etc. as well? :D


www.payback.ie
 
Nope, only doing it for class A for now!#

Have my dynamic excel calculation that works for class a. generates the correct amount for months before the threshold, the month of breaching it and the months after it!!!

=IF(((((($A47*$B3)/12)*K6)>$F2)), IF(((($A47*$B3)/12)*J6 > $F2), ((($A47*$B3)/12) * $H1), ($F1*$H1) + (($F2 - (($A47*$B3)/12) * J6 ) * $H2) + ((((($A47*$B3)/12)*K6) - $F2) *$H1)),(($F1*$H1)+((($A47*$B3)/12-$F1)*$H2)))

I reckon i'll work on with it, it currently does PAYE and PRSI correctly...and allows you to indicate how much of your salary you retain(i.e. if you pay 4% salary then 96% of your salary comes to you) so i need to add an ability to show that your employer pays VHi for you....when I get it more refined I'll offer it to the mods to post up...
 
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