Budget 2022, a €4.7billion package, has been described by the Taoiseach as being about “getting back to normal” after the pandemic. In that regard, Minister for Finance Pascal Donohoe has said that the employment rate will return to pre-COVID-19 levels. It is assumed that the rate of employment will increase by 8% between 2021 and 2022, with 400,000 jobs added to the economy. Several headline items in this Budget will have an impact on both employers and employees.
Wage subsidy scheme
The Employment Wage Subsidy Scheme (EWSS) will be extended until 30 April 2022. However, payments will taper down until they are phased out by that date. There will be no change to the payments during October and November. A two-rate structure of €151.50 and €203 will be in place from December through February. During March and April 2022, the payment will be a flat rate of €100. The reduced rate of employers’ pay related social insurance (PRSI) will not apply for those final two months of the program. The scheme will be closed to new employers from 1 January 2022.
Extension of parent’s leave
Parent’s leave is currently five weeks of leave that can be taken by parents during the first two years of their child’s life, or placement, in the case of adoption. Employees who avail of parent’s leave are entitled to receive Parent’s Benefit from the State during that leave. This entitlement is subject to meeting certain eligibility criteria. There is no obligation on employers to top-up this benefit. From July 2020 parent’s leave, and by extension Parent’s Benefit, is being extended by two weeks to seven weeks per parent.
Tax relief for employees for working from home
As remote working continues even with people returning to the office, there is a new support for those working from home. This will take the form of income tax deduction of 30% of the costs of heat, electricity and broadband. These can be claimed in respect of days spent working from home.
National minimum wage
The National minimum wage is increased by 30 cent to €10.50 per hour.
Change in income tax bands
The Budget has introduced a change in income tax bands, with the standard tax rate band being increased by €1,500. This means that the new limit for the higher tax rate of 40% will be €36,800 for a single person, and €45,800 for married couples/civil partners with one earner. Also, the Personal Tax Credit, Employee Tax Credit, and Earned Income Credit have all risen by €50 each.
In order to ensure that the increase in minimum wage does not lead to disincentives for workers, from 1 January 2022 the weekly income threshold for the higher rate of employer’s PRSI will increase €12 to €410.
Universal Social Charge (USC)
The band for second rate of USC, which is 2%, will increase from €20,687 to €21,295. This is to take account of the increase in the minimum wage from 1 January 2022. The reduced rate of USC for medical card holders and those over 70 earning less than €60,000 is being retained.
Budget 2022 has provided some time for employers to adjust to returning to normal with a tapering off of the EWSS until the end of April 2022. However, other changes, such as the increase in the minimum wage, will commence immediately on New Year’s Day. We recommend employers come to grips with these changes now.
For more information or if you would like to discuss the potential impact of this issue on your business, please contact a member of our Employment & Benefits team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.