Budget 2021 - Employment Related Changes

It is, of course, Budget 2021 time and Ken Killoran (Tax Partner in Mazars) has kindly set out below the main measures from an employment tax perspective:

Summary list of employment-related changes

• No change in income tax rates or bands. 
  
  
• The USC threshold for the 2% rate will be increased by €203 from €20,484 to €20,687 in line with the increase in the national minimum wage. This means that the amount of income liable to USC at 4.5% reduces from €49,560 to €49,357. 
  
  
• From 1 January 2021, the weekly income threshold for the higher rate of employer’s PRSI will increase from €394 to €398. This means that the higher rate of employer’s PRSI (11.05%) will only apply where the weekly pay of the employee is €398 or more, which should result in an employer PRSI cost saving for employers. 
  
  
• The EWSS is due to end on 31 March 2021. The Minister for Finance announced that a similar type scheme will come into operation at that point. The form of the replacement scheme, which will last until the end of 2021, will depend on economic conditions.
  
  
• Remote working - The COVID-19 pandemic has resulted in a significant increase in the number of employees working remotely. The following tax measures are already in place to assist employees in meeting the costs of their remote working arrangements: 
  
   - employers may make a daily tax-free payment of up to €3.20 to the employees to cover expenses such as heating and electrical costs, subject to meeting certain conditions.  
  
   - if such a payment is not made, the employee may make a claim to Revenue for a tax deduction in respect of these costs, together with a claim for other costs which are “wholly, exclusively and necessarily” incurred in the performance of the duties of employment. 
  
  The current Programme for Government includes a commitment to develop a strategy for remote working and an inter-departmental group has been set up for that purpose. Depending on the outcome of its review, it is possible that the group will recommend the introduction of additional tax relief measures to assist employees who work remotely. 
  
  
• The Debt Warehousing Scheme allows businesses to suspend the payment of PAYE (Employer) and VAT tax debts arising from the COVID-19 crisis. Currently, almost 70,000 businesses are availing of the scheme to the value of €2.1 billion.
  
  In order to provide further additional liquidity support for employers, the debt warehousing scheme will now cover repayments of Temporary Wage Subsidy Scheme funds owed by employers. 

The Department of Finance is due to publish the Finance Bill on 22 October 2020.  For more information on Budget 2021, please click here.   

Ken's 2020 budget summary on employment related changes is here if you wish to compare the previous year.