Budget 2016 – What do employers need to know?

The Government delivered Budget 2016 on 13 October 2015. Below are the key provisions that are likely to impact employers:

Increase in minimum wage

  • From an employer's perspective, the most significant change is the increase in the minimum wage. The increase was well flagged as the publication of the Low Pay Commission's first report in July of this year recommended an increase of 50 cent (representing a 5.8% increase) to bring the national minimum wage from €8.65 to €9.15 per hour. The increase is likely to have implications for SMEs and there are concerns that there may be a domino effect as a result of requests for pay rises amongst workers who are just above the minimum wage threshold. The employer PRSI threshold will also be increased in order to offset the higher cost businesses may face as a result of the increase to the minimum wage.  No doubt employer bodies and trade unions will be keeping a close eye on the impact that the increase will have on the number of hours offered by employers to low paid workers, when the increase takes effect in January 2016.

Family friendly benefits

  • From September 2016 2 weeks paid paternity benefit will be introduced. Up until now, Ireland has had one of the most limited paternity leave regimes in Europe (a father could only take leave in the circumstances where a mother died during her maternity leave and the father became entitled to the balance of the leave).

Personal taxation changes

  • The cuts to the Universal Social Charge (USC) signal the gradual abolition of the USC. This tax introduced in 2011 has been synonymous with austerity measures and changes designed to decrease its scope have been welcomed. The changes take more people out of this tax net and lower the rate for those that pay it. The entry point is now €13,000. The big change is the reduction of the 7% rate to 5.5% and its application to incomes in excess of €18,000 and below €70,044. The marginal tax rate for those earning up to €70,000 has been reduced to 49.5%. These changes should make it easier for businesses to attract and retain more highly paid workers.

Pension Levy

  • The 0.15% pension levy introduced for 2014/2015 will be abolished with effect from 31 December 2015. Tax relief for pension contributions continues at the marginal rate of tax. These measures will undoubtedly be welcomed by employers and employees as they will provide some certainty in the tax treatment of pension provisions.

Benefits for mobile employees

  • The SARP (Secondee Assignment Relief Programme) has been extended to 2017 and the conditions to qualify for relief have been revised to include the removal of the upper €500,000 threshold and other positive changes to residency requirements. The Foreign Earnings Deductions (FED) relief has also extended until the end of 2017. The list of qualifying countries has been extended to include Mexico, Chile and other countries in the Middle East and Asia. These measures enhance the attractiveness of Ireland as a destination for foreign direct investment by ensuring that attractive incentives are available for key employees relocating here.

For more information please contact Sinead Grace or your usual contact on the employment team in A&L Goodbody.