Key Budget 2021 takeaways for employers

The government has announced the largest budgetary package in the history of the State, in an effort to combat the financial effects of COVID-19, with targeted support provided to sectors which continue to suffer the worst effects of the pandemic such as hospitality, live entertainment and the Arts.

Below we have outlined the key takeaways for employers:

  • "No cliff edge" to the Employment Wage Subsidy Scheme (EWSS). Finance Minister Paschal Donohoe stated that a similar type scheme will be needed until the end of 2021. The form of this extension is to be decided when macro-economic conditions are clearer.
  • Illness benefit will be available from day three of illness, rather than day six.
  • The planned increase in the State Pension age to 67 on January 1 will not proceed. A Pension Commission is to be established which will be tasked with making recommendations on future increases in the State Pension age.  
  • Parent's Benefit will be increased by three weeks to five weeks for parents of children born or adopted after 1 November 2019.
  • The USC band ceiling was increased from €20,484 to €20,687.
  • The weekly threshold for the higher rate of employers PRSI will increase to €398. This follows a recommendation of the Low Pay Commission to ensure that the increase in the hourly minimum wage does not lead to work disincentives for workers, in particular those seeking to work full-time.
  • Remote working was highlighted; an inter-departmental group has been set up and submissions have been received in response to a stakeholder consultation.
  • A €3.4 billion recovery fund targeted at increasing employment and stimulating the economy in the aftermath of COVID-19 and Brexit was announced. Minister Donohoe stated that this recovery fund will be targeted and will focus on three main areas: infrastructure development, reskilling and retraining, supporting investment and jobs.
  • The government is to commence work on the development of a tax credit for the digital gaming sector with a view to supporting quality employment in creative and digital arts in Ireland.

In relation to the Pandemic Unemployment Payment:

  • Earnings of up to €480 per month will be disregarded in order to enable the self-employed to take up intermittent work without losing their benefit.
  • The vast majority of PUP recipients will receive the Christmas bonus if they remain out of work at the start of December.

Commenting on the budget, the Tánaiste said "This is a pro-business and pro-jobs Budget aimed at building on what we put in place in the July Stimulus, to help business owners and employees through this exceptionally difficult time."

Employers will welcome the fact EWSS is to remain in place until the end of 2021. This coupled with the reduction in VAT rates in certain sectors and the €3.4 billion recovery fund should aid employers' efforts to protect their businesses and maintain employment over the coming months. 

The availability of illness benefit from day three rather than day six had been flagged during discussions on the proposed introduction of a statutory sick pay scheme. Whether it is sufficient to ensure that employees who are unwell, and perhaps experiencing COVID-19 symptoms, do not attend work pending their recovery remains to be seen.

The Budget also sees the government follow through on its commitment during the general election campaign earlier this year not to raise the State Pension age to 67. It will be interesting to see whether the knock on effect of this decision is a reduction in the number of requests received by employers to work beyond contractual retirement age. Anecdotal evidence suggests that employees were increasingly seeking to work beyond retirement due to concerns that, from 2021 on, they would have to wait two years from retirement before becoming eligible to claim the state pension. The Pensions Commission will now have to grapple with this thorny subject before making recommendations to government and we recommend employers watch this space in 2021!

For further information on the impact of Budget 2021 on employers, please contact any member of the Employment Team.    

Date published: 14 October 2020