TWO YEARS AGO, the Minister for Social Protection Joan Burton said on RTÉ’s The Frontline programme that PRSI contributions for self-employed people “can and will be reformed by the end of the year”.
However, fast forward two years, and self-employed people continue to pay PRSI at the Class S rate of 4%.
What’s the hold-up with reform?
TheJournal.ie asked the Department of Social Protection what had been done since Burton made the commitment for change.
Social welfare entitlements
The department said the Advisory Group on Tax and Social Welfare Extending Social Insurance Coverage examined it.
It examined if it was “technically” and “financially” feasible to extend social insurance coverage for self-employed people.
The group found that the current system of means-tested Jobseeker’s Allowance payments “adequately provides cover to self-employed people for the risks associated with unemployment”.
The published report stated that almost 9 out of every 10 self- employed people who claimed the means tested Jobseeker’s Allowance during the three- year period from 2009 to 2011 received payment.
Consequently, the Group was not convinced that there was a need for the extension of social insurance for the self-employed to provide cover for Jobseeker’s Benefit.
So, what’s the problem?
Groups like the Small Firms Association (SFA) state that self-employed people should have the same rights as other workers. It claims it’s time to stop the “discrimination” against business owners.
Chairman AJ Noonan said self-employed people should be able to pay in to a voluntary PRSI rate.
This should enable them to claim unemployment benefit should their business fail and would alleviate some of the risk associated with starting up a business. The scheme should run on an opt-in basis for already established businesses.
Currently the self-employed cannot voluntarily pay extra contributions that would contribute to their social welfare entitlements.
This means a business owner, who invested money and time going into business, while also employing people, can often be left with no where to fall when times get tough.
While the department claims some self-employed people are entitled to claim unemployment benefit, many are not, due to the benefit being means tested.
Unemployment benefit for self-employed workers is means-tested on their income from the previous 12 months. This is used as an indicator of likely future earnings.
The Department of Social Protection told TheJournal.ie that possible variations in income, either upward or downward, is taken into consideration.
Small and medium businesses make up 98% of Irish business, says the SFA. However, the government faces criticism that those employing and contributing the most, are not being supported.
The SFA said this flies in the face of the Government’s initative to encourage entrepreneurship and new business.
SFA Director Patricia Callan told TheJournal.ie that it comes down to cost. She said the advisory group ultimately ruled that it is ”too expensive” to fund.
Callan said the SFA argues that self-employed people have the right to opt-in to voluntary payments that would allow “equal benefits for equal contributions”.
The department said the government will reflect on the findings of the 2013 report by the advisory group “taking into account future developments in terms of the budgetary and fiscal situation”.