Would cutting employers prsi create jobs?

neris

With the government charging employers 10.75% for the pleasure of employing people would cutting the employers prsi encourage companies to employ more staff and possibly remove people from dole etc. Last year our company paid over 30k in employers prsi. That could have gone to take on 1 full time staff member. The government may have lost out on the employers prsi but they could have 1 person off the dole, get the prsi, tax and usc frrom that person aswell..

liammur

neris wrote: »

With the government charging employers 10.75% for the pleasure of employing people would cutting the employers prsi encourage companies to employ more staff and possibly remove people from dole etc. Last year our company paid over 30k in employers prsi. That could have gone to take on 1 full time staff member. The government may have lost out on the employers prsi but they could have 1 person off the dole, get the prsi, tax and usc frrom that person aswell..

The government give companies a lot of subsidies and cheap corporation tax.
The real problem is people don't have much disposable income. And this is why unemployment is much higher in rural areas than in the cities (apart from Limerick).

Statistician

liammur wrote: »

The government give companies a lot of subsidies and cheap corporation tax.
The real problem is people don't have much disposable income. And this is why unemployment is much higher in rural areas than in the cities (apart from Limerick).

As an employer, we do not benefit from the cheap corporation tax. We don't pay any corporation tax as we do not make any profit.
We do pay loads of VAT, PRSI and arbitrary Revenue fines though.

Before making the decision to employ someone we always look at the alternatives. These include:

1. Spending money trying to improve the system that we need the employee for (so we no longer need to hire someone)
2. Getting existing employees to take on the extra work instead.
3. Turning down the extra work.

We are an IT exporter. At the moment, we would rather turn down work than hire someone in Ireland. This is because the odds are stacked against us. Here are the main reasons we believe hiring an Irish person (for us) would be madness:

1. Huge compliance costs. NERA, CSO, Revenue and other quangoes all on your case as soon as you hire someone.
2. The salary costs do not make sense for us.

In fact, we are currently looking to relocate our business outside of Ireland.

Tipp Man

I have never been able to figure out what a company should have to pay any PRSI for employing people

If you stand back and look at it - a country with 14.5% unemployemnt rate is charging 10.5% tax to employers to employ people??

Why???

Sleepy

Tipp Man wrote: »

I have never been able to figure out what a company should have to pay any PRSI for employing people

If you stand back and look at it - a country with 14.5% unemployemnt rate is charging 10.5% tax to employers to employ people??

Why???

It certainly seems to be a ludicrous thing to levy a tax on alright...

Anyone know an economic argument in support of taxing job creation?!

Diarmuid

Sleepy wrote: »

Anyone know an economic argument in support of taxing job creation?!

It's a revenue raising mechanism. Could be worse, could be the French rates.

liammur

Statistician wrote: »

As an employer, we do not benefit from the cheap corporation tax. We don't pay any corporation tax as we do not make any profit.
We do pay loads of VAT, PRSI and arbitrary Revenue fines though.

Before making the decision to employ someone we always look at the alternatives. These include:

1. Spending money trying to improve the system that we need the employee for (so we no longer need to hire someone)
2. Getting existing employees to take on the extra work instead.
3. Turning down the extra work.

We are an IT exporter. At the moment, we would rather turn down work than hire someone in Ireland. This is because the odds are stacked against us. Here are the main reasons we believe hiring an Irish person (for us) would be madness:

1. Huge compliance costs. NERA, CSO, Revenue and other quangoes all on your case as soon as you hire someone.
2. The salary costs do not make sense for us.

In fact, we are currently looking to relocate our business outside of Ireland.

And do you not get subsidies for taking on people?
I read the average IDA job they get subsidies in the region of €14,000 per worker.

Sleepy

Diarmuid wrote: »

It's a revenue raising mechanism. Could be worse, could be the French rates.

An odd one. I can understand taxing corporate profits but taxing the very activity you most desire from companies seems quite odd to me.

Statistician

liammur wrote: »

And do you not get subsidies for taking on people?
I read the average IDA job they get subsidies in the region of €14,000 per worker.

You must be joking!
IDA is for foreign companies locating (putting their tax base) here.

There is enterprise ireland, but the paperwork and red tape makes it unworkable for us to actually claim anything. Even though we make our money from software exports from rural Ireland.

K-9

It's a contribution towards PRSI for the employee, somebody who paid little or no PRSI could still receive a reduced Jobseekers Benefit by virtue of this PRSI.

Nearly sure there's a scheme that Employers don't pay it for two years or so, if they employ a long term unemployed person.

liammur

Statistician wrote: »

You must be joking!
IDA is for foreign companies locating (putting their tax base) here.

There is enterprise ireland, but the paperwork and red tape makes it unworkable for us to actually claim anything. Even though we make our money from software exports from rural Ireland.

I've often said our whole economic model is flawed. This is another example. IDA companies then increase wage inflation because of the subsidies and C Tax, thereby making companies like yours more vulnerable.

neris

liammur wrote: »

And do you not get subsidies for taking on people?

Not if your an average SME you dont. Maybe the likes of teh apples and googles get grants but not for employing

Ive always said - we have to pay the government for the privilage of employing people.

liammur

neris wrote: »

Not if your an average SME you dont. Maybe the likes of teh apples and googles get grants but not for employing

Ive always said - we have to pay the government for the privilage of employing people.

New figures show that for every job which Shannon Development creates, the exchequer hands over €7,552. That’s in comparison with a cost of €14,287 for each job created by IDA Ireland and €12,254 for any job created by Enterprise Ireland. The official figures were supplied to the Dáil Committee on Jobs, Social Protection and Education on foot of a request by Deputy Willie O’Dea, who is a member of the committee.

creedp

Sleepy wrote: »

An odd one. I can understand taxing corporate profits but taxing the very activity you most desire from companies seems quite odd to me.

I suppose the alternative way is to increase the gross pay and deduct PRSI solely from employees .. whichever way you cut it the employer pays for the terms and conditions of their employees, including their sick pay, redundancy benefits and contributory pension. Currently, employee deductions do not cover the cost of providing these benefits so its either cut the benefits or the employer must fund them. Of course the alternative is not to increase gross pay and levy full deductions on employees .. I don't think anyone is suggesting this as an viable/acceptable option.

GSF

Tipp Man wrote: »

I have never been able to figure out what a company should have to pay any PRSI for employing people

If you stand back and look at it - a country with 14.5% unemployemnt rate is charging 10.5% tax to employers to employ people??

Why???

Because putting even €100 of a property tax on people as an alternative has people revolting. The culture of accepting high tax on employment income & complaining about high unemployment but never joining the dots is going to take a lot of overcoming.

Icepick

neris wrote: »

With the government charging employers 10.75% for the pleasure of employing people would cutting the employers prsi encourage companies to employ more staff and possibly remove people from dole etc. Last year our company paid over 30k in employers prsi. That could have gone to take on 1 full time staff member. The government may have lost out on the employers prsi but they could have 1 person off the dole, get the prsi, tax and usc frrom that person aswell..

So you are trying to say that you would cut everybody's salary by ~10%.

neris

Icepick wrote: »

So you are trying to say that you would cut everybody's salary by ~10%.

i never said that or proposed that salaries are cut. im talking about creating jobs and not touching employees pay.

leeroybrown

Tipp Man wrote: »

I have never been able to figure out what a company should have to pay any PRSI for employing people

If you stand back and look at it - a country with 14.5% unemployemnt rate is charging 10.5% tax to employers to employ people??

PRSI (on both employees and employers) exists to provide money to the Social Insurance Fund which provides all the social insurance benefits that employees (and employers) can avail of such as Jobseeker's Benefit, Illness Benefit, Maternity Benefit along with redundancy and unpaid wage protection.

The money has to come from somewhere. Either the employee or the employer has to pay a tax to support it and either way it increases the cost to employ someone. The alternative would be to remove income supports for those who have lost jobs, provide no statutory illness/maternity pay (employers have no obligation to pay these) and let employers go bankrupt with no redundancy or wage protection for their employees. That's an even bigger mess.

GSF wrote: »

Because putting even €100 of a property tax on people as an alternative has people revolting. The culture of accepting high tax on employment income & complaining about high unemployment but never joining the dots is going to take a lot of overcoming.

Ah. Will you go away with that rubbish. It's a whimper rather than a revolt. There'll by 90%+ compliance by the time the courts start getting involved. The state should fund employment related benefits with employment related taxes either on the employee or employer. It would be a ridiculous subsidy otherwise.

Gurgle

Sleepy wrote: »

An odd one. I can understand taxing corporate profits but taxing the very activity you most desire from companies seems quite odd to me.

Do we want big corporations based in Ireland to employ people, or to artificially inflate GDP?

I'd like to assume its for employment, therefore its a no-brainer to increase corporation tax and reduce / eliminate employer's PRSI.

Unfortunately the 'No to Europe' brigade have taken corporation tax as their poster child.

Tipp Man

leeroybrown wrote: »

PRSI (on both employees and employers) exists to provide money to the Social Insurance Fund which provides all the social insurance benefits that employees (and employers) can avail of such as Jobseeker's Benefit, Illness Benefit, Maternity Benefit along with redundancy and unpaid wage protection.

The money has to come from somewhere. Either the employee or the employer has to pay a tax to support it and either way it increases the cost to employ someone. The alternative would be to remove income supports for those who have lost jobs, provide no statutory illness/maternity pay (employers have no obligation to pay these) and let employers go bankrupt with no redundancy or wage protection for their employees. That's an even bigger mess.

how about we cut some of these benefits - some dramatically

Like statutory redundancy - I have no idea why somebody should feel entitled to redundancy. You work - you get paid - if the company folds then you need to find different work.

People nowadays have become so used to pampering and having the government take care of there every need that they have lost touch with how things should be. There are too many safety nets which are far to well paid.

leeroybrown

Tipp Man wrote: »

how about we cut some of these benefits - some dramatically

Like statutory redundancy - I have no idea why somebody should feel entitled to redundancy. You work - you get paid - if the company folds then you need to find different work.

People nowadays have become so used to pampering and having the government take care of there every need that they have lost touch with how things should be. There are too many safety nets which are far to well paid.

We're quickly getting into an ecumenical argument here.

I'd agree that benefits need to be reviewed and it some cases cut but you also can't just leave someone without any protections. I think a lot of the current social welfare arrangements actively discourage people from getting back into work but there's a lot of legacy there that will take years to unwind.

Our redundancy protections are minimal as it is. An employee has almost no protection in their first year of employment, minimal protections in the second year and in the third and subsequent years are only entitled to relatively meagre statutory redundancy payments (two weeks pay per year capped at €600 per week + one extra week). That's not a lot of money and despite being quite pro-business myself I do think there has to be a balance where the employee is protected. The big payments you hear about some employees receiving (public sector, banks, voluntary schemes in industry) are non-statutory, although they are protected by legal precedent in some cases.

creedp

leeroybrown wrote: »

We're quickly getting into an ecumenical argument here.

I'd agree that benefits need to be reviewed and it some cases cut but you also can't just leave someone without any protections. I think a lot of the current social welfare arrangements actively discourage people from getting back into work but there's a lot of legacy there that will take years to unwind.

Our redundancy protections are minimal as it is. An employee has almost no protection in their first year of employment, minimal protections in the second year and in the third and subsequent years are only entitled to relatively meagre statutory redundancy payments (two weeks pay per year capped at €600 per week + one extra week). That's not a lot of money and despite being quite pro-business myself I do think there has to be a balance where the employee is protected. The big payments you hear about some employees receiving (public sector, banks, voluntary schemes in industry) are non-statutory, although they are protected by legal precedent in some cases.

I don't think a proposal to remove statutory redundancy entitlements would get much support even in recessionary Ireland. However, is there an argument to be made that statutory redundancy payments should not be an add onto company redundancy payments but should be paid if the company is not making a redundancy payment, i.e. the minimum payment received should be the statutory payment but if the company makes a payment in excess of that level maybe no statutory payment should be forthcoming .. just a suggestion? Difficult to implement now when people being made redundant are going ot find it difficult to get another job. Another issue is whether someone who gets a very generous voluntary redundancy payment should automatically get unemployed benefit? An example is a person I know who took a €90k voluntary redundancy offer and was in the dole office the following morning demanding her €200 a week unemployment benefit

liammur

Tipp Man wrote: »

Like statutory redundancy - I have no idea why somebody should feel entitled to redundancy. You work - you get paid - if the company folds then you need to find different work.

People nowadays have become so used to pampering and having the government take care of there every need that they have lost touch with how things should be. There are too many safety nets which are far to well paid.

I'll tell you why. People are paying for it. Yes, they get paid, and out of their pay, ...you guessed it....they pay the government taxes and universal social charges precisely for this reason.

Gurgle

Tipp Man wrote: »

Like statutory redundancy - I have no idea why somebody should feel entitled to redundancy. You work - you get paid - if the company folds then you need to find different work.

People nowadays have become so used to pampering and having the government take care of there every need that they have lost touch with how things should be. There are too many safety nets which are far to well paid.

That's an easy game, its called 'Anyone But Me'.

My turn:

Cut all payments and subsidies to farmers, apply an annual tax on their land, say €100 per acre per year. Charge full road tax on tractors and farm machinery, based on carbon emissions. Charge council rates on all farming buildings. Get rid of green diesel, why should road hauliers have to pay full excise while the farmers get cheap fuel?

Then the PAYE workers can get a tiny bit of well deserved slack for once.

Tipp Man

liammur wrote: »

I'll tell you why. People are paying for it. Yes, they get paid, and out of their pay, ...you guessed it....they pay the government taxes and universal social charges precisely for this reason.

They are not paying enough for it -that is the whole point

The relationship between what the person could get as benefits is too high compared to what they contribute - that's why the employers are paying 10% on top

Tipp Man

Gurgle wrote: »

That's an easy game, its called 'Anyone But Me'.

My turn:

Cut all payments and subsidies to farmers, apply an annual tax on their land, say €100 per acre per year. Charge full road tax on tractors and farm machinery, based on carbon emissions. Charge council rates on all farming buildings. Get rid of green diesel, why should road hauliers have to pay full excise while the farmers get cheap fuel?

Then the PAYE workers can get a tiny bit of well deserved slack for once.

not sure why you are personalising this but - Ok based on your list

No problem with subsidies being removed if all the bulls##t red tape and ridiculous rules are also removed. While farmers benefit from subsidy they are severally hampered from producing - and in the case of dairy you are stopped from producing. But don't forget that Ireland receives 2 billion annually in subsidies (about 1.5 billion net) which it would no longer receive. The vast majority of which is spent in this country

Relative to the amount of time that most tractors spend on the road relative to the field then I think the amount of tax they pay is appropriate

Why should farmers pay council rate on farm buildings when they receive ZERO council services on those buildings

Green Diesel will be done away with in the not too distant future - something the hauliers are looking for

Manach

So would the argument be settled if the govenment provided a break-down of what say the PAYE worker paid in and received back from their contribution for the year - given how exact the revenue are about extracting the tax monies then surely this would not be a major issue.

Gurgle

Tipp Man wrote: »

not sure why you are personalising this but -

T'was nought but a tongue-in-cheek list of 'things that don't affect me', no serious suggestions intended.

Everybody can produce a list of cost saving and revenue gathering measures, there are thousands of suggestions all over boards. The one thing 95% of these suggestions have in common is that they're made be people who won't have to pay for / suffer from them.

e.g. Statutory redundancy legislation

Gurgle

Manach wrote: »

So would the argument be settled if the govenment provided a break-down of what say the PAYE worker paid in and received back from their contribution for the year

The argument might be settled, its the civil war I'd be worried about.

liammur

Tipp Man wrote: »

They are not paying enough for it -that is the whole point

The relationship between what the person could get as benefits is too high compared to what they contribute - that's why the employers are paying 10% on top

Employers are getting massive subsidies....to the tune of €14K per IDA worker, where do you think this money is coming from? I'll hazard a guess...the taxpayer.

Tipp Man

liammur wrote: »

Employers are getting massive subsidies....to the tune of €14K per IDA worker, where do you think this money is coming from? I'll hazard a guess...the taxpayer.

That's the multinationals - the majority of employment in this country is actually created by indigineous small business who never see any subsidies like this

anyway if a multinational creates one job @ 50k per annum salary then the PAYE that this employment creates will have paid the 14k back in 1 year of PAYE - ignoring the savings on welfare and other factors

Tipp Man

Gurgle wrote: »

T'was nought but a tongue-in-cheek list of 'things that don't affect me', no serious suggestions intended.

Everybody can produce a list of cost saving and revenue gathering measures, there are thousands of suggestions all over boards. The one thing 95% of these suggestions have in common is that they're made be people who won't have to pay for / suffer from them.

e.g. Statutory redundancy legislation

No worries - tongue in cheek is hard to pick up on a screen:D

Well redundancy doesn't effect me as if i go broke nobody is going to come along with a nice big cheque to sort me out for a few years of doing nothing

And that's exactly my point - i go bust i get nothing - i don't expect anything. but my employee of 10 years gets a nice little cheque - and for what exactly?? It's not like i haven't paid him well over the last 10 years

liammur

Tipp Man wrote: »

That's the multinationals - the majority of employment in this country is actually created by indigineous small business who never see any subsidies like this

anyway if a multinational creates one job @ 50k per annum salary then the PAYE that this employment creates will have paid the 14k back in 1 year of PAYE - ignoring the savings on welfare and other factors

Enterprise Ireland also gives out huge subsidies.

It's the employee that will have paid the PAYE, thereby entitling them to welfare etc imo.

My sympathies are with small employers who themselves have NO entitlement to welfare etc if their businesses goes bust. I wrote to the last government on 3 seperate occasions about this, needless to say, a reply was never forthcoming.

neris

liammur wrote: »

Employers are getting massive subsidies....to the tune of €14K per IDA worker, where do you think this money is coming from? I'll hazard a guess...the taxpayer.

I am an employer and get no subsidies or payments from any government or state agency. Its only a small amount of employers (granted some are big multi nationals) that get subsidies. The average SME receives no financial assistance in employing people.

Tipp Man

liammur wrote: »

Enterprise Ireland also gives out huge subsidies.

It's the employee that will have paid the PAYE, thereby entitling them to welfare etc imo..

Thats missing the point completly - if that job hadn't been created then the employee would have paid Zero tax and instead been a welfare recipient - it might be deducted from his salary but he wouldn't have a salary without the "grant"

liammur wrote: »

My sympathies are with small employers who themselves have NO entitlement to welfare etc if their businesses goes bust. I wrote to the last government on 3 seperate occasions about this, needless to say, a reply was never forthcoming.

Well this is 1 point that I most definately will not argue with. But this goes back to my point - the benefits system in this country is far too high - it creates a disincentive to work and it definately creates a disincentive to start business.

liammur

neris wrote: »

I am an employer and get no subsidies or payments from any government or state agency. Its only a small amount of employers (granted some are big multi nationals) that get subsidies. The average SME receives no financial assistance in employing people.

This is the problem, a very uneven playing field, where successive governments are giving big foreign companies the advantage.

liammur

Tipp Man wrote: »

Thats missing the point completly - if that job hadn't been created then the employee would have paid Zero tax and instead been a welfare recipient - it might be deducted from his salary but he wouldn't have a salary without the "grant"


Well this is 1 point that I most definately will not argue with. But this goes back to my point - the benefits system in this country is far too high - it creates a disincentive to work and it definately creates a disincentive to start business.

There are too many 'ifs'. The job may have been created regardless of a subsidy or not, the individual may set up their own company etc.

If the benefit system is too high, the tax needs to be reduced. You can't have a system where the worker is left with nothing after putting massive tax in.

Tipp Man

neris wrote: »

I am an employer and get no subsidies or payments from any government or state agency. Its only a small amount of employers (granted some are big multi nationals) that get subsidies. The average SME receives no financial assistance in employing people.

Well this is the reality of the situation

Tipp Man

liammur wrote: »

There are too many 'ifs'. The job may have been created regardless of a subsidy or not, the individual may set up their own company etc.

If the benefit system is too high, the tax needs to be reduced. You can't have a system where the worker is left with nothing after putting massive tax in.

There are no ifs involved - we have what 450k people unemployed - how many of them are actually going to start their own companies - couple of thousand at most?

So the only ifs is if a company creates employment or not

I'm not talking about giving the employees nothing - I am saying that the employer should not have to pay 10% PRSI to fund these benefits - the benefits should be in line with the employee contribution.

I wonder how many employees see PRSI paid by employer as a perk the same as an employer pension contribution - maybe a handful in the whole country

liammur

Tipp Man wrote: »

There are no ifs involved - we have what 450k people unemployed - how many of them are actually going to start their own companies - couple of thousand at most?

So the only ifs is if a company creates employment or not

I'm not talking about giving the employees nothing - I am saying that the employer should not have to pay 10% PRSI to fund these benefits - the benefits should be in line with the employee contribution.

I wonder how many employees see PRSI paid by employer as a perk the same as an employer pension contribution - maybe a handful in the whole country

The 'ifs' are:
Who is to say, for instance, Google wouldn't have set up here (if IDA weren't dishing out €14K per worker ?)
These high skilled employees would sit on the dole?...I'm not sure, I would imagine a lot of them would emigrate.

Maybe employers should be paying less to the employee whilst factoring in the PRSI contributions as part of the overall package?

Tipp Man

liammur wrote: »

The 'ifs' are:
Who is to say, for instance, Google wouldn't have set up here (if IDA weren't dishing out €14K per worker ?)
These high skilled employees would sit on the dole?...I'm not sure, I would imagine a lot of them would emigrate.

Maybe employers should be paying less to the employee whilst factoring in the PRSI contributions as part of the overall package?

Re Google - the point is that the 14k spent to get them to employ however many hundred they employ was well spent - it was received back in tax within the first year from PAYE. And Google's own PRSI contributions paid it back in 2 years. If every 14k the government spent was as productive then the country would be fine

i would say that there are alot of skilled people on the dole at the moment - there are 450k after all - regardless of emigration so any none state sector job that is created should be welcomed

liammur

Tipp Man wrote: »

Re Google - the point is that the 14k spent to get them to employ however many hundred they employ was well spent - it was received back in tax within the first year from PAYE. And Google's own PRSI contributions paid it back in 2 years. If every 14k the government spent was as productive then the country would be fine

i would say that there are alot of skilled people on the dole at the moment - there are 450k after all - regardless of emigration so any none state sector job that is created should be welcomed

I find it strange a bankrupt nation giving the likes of Apple and Google large sums of cash, when Apple has $100bln sitting in a bank.
I wouldn't like to be a small startup Irish operation trying to compete with wages.