Social benefits for contractor unable to work

Zander1983

Im an IT contractor and have been for the last 6 years. Come the end of my current contract in June, im planning to take 6 months off to deal with escalating health issues which are affecting my ability to work.

As a contractor, I pay PRSI. However, i've done some research and it looks like Im entitled to absolutely nothing from the state during my time off work. I knew I cannot draw social welfare but it looks like I also cannot apply for disability.

What options are open to me? Why do contractors have pay PRSI for seemingly zero benefit?

CIARAN_BOYLE

Zander1983 wrote: »

Im an IT contractor and have been for the last 6 years. Come the end of my current contract in June, im planning to take 6 months off to deal with escalating health issues which are affecting my ability to work.

As a contractor, I pay PRSI. However, i've done some research and it looks like Im entitled to absolutely nothing from the state during my time off work. I knew I cannot draw social welfare but it looks like I also cannot apply for disability.

What options are open to me? Why do contractors have pay PRSI for seemingly zero benefit?

Well they pay significantly less PRSI than employees given that there is no employers contribution. Presumably they are supposed to take out PHI to cover such areas where they are not covered by benefits from PRSI. Class S is basically maternity benefit and contributory pension only.

Zander1983

CIARAN_BOYLE wrote: »

Well they pay significantly less PRSI than employees given that there is no employers contribution. Presumably they are supposed to take out PHI to cover such areas where they are not covered by benefits from PRSI. Class S is basically maternity benefit and contributory pension only.

Thats what I thought. What a country.

This may be a stupid question but what benefit do I, as a male, get from paying maternity benefit contributions?

AlexisM

Zander1983 wrote: »

This may be a stupid question but what benefit do I, as a male, get from paying maternity benefit contributions?

Obviously nothing directly but that's not really the way taxation works and PRSI is just another form of taxation. There used to be a vague link to benefits when contributions were capped because benefits were capped. That's long gone - I don't know why they don't just simplify the system and combine income tax, PRSI and USC.

The good news for you (not much use at the moment though) is that unless you are a very high earner, your pension benefits will very likely far exceed your PRSI contributions because you are contributing 4% PRSI and not the 14.75% total that employees pay and have paid on their behalf by employers.

barneystinson

Zander1983 wrote: »

Thats what I thought. What a country.

This may be a stupid question but what benefit do I, as a male, get from paying maternity benefit contributions?

In order to qualify for the benefits you're talking about you'd have to have paid 10.75% of your contract rate for the last few years in additional PRSI contributions (ie via an umbrella company). Would you have been happy doing that? You probably were offered that opportunity somewhere along the way and balked at the cost...

CIARAN_BOYLE

Zander1983 wrote: »

Thats what I thought. What a country.

I'm sorry but I've little to no sympathy for you. You are paying significantly less PRSI (by way of no employer PRSI) than the rest of the country. This came at a trade off. You could easily have taken out PHI with the money saved to guarantee your income or saved the money to cover you.

Moomat

Zander1983 wrote: »

However, i've done some research and it looks like Im entitled to absolutely nothing from the state during my time off work.

This is a common misconception. You are entitled to assistance in the form of the meanstested Jobseekers Allowance. The full rate (€188) is exactly the same as the non meanstested Jobseekers benefit that people are entitled to for a period relevant to their PRSI contributions.

Zander1983

AlexisM wrote: »

Obviously nothing directly but that's not really the way taxation works and PRSI is just another form of taxation. There used to be a vague link to benefits when contributions were capped because benefits were capped. That's long gone - I don't know why they don't just simplify the system and combine income tax, PRSI and USC.

The good news for you (not much use at the moment though) is that unless you are a very high earner, your pension benefits will very likely far exceed your PRSI contributions because you are contributing 4% PRSI and not the 14.75% total that employees pay and have paid on their behalf by employers.

I think they do it so that government officals can come out and say "Look, our PAYE is only 41%, what a great little country we are" in the hope that everyone will forget about all the other taxes

dogbert27

Your self employed. When your contract ends in June it just means that you no longer have a client. You will still be employed by your own company.

Do you plan to wind your company up and look for financial assistance in the form of means tested Jobs Seekers Allowance?

And it is job seekers allowance so you would have to look to be finding work which goes against your original plan of not finding any new clients.

To do what you want to do you should have been putting money aside to cover yourself in the eventuality that you would be without clients for a period of time.

As you are an IT contractor is it not possible to work from your home office?

Zander1983

CIARAN_BOYLE wrote: »

I'm sorry but I've little to no sympathy for you. You are paying significantly less PRSI (by way of no employer PRSI) than the rest of the country. This came at a trade off. You could easily have taken out PHI with the money saved to guarantee your income or saved the money to cover you.

But dont I pay the same rate of PRSI as employees do, except I don't have employer PRSI contributions, but get none of the benefits? It makes no sense.

Zander1983

dogbert27 wrote: »

Your self employed. When your contract ends in June it just means that you no longer have a client. You will still be employed by your own company.

Do you plan to wind your company up and look for financial assistance in the form of means tested Jobs Seekers Allowance?

And it is job seekers allowance so you would have to look to be finding work which goes against your original plan of not finding any new clients.

To do what you want to do you should have been putting money aside to cover yourself in the eventuality that you would be without clients for a period of time.

As you are an IT contractor is it not possible to work from your home office?

Well I have been setting money aside and ill be fine until when im well enough to go back to work. Its rather depressing though when you pay a marginal rate of 52% tax and you get ill, theres absolutely no support bar your own savings, which have been hit hard by that 52%.

CIARAN_BOYLE

Zander1983 wrote: »

But dont I pay the same rate of PRSI as employees do, except I don't have employer PRSI contributions, but get none of the benefits? It makes no sense.

While employees PRSI is the same consider it a cheap pension, all the benefits of PRSI come from employer PRSI.

You should be able to charge ~10% more by being a contractor than you would earn as an employee which you should be using for PHI to fill in the gap.

relax carry on

Zander1983 wrote: »

Well I have been setting money aside and ill be fine until when im well enough to go back to work. Its rather depressing though when you pay a marginal rate of 52% tax and you get ill, theres absolutely no support bar your own savings, which have been hit hard by that 52%.

What is your effective tax rate over a full tax year, January to December, not this marginal rate craic.

dogbert27

Zander1983 wrote: »

Well I have been setting money aside and ill be fine until when im well enough to go back to work. Its rather depressing though when you pay a marginal rate of 52% tax and you get ill, theres absolutely no support bar your own savings, which have been hit hard by that 52%.

"If I knew then what I know now"... I was a contractor myself up to last year and while it all looked good going in to the game the shine quickly wears off when you realize that you could just have well been financially better off staying as a PAYE employee.

Zander1983

dogbert27 wrote: »

"If I knew then what I know now"... I was a contractor myself up to last year and while it all looked good going in to the game the shine quickly wears off when you realize that you could just have well been financially better off staying as a PAYE employee.

I like the variety though - if you're bored of a project its tolerable because you can leave once contract is up and start something fresh. When I was permanent, I didn't feel like i had that luxury.

Zander1983

relax carry on wrote: »

What is your effective tax rate over a full tax year, January to December, not this marginal rate craic.

Not much better, last year, my effective tax rate was 41%

CIARAN_BOYLE

Zander1983 wrote: »

Not much better, last year, my effective tax rate was 41%

So assuming standard tax credits and cut off points and your Gross wage was roughly €86,000.

First off fair play to you. Secondly consider the costs of contracting next time and purchase appropriate insurances.