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Contracting & PRSI

All you need to know about your PRSI contributions & social welfare entitlements when making the decision on whether Contracting is the right path for you.

Contracting and PRSI

One of the concerns those new to contracting often raise before taking a contract role is the perceived loss of Social Welfare benefits and the fear of what that might mean for them. Thankfully, there’s good news for self-employed Professional Contractors.

Most employed people over 16 years of age make social insurance contributions whether they are employees or self-employed. The amount you pay is based on your earnings and the type of work you do. For this reason it is called Pay Related Social Insurance (PRSI).
Pay Related Social Insurance is a contribution made by the individual (employee or professional contractor) and the employer (where someone is an employee). It is based on a percentage of your earnings and funds social welfare benefits.

 

PRSI Class A and Class S

PRSI is a big area so the focus here is on the main differences between Class A PRSI, which is typically the rate which employees pay) and Class S PRSI, which is typically the rate self employed people (including Professional Contractors) pay.

At the time of writing (August 2019) the individual rate for all individuals, whether employee (Class A) or self-employed contractor (Class S) is 4%.

This assumes however that your annual earnings are over €18,300 – if they’re not, then you’re probably not suitable to operate as a self employed company director (which is how Professional Contractors are typically set up).

For more information on the types of set up for Professional Contractors see our Solutions Page.

Can I be a Contractor and maintain my Class A status?

The short answer is yes, however it’s not something we’d typically recommend for those entering contracts longer than 6 months. You’d need to carefully consider the pro’s and con’s of maintaining a Class A status and the effect that might have on your take-home pay. The first step is always to have a no-obligation chat with one of our solutions team, even if you don’t have a contract lined up yet.

Chatting to one of our Contracting Experts will give you a much better idea of whether or not contracting is for you. We’d recommend you have an idea of what your day-rate as a Professional Contractor might be. Call us on 1800 54 54 22 or Schedule A Callback at a time that suits you.

If you’re not sure how much you should ask to be paid as a Professional Contractor, then use this tool to calculate your day rate.

PRSI Class A & Class S – What Benefits do I get?

Contractors using an Umbrella Company (PAYE) Solution will pay Class A PRSI. Contractors using the Umbrella Company (Director) Solution or those using their own Personal Limited Company (which COntracting PLUS can set up for you for free) will pay Class S PRSI.

Class A PRSI is the top-tier of PRSI. It covers you for all entitlements (subject to some personal criteria) and this is why many employees sometimes hesitate before taking a contract role.

However, cover under Class S PRSI has been getting more comprehensive over the years as the Government works towards levelling the playing field for both employees and the self-employed.

Class S PRSI typically covers the following (again subject to some personal criteria and correct at the time of writing in August 2019);

  • Jobseekers Benefit (cover kicks in from Quarter 4, 2019)
  • Maternity Benefit
  • Adoptive Benefit
  • Paternity Benefit
  • State Pension (Contributory)
  • Treatment Benefit Scheme
  • Invalidity Pension
  • Widow(er) / Surviving Civil Partner (Contributory) Pension

The cover today for self-employed individuals is still very comprehensive. More detail on PRSI for the self-employed can be found here.

Do I lose the PRSI cover I’ve built up if i leave PAYE employment?

There is no need to worry about losing your PRSI benefits if you are considering leaving your current PAYE role to take up a Contract role.
The first thing to note is you don’t lose your benefits over-night.

There’s a ‘look-back’ period which means you can be a self-employed contractor for about 2 years before you lose all your Class A PRSI entitlements and fall in under the Class S entitlements (that is assuming you’d paid enough stamps to be eligible in the first place).

So, you could easily take some contract roles for up to 24 months and still revert to Class A PRSI cover with minimum disruption. Note here that every individual is different and if you have genuine concerns then it is always best to check you PRSI status by requesting a copy of your Social Isurance contributions record.

When do I stop paying PRSI?

Once you reach age 66 you no longer have to pay PRSI. This applies to employees and self-employed contractors. If you don’t have enough contributions for full benefits by age 66, then you cannot add to them after that.
You can however make additional voluntary PRSI contributions before age 66. The amount is dependent on your personal work history and circumstances. You should contact your local Social Welfare office for more details on this.

You can find information on your local Social Welfare office here.

For a bit more information on PRSI and some tips on the best advice for Contractors read this article by our Commercial Director, Jimmy Sheehan.

The benefits of choosing Contracting PLUS

Our compliant contractors typically achieve the best retention rates; they take home more money.

Our App and online portal remove all the admin and hassle from you.

Standard company insurances are included (at no extra cost) in most cases.

You’ll have a Dedicated Account Manager to answer all your questions.

You’ll get ongoing pro-active tax saving tips and suggestions.

Talk to us

Talk to our team to figure out the best solution for you

1800 54 54 22 Free Phone