Changes Reflected in 2019 Payslips – Importance of Checking Payslips with PAYE Modernisation in Place

The New Year brings with it a number of pay changes which will be fully visible in payslips later this month.

Payslips this week (pay date of 10 January 2019) cover a period of which approximately half is in the calendar year 2019. Accordingly, changes to pay effective from start of 2019 are only partly reflected. The changes include the ending of the Pension Related Deduction (PRD) and the introduction of the Additional Superannuation Contribution (ASC) which will reduce the overall contribution. They also include the broader Budget changes 2019,
affecting all workers, which involve small reductions in the rate of USC and a similarly small increase in the income level over which PAYE is charged at the higher rate.

Changes to PRD/ASC
INTO issued a detailed website notice on 19 December 2018 about the move from Pension Related Deduction (PRD) to Additional Superannuation Contribution (ASC). This will reduce liability for all teachers by at least €325 per year. This reduction is standard for teachers in the pre-2013 pension scheme. The reduction is much greater for teachers in the Single Public Service Pension Scheme (post 1 January 2013 entrants).

A general reduction in contributions happens because the threshold for paying the contribution is being raised to €32,000, yielding an improvement of €325 for 2019. (Further improvement is included for those covered by the public service pay agreement – PSSA – in 2020, and public servants who earn below €30,000 see a 1% increase now because the threshold increase does not benefit them).

For teachers in the Single Scheme, there is (in addition to the threshold change) a reduction in the rate of ASC from the previous PRD rate. The 10% rate is reduced by a third to 6.66%, with a further reduction under the terms of the PSSA due in January 2020.

For a teacher in the Single Scheme on €40,000 per annum, their ASC rate for 2019 will be €592 below their PRD rate for 2018. This €592 includes the €325 reduction in liability which applies to all public servants regardless of their pension scheme. The full impact of the PRD/ASC changes will be reflected in the payslip on 24 January.

USC and PAYE Changes
Budget 2019 provided for a cut in the 4.75% USC rate (to 4.5%) for income below €70,000, and for the 40% (higher) tax rate to be applied to incomes over €35,300 (an increase of €750 in the case of a single worker). These small changes should be reflected in the deductions section of payslips.

INTO Subscription at a Percentage Rate

The move from a flat rate INTO subscription to a percentage rate is not reflected in the payslips this week. The percentage subscription agreed at INTO Congress 2018 is 0.75% of salary and academic allowances, capped at that percentage of point 11 of the post 1 January
2011 payscale.

This change will be reflected on the pay date of 24 January 2019 which covers the pay period 8-21 January 2019 for teachers generally, and the period 1-14 January for substitute teachers. The change will see a reduced rate of INTO subscription for teachers on lower scale points (salaries up to €46,300), and a maximum subscription per payslip of €14.52. This involves a slight increase for some members but the maximum remains below the rate which all members paid up to 2011. The revised system is structured to be income-neutral for INTO funds, and provides for subscriptions ranging from €10.48 to €14.52 per member.

PAYE Modernisation
From 1 January 2019, employers are obliged to report their employees’ pay and deductions to the Revenue Commissioners when or before they pay them. This “PAYS modernisation” involves, according to Revenue, the most significant changes to the Pay As You Earn (PAYE) system since its introduction in the 1960s.

Benefits listed for employees include:

  • the ability to maximise the use of tax credit entitlements
  • the availability of real time accurate data using the Revenue Commissioners’ online
  • automatic year-end review (a paper P60 will not be issued in respect of the tax-year 2019 or after but will be available on-line)

More information on the Revenue project is available on the Revenue website.

It is important at the beginning of every tax year to check your payslip to ensure you have received the correct tax credits and standard rate band and that they have been correctly applied. This review is even more necessary in 2019 with these changes to the PAYE system.