For an quick and easy view of the Budget 2021 changes just download our free factsheet below
On 13th October 2020, Budget 2021 was announced. In the middle of a global pandemic, the Government were faced with the challenges of preparing a Budget for the country that also took into account the additional requirements to keep the economy afloat. The economy is expected to shrink 2.4% in 2020 and a further 1.7% in 2021 due to the pandemic. There have been some changes that will impact both Employers and Employees and the main takeaways for Employers are listed below:
- Parents Leave
As of April 2021, Parent’s Leave will increase from 2 weeks to 5 weeks for each parent. Parent’s Benefit will also increase in the number of weeks applicable. Parent’s Leave was originally introduced in 2019 to assist parents spending time with their child in the first year of life or the first year of placement in the case of adoption.
It’s important for Employers to note that it has not been clearly defined if the additional leave will apply retrospectively. The changes note that the period it can be taken will be extended up to the child’s second birthday or within 2 years of the placement of the child from April 2021. With that in mind, it would be prudent for Employers to plan for the potential of Employees to request the additional 3 weeks leave once it is implemented in April 2021.
- Minimum Wage
As was expected, there has been an increase in the Minimum Wage from 1st January 2021 from €10.10 to €10.20. All employers must make sure that this new rate has been implemented on their payroll from 1st January 2021 for all staff who are on the minimum wage.
- Employers PRSI
The weekly income threshold for the higher rate of Employers PRSI is increasing from €394 to €398 with an expected implementation date of 1st January 2021. Minister Donohue noted that this increase was to prevent Employers from reducing the working week of employees in receipt of the Minimum Wage following the €0.10 increase.
- Income Tax
There has been no change to the Standard Rate Cut Off Point for Employees. Although the Dependent Relative Tax Credit and Earned Income Tax Credit for the Self Employed have been increase from €70 to €265 and €1500 to €1560 respectively.
- Universal Social Charge
There is one change to the USC and that is on the 2% band (second band) which is expected to take effect from 1st January 2021. The ceiling will increase from €20,484 to €20,687 to assist full time minimum wage Employees from staying outside of the higher USC rates.
Medical card holders will continue to pay a reduced rate of USC until December 2021.
- EWSS (Employment Wage Subsidy Scheme)
It has been confirmed that the EWSS will remain in place until April 2021 and it has further been confirmed that “there will be no cliff edge to this vital scheme” by Minister Donohue which would indicate that a further scheme to allow for transition away from dependency on the scheme will be implemented.
- State Pension Age
There has been no change in this Budget to the State Pension Age. Interestingly the State Pension Age was due to increase from 66 to 67 in 2021 however this has been deferred pending a report from an expert group. Legislation will likely be introduced in late 2020 to reverse the increase in pension age to 67.
There has been an increase in the number of claims regarding retirement age in recent years and it would be prudent of Employers to review their contracts and policy around retirement age to ensure it is reasonable and sound.
- Illness Benefit
There have been significant changes to Illness Benefit in light of COVID-19 with the introduction of the Enhanced Illness Benefit and the removal of the waiting period being removed for any person eligible for the Enhanced Illness Benefit. The Enhanced Illness Benefit is expected to cease in March 2021.
A further change is as of 1st February 2021 the waiting period to claim Illness Benefit is reducing from 6 days to 3 days.
- Remote Working Allowance
The current measures in place for remote working are:
- Where the Employer makes payments towards the Employees expenses of working from home, up to €3.20 may be paid to Employees without a Benefit-In Kind arising;
- Where the Employer does not make a contribution, the Employee may claim a tax deduction for utility expenses. Broadband may also be covered as an allowable home expense for e-working.
Any expenses claimed must be for expenses incurred wholly, exclusively and necessarily in the performance of the duties of employment and the employer does not make payment towards the expense. Further guidance is expected from Revenue in due course on what expenses exactly can be claimed by Employees.
A national strategy for remote working and remote delivery of service has been committed to by the Government which would reasonably indicate that new guidelines and regulations may be coming in the near future on remote working.