The Minister for Social Protection, Joan Burton T.D., today (6th September 2013) published the third report of the Advisory Group on Tax and Social Welfare on the issue of extending social insurance coverage for the self-employed.
The Advisory Group was established in June 2011 with the aim of harnessing expert opinion and experience to examine a number of specific issues. Specifically, in its terms of reference, the Group was asked to examine and report on issues involved in providing social insurance cover for self-employed people in order to establish whether or not such cover is technically feasible and financially sustainable. In this context, the Group was required to consider any proposals for change to existing arrangements in a cost-neutral or cost-reducing context.
Pay related social insurance (PRSI) contributions go to the Social Insurance Fund (SIF), which helps pay for social welfare benefits and pensions. Currently, self-employed people are liable for PRSI at the Class S rate, which entitles them to access long-term benefits such as State Pension (Contributory). However, Class S contributions do not count towards the social insurance contributions required for eligibility under a number of schemes, notably the non-means tested Jobseeker’s Benefit. This has led to a perception that the self-employed are not eligible for any social welfare support while unemployed. The Group finds that this is not the case.
The report outlines how 85% of self-employed people who claimed the means tested Jobseeker’s Allowance during the three-year period from 2009 to 2011 received payment, in contrast to the perception that the self-employed do not receive social welfare support while unemployed.
The Group therefore found that the current system of means tested Jobseeker’s Allowance payments adequately provides cover to self-employed people for the risks associated with unemployment.
Where the Group found that extending social insurance for the self-employed is warranted is in cases related to long-term sickness or injuries. To this end, the Group recommended that Class S benefits should be extended to provide cover for people who are permanently incapable of work because of a long-term illness or incapacity through the Invalidity Pension and the Partial Capacity Benefit. To fund this, the Group recommends that the rate of contribution for Class S should be increased by at least 1.5 percentage points.
Minister Burton said: “The question as to whether the present arrangements regarding social insurance for the self-employed are appropriate has increased in prominence over recent years. I welcome the Group’s finding that the current system of means tested Jobseeker’s Allowance payments adequately provides cover to self-employed people for the risks associated with unemployment.
“In this regard, it should be noted that contrary to widespread misconceptions, self-employed people are eligible for means tested payments in the same way as employees are eligible, although there are differences in the way income is assessed. In particular, I note that the report contains statistics that show that during the three-year period 2009 to 2011, there were around 20,000 Jobseeker’s Allowance claims from self-employed people, 85% of which were awarded.”
In relation to the recommendation concerning long-term sickness or injuries, the Minister said: “This recommendation is an important contribution to the policy debate regarding the range of benefits the self-employed might access through their social insurance contributions. In this regard, the 2010 Actuarial Review of the Social Insurance Fund, published last year, determined that the self-employed are obtaining better value for the level of their current social insurance contributions than employees.
“This finding was noted by the Advisory Group in its recommendations. Consequently, the recommendations of the Advisory Group require further consideration in conjunction with the findings of the 2010 Actuarial Review relating to the level of contributions levied on Class S contributors and the current shortfall in this regard.
“My colleagues in Government and I will now carefully reflect on the findings of the Advisory Group on this issue and will further consider the recommendations contained in the report taking into account future developments in terms of the budgetary and fiscal situation as well as other work under way.”
Minister Burton concluded by thanking chairperson Ita Mangan and the members of the Advisory Group for their extensive work in producing this report. The Minister also acknowledged the organisations and individuals who had made submissions to the Advisory Group following the Group’s invitation for submissions in national newspapers at the outset of their work.
The third report of the Advisory Group on Tax and Social Welfare on Extending Social Insurance Coverage for the Self-Employed is available on www.welfare.ie.
Note for editors
The Advisory Group on Tax and Social Welfare was established in June 2011 in line with commitments contained in the Programme for Government. The Advisory Group is chaired by Ms Ita Mangan, a barrister with considerable experience in public policy. In line with a practical, problem-focused and evidence-orientated approach, members of the Advisory Group have expertise from economic and social policy and other relevant areas and include individuals with a mix of experience from within and outside the public sector.
The Group’s overall method of working is based on producing modular reports on the priority areas identified in the terms of reference, which allows for the Group to bring these reports to the Minister for her consideration on a regular basis. To date, the Group has completed modules on child and family income supports and on a review of Budget 2012 proposals regarding Disability Allowance and Domiciliary Care Allowance. The Group is currently progressing its final module of work relating to the issue of working age supports.
Self-employed people with reckonable annual income of over €5,000 pay a Class S PRSI rate of 4% of all income including unearned income, subject to a minimum annual contribution of €500.