According to the Dept of Social Protection’s User Guide for 2011, reckonable pay is not reduced by superannuation and permanent health insurance (PHI) contributions made by an employee, deducted under a net pay arrangement by the employer, which are allowable for income tax purposes.
Reckonable pay for the purposes of employer contributions is calculated as gross money pay plus notional pay (or benefit in kind) if applicable – reduced by half of any superannuation and permanent health insurance contributions made by an employee,deducted under a net pay arrangement by the employer, which are allowable for income tax purposes.
In the case of civil and public servants, reckonable pay includes ‘pension levy’. However, ‘pension levy’ deductions are not included in reckonable pay for the purposes of calculating employer contributions.
In some limited cases the above arrangements may result in the reckonable pay of employees and employers attracting different subclasses. Where this occurs the following should be noted:
- If a Class A employee has pay of €360 and, from this pay, makes a pension contribution of €30, the ’employer reckonable pay’ is €345.
- As the employee falls into Subclass AL, employee PRSI is calculated at this subclass.
- As the employer falls into Subclass AO, employer PRSI is calculated at this subclass.
- The amounts should then be added together as normal but the return must always be made at the employee subclass, in this example, AL.
In our experience, the above has been contradicted by other institutions so the question is, how do you treat superannuation and PHI in this case? We say, do what the Dept of Social Protection’s guide tells you (SW14_11).
All the best,
The Team at Jefferson