Taoiseach Leo Varadkar announced earlier this week that Budget 2019 would make a real difference in people’s lives by putting money back in people’s pockets. Increases in social welfare payments were pledged along with reductions in USC and income tax. Family-friendly measures which seek to make childcare more affordable were also promised. The clear message from the government was that our national economic growth should translate into rising living standards. How will employers feel the impact of Budget 2019? Given that the political pressures of the housing crisis and healthcare reform almost certainly exerted the greatest influence on this year’s budget, we now take a look to see how exactly the government’s budgetary decisions will impact on both employers and employees. Budget 2019 – an employer perspective SME supports €950 million has been allocated to the Department of Business, Enterprise and Innovation. This represents a 9% increase on last year and will be used to support the SME sector during a period of uncertainty caused by Brexit. VAT changes Special VAT rate of 9% in the hotel and restaurant sector to be increased to 13.5%. Special VAT rate of 9% for hairdressers to be increased to 13.5%. Reduction in VAT for electronic newspapers from 23% to 9%. Printed newspapers to continue to enjoy VAT rate of 9%. The changes in VAT will be most disappointing to employers in the hospitality sector which supports over 200,000 jobs. The increased VAT rate will undoubtedly impact on the sector’s ability to continue to generate employment particularly in light of its exposure to a bad Brexit outcome. National Minimum Wage The minimum wage increase of €0.25 to €9.80 has been confirmed. The increase may exert pressure on the payrolls of certain employers. PRSI The weekly threshold for the higher rate of employer’s PRSI will be increased from €376 to €386. This change is intended to "ensure that there is no incentive to reduce working hours for a full-time minimum wage worker". Paid parental leave Two weeks’ paid parental leave will be introduced in November 2019. An incremental increase of up to 7 weeks’ paid leave to every parent of a child under one year of age will be introduced over time. Employers will have a full year to ensure they are prepared for the introduction of this benefit which is more likely to be availed of by both parents. Budget 2019 – an employee perspective Middle-income earners The point at which people hit the 40% rate of income tax will rise by €750 to €35,300 for single workers. USC The 2% rate of USC currently levied on income over €12,012 and under €19,372 has been increased by €502 to ensure that a full-time worker on the minimum wage will remain outside the top rates of USC. The third rate of USC currently levied on incomes between €19,300 and €70,000 will be reduced from 4.75 % to 4.5%. This measure will see a worker at the top end of this band increase their disposable income by around €175 a year. Working families The Home Carer Credit is increased by €300 bringing the value of the credit to €1,500 per year. This will assist families where one spouse works primarily in the home to care for children or other dependants. Paid parental leave The introduction of paid parental leave is likely to be welcomed by working parents of young children who are experiencing significant pressures with childcare costs. Affordable childcare scheme The income thresholds for the Affordable Childcare Scheme will increase next year. In net terms
- the base income threshold is being raised from €22,700 to €26,000;
- the maximum income threshold will go from €47,500 to €60,000; and
- the multiple child deduction will increase from €3,800 to €4,300.
The expansion of this scheme is intended to allow more workers to access childcare and to encourage people to return to work. Brexit challenges and border county investment The Minister for Finance, Paschal Donohoe’s presentation began by putting the challenges posed by Brexit at the forefront. Notably for border county employers, Mr Donohoe confirmed that Project Ireland 2040 includes comprehensive investment in cross-border and all-island projects which are intended to promote growth in the border region. Budget 2019 – a step in the right direction towards a more diverse workplace? One of the stated aims of the budget was to make childcare more affordable. The introduction of paid parental leave and the widening of the bands that qualify for the childcare subsidy appear to be a step in the right direction on the road towards tackling the gender pay gap and promoting a more diverse workplace. At first glance, Budget 2019 goes some way towards ultimately equalising parental leave entitlements. As Peninsula pointed out in submissions to the Department of Justice and Equality last year, the failure to address affordable childcare concerns and the structure of parental leave entitlements is a contributory factor in Ireland’s persistent gender pay gap. If the onus on caring for children continues to weigh so heavily on women who continue to receive a far greater entitlement to maternity leave, the notion that family responsibilities should predominantly be taken up by women will persist. Furthermore, if childcare costs are not tackled then this similarly acts as a barrier for many women to return to the workplace. One of Peninsula’s key submissions included tackling childcare costs and introducing measures to encourage male employees to play a more active role in family-related responsibilities. It is only by encouraging men to share the burden of parenting young children that the negative impacts of maternity leave on women’s long-term contributions to business will be reduced. With gender pay gap reporting legislation not yet introduced, the measures announced in Budget 2019 may represent the first step on the road towards eliminating Ireland’s gender pay gap. Need advice following Budget 2019? Call the Peninsula 24-hour advice line FREE on 0818 923 923 to speak with an adviser
