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Ireland’s Budget 2021: Key takeaways for employers

16 October 2020

The Covid-19 pandemic and the threat of a no-trade deal Brexit are the overriding themes underpinning the government’s budget for 2021. According to Tánaiste Leo Varadkar, the government has set aside €5.5 billion in contingency funds due to the “unbelievable uncertainty” facing the country. In this article we highlight key points from the budget for employers to note.

  • No cliff edge to Employment Wage Subsidy Scheme (“EWSS”). The EWSS which provides a flat-rate subsidy to employers in sectors impacted by Covid-19 whose turnover has fallen by 30%, will continue until April 2021 and a new form of the scheme will take its place until the end of 2021
  • Parents leave and benefit extended to 5 weeks from April 2021. Introduced in 2019, parents leave currently entitles each eligible parent to 2 weeks’ paid leave during the first year of a child's life, or in the case of adopted parents, during the first year of placement. The government has confirmed that the extension to 5 weeks’ paid leave will apply retrospectively to parents of children born or adopted from November 2019.
  • Waiting period for illness benefit reduced to 3 days from end February 2021. The current waiting period to apply for illness benefit is 6 days. Illness benefit is paid at a rate €203 per week before tax for full-time PAYE workers with a sufficient level of PRSI contributions. Employees certified as diagnosed with or suspected of having Covid-19 are entitled to apply for enhanced illness benefit of €350 per week There is currently no waiting period to apply for enhanced illness benefit, however, this is expected to end by 1 April 2021. The Labour Party has recently proposed a Bill which would introduce a statutory right to paid sick leave – read our article here.
  • State pension age remains at 66. The government had previously indicated that the state pension age would increase to 67 in 2021, with a further increase to 68 expected in 2028. 
  • No broad changes to income tax credits or bands. Instead, the ceiling of the second USC rate band will be increased to ensure that the salary of full-time workers on minimum wage will remain outside the USC's top rate. The government announced earlier this month that the national minimum wage will increase by 10c to €10.20 per hour. The weekly threshold for the higher rate of employers’ PRSI will also be increased to ensure that the lower rate applies to full-time minimum wage workers so that there is no incentive for employers to reduce working hours.
  • Christmas bonus for those in receipt of the pandemic unemployment payment (“PUP”) for four months or more. The Christmas Bonus is an extra payment for people on long-term social welfare and it is paid at 100% of the relevant weekly social welfare payment. PUP is due to continue until April 2021 but the higher rate of €350 per week, which was reduced to €300 in September, will not be restored.
  • Minister emphasised the importance part remote working has played in the country’s response to the pandemic. Minister for Finance, Paschal Donohoe confirmed that an Inter-Departmental Group has been set up to work on a strategy for remote working and remote service delivery and highlighted the tax reliefs currently available for employees working from home, which include:
  • Up to €3.20 may be paid by employers towards employees’ expenses of working from home without a benefit-in-kind arising;
  • Where an employer does not make a contribution, employees may claim a tax deduction for utility expenses such as heat and light. This will now also include broadband (Revenue guidance is expected); and
  • Claims may also be made by employees for other vouched expenses incurred “wholly, exclusively and necessarily” in the performance of their duties of employment.

UPDATE: Since the date this article was published, the Irish government have announced that the rate of the PUP will be restored to €350 for those who were earning in excess of €400 per week.

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