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Budget 2021 is the biggest budget announced in the history of the State and was prepared in response to the worst global pandemic in a century and the challenges faced in preparation for Brexit.
In this blog, we provide a snapshot of the key takeaways from Budget 2021 for both employers and employees:
In this blog, we provide a snapshot of the key takeaways from Budget 2021 for both employers and employees:
EWSS expires in April 2021
It was confirmed that the Employment Wage Subsidy Scheme ("EWSS") will continue until 1st April 2021.
It is anticipated that a transitionary scheme will be introduced until the end of 2021. The details of this transitionary scheme have yet to be announced but Minister Donohue gave assurances that "there will be no cliff edge to this vital scheme".
Extension of Parent's leave
Parent's Leave was a new form of leave introduced in 2019 that both parents could avail of during the first year of a child's life, or in the case of adoption within the first year of placement. Parent's Leave will increase from 2 weeks to 5 weeks for each parent as will the associated Parent's Benefit for those who qualify. This change is due to take effect from April 2021.
Employers should be mindful that this may apply retrospectively and should plan ahead for employees seeking to take their full/additional entitlement following its extension.
State Pension Age remains at 66
The State pension age was due to increase from 66 to 67 in 2021 with a further increase to 68 expected in 2028. However, this has become a politically contentious topic and the planned increase has been deferred pending a report by an expert group.
Employers often align their compulsory retirement age with the State pension age. However, they should be aware that a compulsory retirement age is potentially discriminatory on age grounds. In our experience, there has been an increase in claims challenging the lawfulness of compulsory retirement ages. These claims can be difficult to defend unless the employee is on notice of the compulsory retirement age and it is backed up by a retirement age policy.
Minimum Wage
While technically not part of Budget 2021, the Minister for Social Protection and Employment Affairs confirmed earlier this month that the minimum wage will increase by 10c per hour to €10.20. This change is expected to take effect from 1st January 2021.
Employer PRSI
The weekly employee income threshold for the higher rate of employer’s PRSI will increase from €394 to €398. Minister Donohue confirmed that this is to ensure that there is no incentive for employers to reduce working hours for a full-time minimum wage worker following the increase in the minimum wage. This change is expected to take effect from 1st January 2021.
Universal Social Charge ("USC")
The ceiling of the second USC rate band will increase from €20,484 to €20,687. Minister Donohue stated that this change is to ensure that full time minimum wage workers stay outside the top rates of USC. This change is expected to take effect from 1st January 2021.
Illness Benefit
The waiting period for Illness Benefit will be reduced from 6 days to 3 days for all new claims from the end of February 2021.
Currently, employees who are diagnosed with Covid-19 or medically required to self-isolate are eligible for an enhanced Illness Benefit. There is no waiting period to apply for the enhanced Illness Benefit. This is expected to expire at the end of March 2021.
Remote Working
The Government has committed to develop a national strategy for remote working and remote service delivery. This should be taken as yet another sign that remote working is here to stay and that new regulations and supports are on the horizon.
In the meantime, Minister Donohue did acknowledge the following measures that are currently in place for remote workers:
It was confirmed that the Employment Wage Subsidy Scheme ("EWSS") will continue until 1st April 2021.
It is anticipated that a transitionary scheme will be introduced until the end of 2021. The details of this transitionary scheme have yet to be announced but Minister Donohue gave assurances that "there will be no cliff edge to this vital scheme".
Extension of Parent's leave
Parent's Leave was a new form of leave introduced in 2019 that both parents could avail of during the first year of a child's life, or in the case of adoption within the first year of placement. Parent's Leave will increase from 2 weeks to 5 weeks for each parent as will the associated Parent's Benefit for those who qualify. This change is due to take effect from April 2021.
Employers should be mindful that this may apply retrospectively and should plan ahead for employees seeking to take their full/additional entitlement following its extension.
State Pension Age remains at 66
The State pension age was due to increase from 66 to 67 in 2021 with a further increase to 68 expected in 2028. However, this has become a politically contentious topic and the planned increase has been deferred pending a report by an expert group.
Employers often align their compulsory retirement age with the State pension age. However, they should be aware that a compulsory retirement age is potentially discriminatory on age grounds. In our experience, there has been an increase in claims challenging the lawfulness of compulsory retirement ages. These claims can be difficult to defend unless the employee is on notice of the compulsory retirement age and it is backed up by a retirement age policy.
Minimum Wage
While technically not part of Budget 2021, the Minister for Social Protection and Employment Affairs confirmed earlier this month that the minimum wage will increase by 10c per hour to €10.20. This change is expected to take effect from 1st January 2021.
Employer PRSI
The weekly employee income threshold for the higher rate of employer’s PRSI will increase from €394 to €398. Minister Donohue confirmed that this is to ensure that there is no incentive for employers to reduce working hours for a full-time minimum wage worker following the increase in the minimum wage. This change is expected to take effect from 1st January 2021.
Universal Social Charge ("USC")
The ceiling of the second USC rate band will increase from €20,484 to €20,687. Minister Donohue stated that this change is to ensure that full time minimum wage workers stay outside the top rates of USC. This change is expected to take effect from 1st January 2021.
Illness Benefit
The waiting period for Illness Benefit will be reduced from 6 days to 3 days for all new claims from the end of February 2021.
Currently, employees who are diagnosed with Covid-19 or medically required to self-isolate are eligible for an enhanced Illness Benefit. There is no waiting period to apply for the enhanced Illness Benefit. This is expected to expire at the end of March 2021.
Remote Working
The Government has committed to develop a national strategy for remote working and remote service delivery. This should be taken as yet another sign that remote working is here to stay and that new regulations and supports are on the horizon.
In the meantime, Minister Donohue did acknowledge the following measures that are currently in place for remote workers:
- In cases where the employer makes payments towards the 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 worker may claim a tax deduction for utility expenses such as heat and light. This may also include the cost of broadband and further guidance on this is expected from Revenue guidance; and
- Finally, claims may also be made for any other vouched expenses incurred “wholly, exclusively and necessarily” in the performance of the duties of employment.
Written by Maeve Griffin and David Murphy.
We continue to be available to our clients either remotely or in person, with your business as usual matters, as well as for C-19 support. Please review our Covid-19 hub for updates and get in touch if you require further information