The Difference Between Class S PRSI and Class A PRSI

Understanding the difference between Class S PRSI and Class A PRSI is crucial for individuals venturing into self-employment. As a leading accountancy firm in Ireland, we emphasise the importance of comprehending the PRSI system.

PRSI, or Pay-Related Social Insurance, is a mandatory contribution system in Ireland that funds social insurance (welfare) payments. Class A PRSI commonly applies to most employments, where employees’ and employers’ contributions are managed under the PAYE system. In contrast, Class S PRSI primarily pertains to self-employed individuals and directors with a controlling interest in their companies. Self-employed individuals pay their PRSI through annual tax returns, while directors on Class S are managed through the PAYE system. Recognising the distinctions between these classes is essential for managing your social welfare entitlements, with each class offering different benefits such as maternity, illness, and state pensions.

PRSI Class Increases 2023

The Government has recently approved a comprehensive plan to incrementally increase PRSI rates over the next five years, aimed at replenishing the Social Insurance Fund. This initiative will result in higher PRSI rates for employers, employees, and the self-employed. As part of the plan, a 0.1% rise is planned for the coming year, followed by the same increase in 2025. Subsequent years will witness 0.15% increases in 2026 and 2027, succeeded by a 0.2% rise in 2028.

The decision aligns with the government’s commitment to maintaining the State Pension Age at 66. Additionally, this move supports the introduction of a new pay-related job seekers’ benefit system, enhancing social protection payments for those who lose their jobs for up to nine months. These changes are part of broader social welfare reforms aimed at providing comprehensive support to various segments of the population, as outlined by Minister Humphreys in a recent announcement on November 21st, 2023. Read more about it at Gov.ie.

Class S PRSI and Class A PRSI – What is the difference?

Are you thinking of starting your own business? If so, it is important you know the difference between Class S PRSI and Class A PRSI.

A good product along with a solid business plan will be integral for your new venture, but you will also need to ensure you have your payroll in order. One important aspect to be aware of is the PRSI differences in rates and entitlements when you move from employment to self-employment.

PRSI (pay related social insurance) is paid by employers, employees, individuals with self–employment income of €5,000 or more and certain other individuals, such as those in receipt of occupation pensions. The amount paid is used to fund social insurance (welfare) payments.

There are many classes of PRSI with various rates and entitlement to benefits. The current classes and rates of PRSI can be found on the Department of Social Protection website.

Here, we will focus on two common classes of PRSI:

• Class A which applies to most employments
• Class S which generally applies to self-employed individuals and directors who have a controlling interest in their company

PRSI Rates

The rate of PRSI to be paid under each class can be found on the Citizens Information website and may be updated each year during the budget.

For employees under Class A, PRSI is dealt with under the PAYE system. Employee PRSI is deducted from an employee’s wages. Employers PRSI is paid by the employer.

Self-employed individuals pay PRSI in their annual tax return. Directors on class S will be dealt with under the PAYE system.

PRSI class A and PRSI class S – Entitlements

When it comes to social welfare entitlements there is a vast difference between PRSI class A and PRSI class S as follows:

Social welfare benefits and pensions under Class A PRSI

• Adoptive Benefit
• Carer’s Benefit
• Illness Benefit
• Health and Safety Benefit
• Invalidity Pension
• Maternity Benefit
• Occupational Injuries Benefits
• State Pension (Contributory)
• Guardian’s Payment
• Treatment Benefit
• Jobseeker’s Benefit
• Widow’s/Widower’s Pension (Contributory)

Social welfare benefits and pensions under Class S PRSI

• Maternity Benefit
• Adoptive Benefit
• Paternity Benefit
• Widow’s, Widower’s or Surviving Civil Partner’s (Contributory) Pension
• State Pension (Contributory)
• Treatment Benefit Scheme
• Invalidity Pension

Under either class, you may be entitled to Job Seekers Allowance provided you meet the conditions.

Let us help you

At Cronin & Company, we offer outsourced payroll and bookkeeping services for sole traders & companies across Ireland. Outsourcing payroll and  bookkeeping services enables individuals and small and medium sized companies to maintain adequate accounting records for less than the cost of employing a full-time internal bookkeeper.

Our fully managed payroll team is adaptable to your requirements. Regardless of the size of your business, our service will cater for your individual needs. Please contact [email protected] for further assistance.