On May 10, 2011, the Irish government announced a new Jobs Initiative that provides, among other things, for the abolition of employer Pay-Related Social Insurance ("PRSI") on share-based remuneration, which is retroactively effective as of January 1, 2011.
This development follows the changes made effective January 1, 2011, when gains in income from unapproved stock option plans and RSUs became subject to PRSI (both employer and employee portions) and the Universal Social Charge, and companies not based in Ireland were required to withhold those amounts from the salaries of their Irish employees.
This development to abolish the employer PRSI obligation should represent a significant savings for non-Irish companies in Ireland because they will no longer have to pay the 10.75% contribution rate with respect to income earned on equity awards.
Employee PRSI (and the Universal Social Charge), however, will continue to apply to share awards as previously enacted (i.e., it will apply to all income earned from equity awards granted on or after January 1, 2011). The employee PRSI rate for 2011 is 4% and applies to any income earned above a €127 threshold.
The 2011 rates for the Universal Social Charge are as follows:
- 2% on the first €10,036 of income
- 4% on the next €5,980 of income
- 7% on the remainder
Legislation is expected to implement the Jobs Initiative (and hopefully provide procedures for recovering any employer PRSI contributions already made).