Not many have escaped the effects of Budget 2013 announced in Dáil Éireann yesterday afternoon, and employers are no different. We have outlined below the main points from Budget 2013, which employers should be aware of.
From 1 January 2013, the statutory redundancy employer rebate will be abolished. No rebate will apply where the date of dismissal by reason of redundancy occurs on or after 1 January 2013.
The date of dismissal is the date that notice of termination of employment expires, regardless of whether the employee is paid in lieu of notice or whether he/she is required to work through his/her notice.
Effectively, this means that in order be entitled to a statutory redundancy rebate, the date of dismissal must be on or before 31 December 2012, which, given that employees must be given at least two weeks’ notice of redundancy, means that there is a very narrow window for employers to implement redundancies this year in order to avail of the rebate.
From 1 January 2013, maternity benefit will be treated as taxable income, however it will be exempt from the Universal Social Charge ("USC").
This is quite a controversial move as it introduces the concept of taxing a social welfare benefit. Whilst it is yet to be seen how this measure will operate in practice, it is possible that the maternity payment will be made directly to the employer, who in turn will process that payment through its payroll system as normal. Where the employer “tops up” the employee’s salary, then the maternity benefit portion of the salary will be taxed as income in the normal manner, save as to the application of the USC. Where the employer does not “top up” the employee’s salary, depending on the employee’s tax credits, the maternity benefit may be subject to limited tax.
Where an employer makes an ex-gratia termination payment to an employee, generally the employee can avail of certain taxation reliefs on that payment, which makes the “deal” more attractive in the first instance.
One of the reliefs, quite often utilised by higher earners, is known as “Top-Slicing Relief”. From 1 January 2013, this relief will not be available to those in receipt of ex gratia lump sums of €200,000 or above.
Therefore, for terminations currently in negotiation, we would recommend that they are finalised and the termination payment is paid to the employee on or before 31 December 2012.
From 1 January 2013, employees who earn in excess of €352 per week will have their PRSI-free allowance abolished. It is likely that these changes should be automatically applied in an employees’ tax credits for the year, however, an employer should ensure that its payroll system recognises and applies this change.