Deductions Taken from Pay

1. Compulsory Deductions

Income Tax/Pay As You Earn (PAYE) System

Definition

• The PAYE system is a method of tax deduction from an employee's salary or wages, directly remitted to the Revenue Commissioners by the employer.

Application

• It is calculated based on the individual's income, with consideration for tax credits and standard rate cut-off points.
• Tax rates in Ireland are progressive, meaning they increase with the level of income.

Examples

• For instance, an individual earning €35,000 annually might pay a certain percentage in the standard rate and a higher percentage for earnings above the cut-off point.

Pay Related Social Insurance (PRSI)

Definition

• PRSI is a contribution made to the Social Insurance Fund, which provides for social welfare benefits and pensions.

Application

• The rate depends on earnings and employment type (e.g., employee, self-employed).
• It entitles contributors to a range of social welfare benefits, including jobseeker's benefits, illness, maternity, and pensions.

Examples

• An employee earning a weekly wage may see a fixed percentage of their salary deducted for PRSI.

2. Voluntary Deductions

Private Health Insurance

Definition

• Contributions to a private health insurance plan, providing coverage beyond what is offered by the public health system.

Application

• Deducted from the salary at the request of the employee.
• Provides benefits like faster access to treatment and private hospital rooms.

Examples

• An employee may opt to have €200 monthly deducted for a comprehensive health insurance plan.

Pension Contributions

Definition

• Contributions to a pension scheme, either a workplace pension or a personal pension plan.

Application

• Helps in building a fund for retirement.
• Can be a fixed amount or a percentage of the salary.

Examples

• A deduction of 5% of monthly gross income towards a retirement fund.

Union Fees

Definition

• Membership fees for a trade union or professional organisation.

Application

• Provides access to union services, including legal advice and representation.
• Typically a fixed amount deducted monthly or annually.

Examples

• €15 per month for union membership in a teachers' union.

Savings

Definition

• Voluntary deduction for saving purposes, often through a company savings scheme.

Application

• Encourages regular savings by direct deduction from salary.
• Can be used for various purposes, like emergency fund or specific purchases.

Examples

• Monthly deduction of €100 into a company-sponsored savings account.

Loan Repayments

Definition

• Repayment of loans such as credit union loans, car loans, or other personal loans.

Application

• Deducted directly from salary for convenience and to ensure timely repayment.
• Amount and duration depend on the loan terms.

Examples

• €250 monthly for a car loan repayment directly from salary.