Are you confident that your Pay Related Social Insurance (PRSI) weeks, also known as PRSI Stamps, are correctly accounted for?
In many cases, Payroll processors place blind trust in their systems, not only for calculations but also for granting PRSI weeks for Employees.
This poses a significant risk, potentially leading to compliance issues at a Company level and inaccuracies in PRSI reporting to the Department of Social Protection, also known as the Social Welfare Department.
Those entrusted with the responsibility of processing Payroll should not only understand how to calculate net pay from gross but also be able to account for the number of PRSI weeks granted in a period.
PRSI weeks hold significant importance for all individuals. Incorrect allocation through Payroll can substantially impact Social Welfare benefits in the future. Additionally, if an inaccurate number of PRSI weeks is granted, it could lead to incorrect PRSI monetary amounts for both employees (EE) and employers (ER), affecting the amounts collected, not collected, or submitted to Revenue. This could potentially trigger compliance issues and raise red flags for Revenue.
The days of disconnected operations are long gone —— the Social Welfare Department now works closely with Revenue, ensuring the efficient exchange of Payroll data. This allows Revenue to quickly identify discrepancies and address any issues. Consequently, this can accelerate compliance interventions, a situation everyone aims to avoid.
The Payroll function within any organisation is far more than just a net figure in our bank accounts or a significant expense in the company’s books!
And yet, PRSI weeks in Payroll often receive insufficient attention or consideration, especially for mid-month starters or leavers.
Definition of PRSI week: According to the SW Consolidation Act 2005, Section 2, a contribution week is a successive 7 day period commencing on 1st January each year, aligning with the income tax calendar. If an EE receives payment for any part of a week subject to PRSI, even if only an ER contribution is payable, they are deemed to have made a contribution for that week. For example, an individual who earns 500 euros for 2 days’ work on 7th and 8th January, is deemed to have made PRSI contribution for 2 separate weeks, WK1 and WK2 of the income tax year (7th Jan falls within WK1 and 8th Jan falls within WK2).
A couple of practical examples:
An EE starts on 26th April 2024. He is on a monthly Payroll, with the payment date on 31st May (last working day of a month). May is the first month he gets paid, and he is due to receive 6 PRSI weeks. However, your system will likely only grant 4 or 5 PRSI weeks, depending on the system. The record would need to be manually adjusted on the timesheet to ensure the correct number of PRSI weeks for the EE is processed in May, correctly reported to Revenue and the Social Welfare Department, and the correct monetary amount of PRSI (for both EE and ER) are submitted to the authorities.
Following on from the set of circumstance as per above, a different EE leaves on 16th May. He is due 3 PRSI weeks, but your Payroll system more than likely will grant 4 or 5 PRSI weeks, depending on the system. Again, the record would need to be manually adjusted on the Employees timesheet to ensure the correct number of PRSI weeks for the EE is processed in May, accurately reported to Revenue and the Social Welfare Department, and the correct monetary amount of PRSI (for both EE and for ER) are submitted to the authorities.
We frequently encounter PRSI discrepancies in Payroll and would be more than happy to help you implement safeguards to prevent these avoidable errors.
Tired of preventable Payroll mistakes? We are here to help! Let Evergreen Payroll review your Payroll processes and offer expert guidance to your organisation. Reach out today for accuracy and peace of mind.