Employees rarely get to take home their gross pay. Gross pay is pay before deductions. A deduction is a sum of money that is taken from an employee’s gross pay. It is very important that employees understand the deductions from their gross pay.
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A deduction is a sum of money that is withheld from an employee’s gross pay.
Deductions from an employee’s gross pay can be statutory or non-statutory.
• Statutory deductions are deductions that must be paid. For example, income tax.
• Non-statutory deductions are deductions that an employee chooses to pay. For example, health insurance. Non-statutory deductions are sometimes called voluntary deductions.
Statutory Deductions i
We will learn more about tax in chapter 33
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Statutory deductions are deductions that must be paid.
There are three main statutory deductions in Ireland: 1. Income tax for employees is collected by Pay As You Earn (PAYE). The
more income a person earns, the more tax they pay. This tax is collected in Ireland by the Office of the Revenue Commissioners. Income tax is used to pay for the running of our country, such as education, healthcare and the emergency services.
2. Pay Related Social Insurance (PRSI) is calculated as a percentage of an employee’s gross pay. The government use the money collected from PRSI to pay for unemployment benefit, Maternity Benefit and Illness Benefit. By paying PRSI, an employee is entitled to these benefits should they need them in the future.
3. Universal Social Charge (USC) is calculated as a percentage of an employee’s gross pay, depending on the amount the employee earns. It was introduced by the government in 2011.
Find out the current rates of income tax, PRSI and USC (you will find them on citizensinformation.ie or revenue.ie). Record them in the Economy Watch section of your Activities and Accounts Book.
Non-statutory Deductions i
Non-statutory deductions are deductions that an employee chooses to pay.
