Have a good long look at last month’s payslip because your employer and the Government have helped themselves to a big chunk of your next one
SET YOUR faces to stunned. Those of you with jobs will get a surprise when you open your monthly payslips this week.
The budget measures the Government announced are about to come into effect, and the last figure on your payslip is going to shrink as the country gets a collective pay cut. In the days after the budget cutbacks were announced, many people sat down with pens and spreadsheets and tried to figure out just how the hiking of the pension levy, the health levy, PRSI, and the reductions in mortgage interest relief and the early childcare supplement, would clobber their wallet.
“We started to look at the figures on the night of the budget, but we just gave up after a while,” says Seán, a married man who works in a Dublin marketing company. “It wasn’t just that the maths were a bit beyond me, it was also a bit of a grim task. So we quit trying to figure out what might happen and decided that we’d just wait until the payslips did the job for us.”
This week, then, companies’ salary departments are about to answer that question. Of course, those who are paid weekly will already have noticed the changes. Some even have complained that the changes were in their pay slips from the week ending on May 1st. There was also a row within the public sector, when clerical officers and similar grades were hit by the income and health levies in the first week of the month, when those at a higher grade who had been paid only a few days earlier managed to escape it.
However, the general anger may not be there. “I haven’t noticed that much discussion of it,” says Brendan Burgess, founder of the financial forum askaboutmoney.com. “Most of the talk about it was in early April, when the Budget was announced. A lot of talk at the time was that when it hits salaries in late May, it will have a big impact on the elections, but I haven’t heard people shouting about it recently.”
For those who haven’t had the full cost revealed to them yet, here’s a quick breakdown of what’s about to hit your pay packet. You might want to look away now. Especially if you earn €75,037 a year.
It’s not just that the income levy rates doubled as of May 1st, but the threshold was lowered too. If you earn more than €15,028 a year, you’re now paying a 2 per cent levy on all income up to €75,036. After that, it’s 4 per cent up to €174,980, and after that again you’re getting hit for 6 per cent – although if you earn more than €174,980 a year, you may not find much sympathy for your plight.
Meanwhile, the health levy, which insured workers pay out to fund the health service, has doubled to 4 per cent for anyone who earns between €26,000 and €75,036 and 5 per cent after that. And finally, the PRSI ceiling has gone up from €52,000 to – you’ve guessed it – €75,036.
Many workers have already taken pay cuts – up to 20 per cent in some cases, and not just for those on very high wages – and others are working three-day weeks.
Meanwhile, the start of this month also saw the early childcare supplement, payable to families with children under the age of five, halved to €41.50 a month before it gets phased out at the end of the year. And if you’ve owned a house for more than seven years, your mortgage interest relief has vanished too.
In a year during which they’ve had their wallet rifled through time and time again by either employers or the State, May has been a hard month for many people. On the upside for the consumer, there has been a decline in the cost of living so dramatic that, according to the Central Statistics Office, it is declining at its fastest rate since May 1933.
The annual rate of deflation is now running at 3.5 per cent, and much of this is thanks to the drop in mortgage rates, from which some – though not all – homeowners have been benefiting in recent months. However, the positives brought about by the fall in the cost of living won’t come close to balancing out the cuts.
“I think the vast majority of people fully appreciate that there’s an empty desk beside them where somebody went from earning €5,000 a month to €200 a week on the dole,” says Brendan Burgess. “In my limited experience, most people are happy not to be unemployed.”
The common advice from financial planners seems to be to budget accordingly, cut down on luxuries, avoid getting into heavy debt, and to frame last month’s payslip. You might never see its like again.
