What is PRSI?
Pay-related social insurance (PRSI) is a form of compulsory insurance which is payable from the income of employees, employers and the self-employed. The contributions collected are used to finance the expenditure of the Department of Social, Community and Family Affairs, which administers the system. The idea is that you can draw on your contributions by claiming social welfare benefits if, for example, you become unemployed, or if you have no old age pension.
PRSI is a form of double taxation, since it is levied on income which is also subject to income tax. As an employee, you are faced with a marginal tax rate of up to 55% (composed of 40% income tax, 4% PRSI, up to 10% universal social charge). PRSI takes a bigger bite from your income as it comes from gross income, whereas income tax comes from taxable income.