Budget 2024 provides tax and social welfare benefits for employees while looking to secure Ireland’s future economic growth. It includes measures to improve living standards, support enterprise, combat climate change, and address skills and housing challenges.
While the context is one of an economy delivering a government surplus, the budget was framed against a backdrop of global uncertainty – economic and geopolitical. The estimated rate of inflation is just over 5.25% for 2023, while a rate of 2.9% is projected for 2024. Unemployment rates in Ireland have dropped again from 4.4% last year to 4.1%, reflecting full employment and a tight labour market.
In introducing the budget, Minister Michael McGrath said that he expects “living standards will improve for the vast majority in the next 12 months, with incomes growing faster than the rate of inflation.”
Employment and taxation
The minister announced several changes that will impact workers’ income and taxes. First, the national minimum wage will rise by €1.40 per hour on January 1, 2024, reaching €12.70 per hour. Simultaneously, the Universal Social Charge (USC) rate of 4.5% will decrease to 4% for salaries between €25,760 and €70,044. These adjustments, the first in five years, will ensure that full-time minimum wage workers remain outside the higher rate of USC, offering some benefits to those earning above the minimum wage as well.
Workers will see a further increase in their take-home pay as the threshold for the higher 40% tax band is raised from €40,000 to €42,000. This change will also benefit married couples and civil partners.
Moreover, there will be additional tax measures to support workers, including increases in personal tax credits, PAYE tax credits, home carer tax credits, earned income tax credits, and the single person child carer credit by €100. The incapacitated child tax credit will be increased by €200.
To enhance labour market accessibility, the income threshold for the Working Family Payment will rise by €54 per week. The CIPD welcomes the reduction in the weekly hours threshold for the Wage Subsidy Scheme, from 21 hours to 15 hours from April 2024. The scheme gives financial support to employers who employ people with disabilities.
In anticipation of managing the aging workforce and retirement costs, there will be a 0.1% increase in all PRSI contributions starting in October 2024. We anticipate this will apply to both employers and employees. An additional PRSI benefit is yet to be announced, expected to be a pay-related benefit for jobseekers.
Given that many people do not fully claim all the tax relief, an extensive public information campaign will be launched with Revenue to raise awareness of the range of tax credits and reliefs available to PAYE taxpayers, to ensure people avail themselves of their full entitlements and receive any refunds that are due.
The Irish Government announced the implementation of the 15% minimum corporation tax rate for large companies as provided for under the OECD Pillar Two agreement. This is a once-in-a-generation reform to the corporation tax system, the culmination of a ten-year global project.
A package of wide-ranging measures to support Irish enterprise, especially SMEs, was also announced. These will be necessary to cover increases in employment costs. It includes an increase in the Research and Development (R&D) tax credit to 30%, and a doubling of the first-year payment threshold to €50,000, providing valuable cashflow support to companies with smaller R&D projects.
The share-based Key Employee Engagement Programme for SMEs will be extended to 2025 and the limit doubled to €6 million. The Employment and Investment Incentive scheme (EII) will be enhanced to support SMEs and start-ups, and further reviewed next year.
In support of entrepreneurship and local businesses, €35 million was allocated to go towards mentoring programmes, digital services, and regional investments, aligning with the government’s goal of fostering regional growth. To support SMEs to understand and avail themselves of the range of business support schemes, the Revenue Commissioners will look at ways to modernise and simplify tax administration.
A Future Ireland Fund will help to protect living standards and public services for current and future generations, with a potential to grow to over €100 billion by the middle of the next decade.
And in another positive development, two public consultations were announced, one on the digitalisation of the VAT system and one on share-based remuneration to support rewarding and retaining employees in the context of a globalised workforce.
A much-needed focus on climate action and supporting firms to handle climate change and create sustainable businesses was seen through the establishment of an Infrastructure, Climate and Nature Fund, expected to grow to up to €14 billion by 2030.
A planned increase in carbon tax on 11 October 2023 will lead to a 2.5% price rise for diesel and 2.1% for petrol.
The government will continue to stimulate environmentally conscious commuting practices by improving the cycling and walking infrastructure. Simultaneously, the extension of the Benefit in Kind (BIK) scheme for electric vehicle (EV) company cars for an additional year underscores a commitment to incentivise greener transportation choices. The 20% public transport costs reduction will be extended to end 2024.
Employers will continue to benefit from the accelerated capital allowances scheme for energy efficient equipment for a further two years. By 2030, Ireland will have 80% of its energy from renewable sources as the government continues to invest in wind and solar.
In this area, with the benefit of Skillnet funding, the CIPD has launched a Sustainable HRM Skillnet to help HR professionals build knowledge and contribute to a sustainable people framework.
Social welfare and families
Minister O’Donohoe announced significant increases in social welfare payments, and a package of winter payments to address the cost-of-living crisis.
The maximum rate of all weekly social welfare payments will increase by €12 from January 2024 with proportional increases for qualified adults and people on reduced rates of payment. This increase applies to social insurance payments paid to employees such as Maternity / Paternity / Adoptive / Parents Benefit as well as Illness / Health and Safety / Injury Benefit and Carer's Benefit. Where employers make a top-up payment (on top of social welfare payments), the increase in these state payments will result in a cost saving for employers of €12 per week per person receiving the benefit.
The minister called out the need to tackle child poverty, with the ambition of making sure Ireland is one of the best places in which to be a child. A range of payment increases were announced to support families. The National Childcare Scheme will facilitate a 25% reduction in childcare costs from September 2024, a long time away for many parents, but the shortage of places was not addressed. Parents Benefit will be extended to 9 weeks from August 2024, and there will be an increase in the income threshold for the Working Family Payment.
Education and skills
The government is taking steps to increase investment in education and skills, and improve accessibility. They have allocated €10.5 billion to the Department of Education for various projects, including school construction, transportation, and providing free books to promote inclusion.
Higher education is receiving €60 million, which will support increased capacity for medical programmes and extend funding to postgraduate students. Additionally 16,000 more places will be available in the Craft Apprenticeship scheme, contributing to housing and climate action efforts.
Notably, there will be a once-off reduction of €1,000 in the student contribution fee for eligible students, a once-off 33% reduction in contribution fees for apprentices in higher education, and a €1,000 increase in the Postgraduate Tuition fee contribution for student grant recipients. These measures are intended to make education more affordable and accessible, investing in the future workforce.
The National Training Fund, which addresses labour market skill needs and promotes lifelong learning is in surplus due to increased PRSI contributions and lower unemployment rates. The Irish Government is considering future management options for the fund. This will support efforts to hold on to Ireland’s status as the most educated workforce in Europe and provides an opportunity to address the current digital skills shortages.
The Budget has to show it can deliver for a workforce hit by the cost-of-living increases, for businesses dealing with increasing costs, for an economy facing volatility and a society demanding improved services.
The CIPD hopes that the childcare and family measures will make it easier for people to stay working while balancing their family’s needs. The investment in education is necessary to expand access and deliver much needed skills for Ireland’s future workforce. While an unprecedented housing budget was proposed, urgent progress is required to ease the pressure on workers, and hence employers, in relation to the availability and affordability of housing. The expanded renters’ tax credit will do little to alleviate the pressures on rented accommodation.
The schemes that will ease the impact of energy costs, support climate action, make it easier to access public services and open access to education and employment are positive steps forward.
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