First published: 06/1/2022
Last updated: 14/11/2022
Billed as the ‘cost-of-living’ budget, the Government have announced a range of measures to help ensure the economy survives what looks set to be a difficult winter.
With total budget spending expected to reach around €11 billion, a once-off set of measures (costing as much as €4 billion) have been targeted to reduce the impact of soaring energy costs.
Here we take a look at the key developments for both employers and employees….
Supports for Employers
The budget includes a number of measures to address the business community’s most pressing concerns around surging energy costs. The key support for businesses will be an energy support scheme as outlined below:
1. Temporary Business Energy Support Scheme
This scheme looks set to operate in a similar fashion to the Temporary Wage Subsidy Scheme.
To qualify for the payment, businesses will need to compare the average unit price for the relevant bill period in 2022 with the average unit price in the corresponding reference period in 2021. If there is an energy cost increase of more than 50%, the state will pay 40% of the increase in gas and electricity that businesses are facing subject to a cap of €10,000 per month per business.
The scheme will be administered by the Revenue and businesses will be entitled to claim for September bills. This support will remain in place until February of next year when it will be reviewed.
2. VAT rate for hospitality sector fixed at 9% until February 2023
The Government is keeping the 9% VAT rate for the hospitality sector but only until early next year. The VAT rate for hospitality will return to 13.5% from 1 March 2023.
3. Increase in tax free bonus that employers can give to employees
The small benefit exemption which allows employers to reward staff with a tax-free bonus has increased from €500 to €1,000.
Supports for Employees
With many businesses struggling to attract and retain staff, the following personal supports will help employees and jobseekers ride out the cost-of-living crisis.
These cost-of-living measures are also welcome from an employer’s point of view as they should incentivise people to continue working or to return to work if they have left the workforce temporarily:
1. Childcare costs to reduce by 25%
Childcare fees are to be cut by 25% next year. This move could see working parents retain over €2,000 in disposable income next year.
2. Income tax – top rate of tax kicks in at €40,000
The top rate of income tax will kick in at €40,000 in an effort to put more money in people’s pockets.
3. Household energy bills to benefit from €600 payment
Households will also benefit from a financial support that will see them receive two payments to reduce their home heating costs. The payments will be made either side of Christmas and total €600.
4. Tax credit for renters
Employees (and indeed employers) will be in line to receive a tax credit of €500 for both the 2022 and 2023 tax years.
5. GP visit card extended to 430,000 citizens
More than 430,000 people will be eligible to receive a GP visit card. This means more than half the population will have a GP visit card or a full medical card.
6. Reduced public transport fees extended into 2023
The current price reductions on public transport will also be extended for the duration of 2023.
What does Budget 2023 mean for your business?
The government has moved to address the business community’s most pressing concerns around energy costs. The COVID-19 Temporary Wage Subsidy Schemes allowed employers to manage their way through lockdowns and Budget 2023 includes a range of similar business support measures to help employers survive the ongoing energy crisis.
Further measures that could have an indirect impact on employment include:
Carbon tax to remain static
The carbon tax for petrol and diesel will go up from €41 to €48.50 from 12 October as scheduled. The Government is however proposing to offset the carbon tax increase with a reduction to zero of the National Oil Reserves Agency levy. This move means the price at the pump will not go up.
Pre-letting expenses relief to double
The amount of pre-letting expenses that landlords are entitled to claim tax relief on has been doubled from €5,000 to €10,000.
Special Exemption Order fee for late night events reduced by 50%
The cost of applying for a Special Exemption Order for late night venues has been halved in the from €110 to €55.
The budget’s broad range of personal financial supports should put more money in your employees’ pockets. As an employer, we recommend familiarising yourself both with the personal supports available to employees as well as the financial supports your business can avail of. Helping staff maximise their benefits under schemes like ‘bike-to-work’, the small benefit exemption and harnessing any applicable new cost-of-living measures will allow you to offer staff the most tax efficient and lucrative employment package.
The business environment remains challenging and increased payroll costs will kick in early next year with the introduction of statutory sick pay along with an increased minimum wage.
There is nonetheless a broad range of both business and personal financial supports available for the coming year. In short, these measures should free up more cash for Irish businesses during a difficult trading period and incentivise people to work by enabling them to keep more of what they earn.
To find out more about how to avail of the financial supports announced in this year’s budget, why not speak to one of our employment law and HR experts.