Minister for Finance Jack Chambers and Minister for Public Expenditure Paschal Donohoe have delivered their Budget 2025 speeches which outline a range of employment-related measures. Here we look at the key employment-related changes…
Income tax
A personal income tax package of €1.6 billion included the following:
- Increasing the main tax credits, the Personal, Employee and Earned Income Credits, by €125.
- Increasing the Standard Rate Cut Off Point by €2,000 to €44,000, with proportionate increases for married couples and civil partners.
- Reducing the 4.0% USC rate to 3% (incomes between €27,382.01 to €70,044).
National Minimum Wage
As of 1 January 2025, the national minimum wage will increase by €0.80 per hour to €13.50 per hour. The entry threshold to the new 3% USC rate will also increase by €1,622 to €27,382, in line with the increase to the national minimum wage. This means that a full-time worker on the minimum wage will see an increase in their net take home pay of approximately €1,424 on an annual basis.
Small Benefit Exemption
The Small Benefit Exemption allows an Employer to provide limited non-cash benefits or rewards to their workers without the payment of income tax, PRSI and USC. The Government has increased the annual limit provided for in the exemption from €1,000 to €1,500 and will also permit five non-cash benefits to be granted by an Employer in a single year. This change will provide greater flexibility to Employers in giving non-tax rewards to their Employees. This means that workers may receive up to three additional tax-free rewards or gifts, for instance to reward exceptional performance, or mark significant life events.
Benefit-in-Kind – Motor Vehicles
The Government have extended the Benefit-in-Kind (BIK) regime for company cars for a further year. An Employee with an electric company vehicle will have an overall BIK relief of €45,000 in 2025 which comprises of the €35,000 electric vehicle specific relief (already in legislation) plus the additional temporary universal relief of €10,000. A BIK exemption for the provision of electric vehicle chargers at the home of a director or employee is also being provided for.
Families and Children
The Government is increasing maternity, paternity, adoptive and parents’ payments by €15 as well as introducing a newborn grant of an additional double child benefit payment, in addition to the first month of child benefit. This will be a €420 payment to families for each newborn child. To provide further support to families raising children, two double payments of Child Benefit will be made to all qualifying households in November and December.
Business Energy Costs
Recognising that rising energy costs have impacts for hospitality and retail businesses, the Government announced an Energy Subsidy Scheme for these businesses worth €170 million. This will provide a support to approximately thirty-nine thousand Organisations.
Infrastructure
€3 billion has been ringfenced for infrastructure spending. The three priorities for this funding will be housing together with water and energy infrastructure.
Key Takeaways for Employers
Employer associations have largely welcomed the measures as tax cuts and cost of living supports are likely to increase consumer confidence and spending. On the other hand, rising labour costs and the overall costs of doing business remain a concern across a number of sectors. While the Energy Subsidy Scheme will go some way to supporting certain Organisations, a higher national minimum wage and the prospect of pension auto-enrolment next year present substantial challenges in the context of labour costs in 2025.