- By Andy Flower
- Published 11/9/2012
The employer and employees participating in the TaxSaver Commuter Ticket Scheme can save considerable amounts on tax and PRSI payments. This is one of the chief reasons that this scheme attracts employers and employees. Here are a few details that will help you understand the way the scheme benefits the employers and employees.
The salary sacrifice arrangement forms the basis of the savings. To understand the savings for the employer and the employees, you need to understand the way the salary sacrifice arrangement works and the way it affects the tax and PRSI payments. An example will illustrate this with ease.
Suppose an employee earns €20,000 per annum. If the annual ticket that he requires costs €1,040 and he gets it from the employer as per the TaxSaver Scheme, he only needs to pay €20 per week, which will equate to €1,040 in a year. He does not need to pay the entire cost of the ticket at once.
As he sacrifices part of his salary package to get this ticket, the tax and PRSI payments are calculated on the salary he receives on the reduced salary. Therefore, he has to pay tax and PRSI based on his reduced salary, which is €18,960. He also gets to use the commuter ticket for the entire year.
The employer, on the other hand, claims an expense on the basis of the salary he pays to the employees. When there is no salary sacrifice arrangement, the employer may claim an expense of the €20,000 he pays to the employee and the PRSI he pays on it. The PRSI payment figure, applying the 10.75% rate, is €2,150.
With the salary sacrifice arrangement in place, the employer pays only €18,960 to the employee and may claim an expense of the €18,960 as well as the PRSI for it, which is approximately €2,030. This saves a considerable amount of money. Moreover, there is also the deduction of the cost of the ticket.
As the statistics reveal, participation in the commuter scheme makes it possible for employers to save approximately 10.75% on the PRSI payments. The employees also benefit considerably from this scheme; they save approximately 47% on their travel costs. An employer may use this as part of the employee retention policy in the organisation.
The employees need not bother standing in long queues to get the Irish rail or Dublin Bus tickets for their regular commute. As the scheme is available to all employees, no one working for the organisation has to face this hassle. Moreover, opting for this scheme instead of driving to work in your own car also saves on the fuel and maintenance costs.
An advantage of opting for prepaid tickets is that they save more money than the tickets you buy with cash. For example, the value of an annual ticket for bus and rail is used up by the eighth month. However, you may avail of its benefit for the next four months at no cost. Reduction in travel expenses becomes easy when you avail of the commuter scheme.
Andy Flower is an experienced supplier working on the TaxSaver scheme. He provides a look at the way the scheme offers tax free train and bus tickets for employees. If you are looking more details about the commuter ticket scheme, he suggests you to visit www.travelhub.ie/ for further information.