WHO IS THE BETTER OFF – A PAYE WORKER OR A PUBLIC SECTOR EMPLOYEE?
EY examined whether an individual earning €50,000 would be better off under Budget 2018 as a PAYE worker, a public servant or a self-employed individual. The individual is single and has no children. It is the self-employed individual whose takehome pay has risen most since 2006 — largely due to the introduction of the earned income tax credit in 2016 and the increase of that credit in 2017 and 2018. The earned income tax credit was introduced to address a discrepancy whereby employees could get a tax credit for PAYE income earned — but self-employed individuals couldn’t get a tax credit for income they earned. There was no earned income tax credit in 2006.
A self-employed individual earning €50,000 will take home €878 more next year than he did in 2006. A self-employed individual earning €50,000 is about €17 a week better off under Budget 2018 than he was at the height of the boom.
The increase in the amount that all taxpayers can earn before getting hit for the higher rate of income tax has also benefited the self-employed individual — as has the reduction in the top rate of income tax.
A PAYE worker earning €50,000 will take home €3 more under Budget 2018 than he did in 2006, according to EY. Although the self-employed individual has seen the biggest increase in take-home pay since 2006, it is still the PAYE worker who is coming home with more money after tax.
The PAYE worker in this case takes home €36,548 of his pay after tax — while the self-employed individual takes home €36,048.
By contrast, a public servant on €50,000 will take home €1,272 less pay (or €24.50 less a week) under Budget 2018 than he did in 2006. This is largely due to the impact of the pension levy on the public servant’s income. So when it comes to take-home pay, a public servant earning €50,000 is in a much worse position than a self-employed person or PAYE worker on the same income.