The scheme involves employers providing employees or directors with public transport tickets while saving on employer PRSI payments. Employees participating in the scheme benefit from reduced tax and PRSI payments.
Employees receive tickets either as part of their salary package (salary sacrifice) or in lieu of an annual bonus. Savings arise because tickets are not subject to tax or PRSI and benefit-in-kind does not apply.
1. Firstly, the employee and employer need to agree that the commuter ticket will be:
- A salary sacrifice, i.e. the cost of the ticket is deducted from gross salary. For example if the salary is €30,000 and the ticket costs €1,000, the revised gross salary will be €29,000. The employee will only be taxed on €29,000.
- Instead of a cash bonus
- In addition to salary
Ensure that there is an agreement between the employee and employer as it is in effect an alteration of the terms and conditions of employment. The alteration cannot be made retrospectively. The TaxSaver site provides a sample alteration form which includes a record of the employee’s choice of ticket.
2. The employer then registers on www.taxsaver.ie.
3. Employees should ensure they have the required ID cards.
4. The employer then purchases the tickets online based on the employee’s needs.
- It can take up to 3 weeks for the direct debit to be set up to pay for the tickets, so it would need to be planned ahead of time.
- The monthly ticket option may be more slightly more expensive than an annual ticket but it would save costs if a staff member was to leave mid-year or move house, rendering the ticket worthless.
- Ordering tickets online will need to be done on time to ensure that the monthly tickets arrive before the 1st of every month.
John is due an annual bonus of €1,000 and is on the higher rate of tax. After tax (41%), USC (7%) and PRSI (4%) he will receive €480. His employer will also pay €107.50 in Employers PRSI.
If John decides to take a commuter ticket worth €1,000 in lieu of his annual bonus he pays no tax and his employer saves €107.50 in Employers PRSI. Therefore the €1,000 commuter ticket has only cost him €480.
You can find more information on the scheme on www.taxsaver.ie.
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