Common reasons for incorrect PRSI and USC calculations

Summary

Common reasons for incorrect PRSI and USC calculations in Sage Payroll.

Description

We all know mistakes can happen, and processing payroll is no exception. Incorrect payroll information causes errors in Pay Related Social Insurance (PRSI) and Universal Social Charge (USC) calculations.

Use this article to check if the following types of information are incorrect.

Resolution

PRSI class

Every employee has a PRSI code, made up of a class and subclass.

TIP:

If you’re not sure which PRSI class to use, contact the Department of Social Protection.

To check an employee’s PRSI class within the software, carry out the following steps:

Select the Employees tab and choose the relevant employee.
In the Current Tax Details section, check the PRSI code is correct.
If you need to change the employee’s PRSI code, select the correct PRSI code from the list. Click Save.

Have you already completed a pay run using the wrong PRSI class for an employee? You can edit the relevant completed pay run.

Payment settings

It’s important to make sure that all the payments you use are set up correctly. Some payment types are not subject to PRSI or USC. These include:

Non-taxable redundancy
Expenses
Illness benefit
Enhanced Reporting Requirements (ERR)

To check that a payment set up is correct:

Select the Settings tab. Select Payment & Deductions.
Open the Payments tab, then select Edit for the payment you want to check the settings for.

It specifies here whether the payment is subject to PAYE, PRSI and USC. Make sure that the payment’s name and description match its purpose.

If the PRSI or USC settings are wrong, you must set up a new payment to replace this one.
Change the name of the incorrect payment first, as you can't delete an existing payment. Add ‘do not use’ to the incorrect payment’s name.
Select Save.

TIP:

Correct any completed pay runs that used the incorrect payment. Replace it with the new payment. You can read our article Edit a completed pay run to rectify the error.

Deduction settings

It’s important to make sure that all the deductions you use are set up correctly.

The following deduction categories are available:

Gross deduction
Deducts from an employee’s pay before PRSI and USC are calculated. An example of a gross deduction is a Salary reduction for unpaid leave.

Net deduction
Deducts from the employee’s pay after tax is calculated. An example of a net deduction is union fees.

Pension
Deducts from an employee’s pay after PRSI and USC are calculated.

To check that your deductions are correct:

Select the Settings tab. Select Payment & Deductions.
Open the Deductions tab, select Edit for the deduction you want to check the settings for.
It specifies here if it is a gross or net deduction. Make sure that the deduction’s name and description match its purpose.
If the PRSI or USC settings are wrong, you must set up a new deduction to replace this one.
Change the name of the incorrect deduction first, as you can't delete an existing payment. Add ‘do not use’ to the incorrect deduction's name.

Select Save.

TIP:

Correct any completed pay runs that used the incorrect deduction. Replace it with the new deduction. You can edit the completed pay run to rectify the error.

Pay cycle

You need to check that your employees are set up in the correct pay cycle. For example, if you want to pay an employee weekly, they should be set up in a weekly pay cycle.

To check that an employee’s pay cycle is correct, carry out these steps:

Select the Employees tab and click on the relevant employee.
In the Employment Details section, check the pay cycle is correct.
If the pay cycle is wrong but you haven’t yet completed a pay run for this employee, this can be amended.
Select the correct pay cycle from the list.
Select Save.

You can now carry on with the payroll as usual.

If you have completed a pay run for this employee using the incorrect pay cycle, you must correct this. Read our article Edit a completed pay run. Correct the relevant pay run to reflect the amount of pay the employee would receive for that pay period.

For example:

You paid a weekly employee in a monthly pay run by accident. Increase the amount of pay they receive to the total monthly amount. Then change them to the weekly pay cycle for the start of the new tax month
You paid a monthly employee in a weekly pay run by accident. Reduce their pay to the weekly amount and continue paying them weekly for the rest of the tax month. Then change them to the monthly pay cycle

TIP:

You need to inform ROS before making this change. Read how to change how often you pay an employee.

Holiday pay

Errors in the way you record holidays can cause problems with PAYE, PRSI and USC.

Previous employment information

Previous Tax details are provided in the first RPN you retrieve for your new employee.

Common reasons for incorrect PRSI and USC calculations

Summary

Description

Resolution

PRSI class

TIP:

Payment settings

TIP:

Deduction settings

TIP:

Pay cycle

TIP:

Holiday pay

Previous employment information

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