Ireland Payroll: Rules, Regulations, and Compliance Guide

Understanding how to process payroll in Ireland is crucial when starting a business in the emerald isle. Notably, the Irish workforce is highly educated and thus is completely aware of salary laws, minimum wages, and payroll deductions.

Thus it is crucial to accurately calculate payroll and pay employees or risk high employee turnover and dissatisfaction.

Employers can refer to this article to ensure accurate payroll processing in Ireland.

Before understanding payroll procedures, employers must know about payroll taxes, policies, and laws governing regulations.  Understanding payslips would be ideal as a first step.

A payslip is a written statement from the employer that depicts the gross pay (non-taxed income, PRSI) and other deductions.

The Payment of Wages Act 1991 informs the payslip structure of an Irish employee. It also entitles employees to a payslip each time they get paid.

Employers must be aware of any changes made to the Act to abide by payroll rules and process payroll in Ireland accurately.

Employers must understand the structure of payslips before setting up payroll in Ireland.

Payslips in Ireland generally include:

• Personal information; name, PPS number
• Name of the employer
• Employer’s registration number
• Pay period
• Total annual income
• Tax credits
• Cut-off points

Refer to the table below to understand the components of the payslip:

Payroll procedures require recording, storing, and calculating employees’ salaries, working days, commissions, bonuses, and taxes.  Employers should do this monumental activity accurately to avoid creating distrust and lower employee morale.

Processing payroll in Ireland can be categorized into three-phase: pre-payroll activities, processing payroll, and post-payroll activities.

Pre-payroll Activities

Pre-payroll activities include all actions leading up to the planning and understanding of the requirements to process payroll.

Understanding Ireland’s payroll laws

Each country has laws governing minimum wages, taxable and non-taxable benefits, social security, and pensions (referred to as payroll taxes). When processing payroll in Ireland, employers need to be aware of laws concerning payroll, which inform an employee’s salary package.

This phase also allows employers to establish company-wide policies on pay cycles, overtime, leave policy, bonuses, benefits, and employer contributions.

Inputs for the Payroll Processing

This step involves gathering the necessary data to process payroll.

This includes, but isn’t limited to:

• Employee’s name
• Employee role
• Number of hours worked
• Overtime
• Bonus & commissions
• One-time payments
• Arrears of Salary
• Penalties

Tax and Deductions

Thirdly, employers must gather data on income tax and the deductions and others required to process payrolls.

This includes,

• Income tax brackets
• PAYE contributions
• USC contributions
• Insurance
• Employee benefits
• Occupational costs levied on the employee

Payroll Processing

Processing payrolls involves gathering the input and calculating the gross salary and net income for the defined period.

Post-payroll Activities

Section 4 of the Payment of Wages Act 1991 entitles employees in Ireland to a payslip at the end of their payroll cycle.

Paying salaries is the last leg of processing payroll in Ireland. Employers must pay salaries in Euros.

The answer to how to do payroll in Ireland is a five-step process.

Step 1: Company Incorporation

To process payroll, one must need to register their company. Company incorporation can be done with the Irish Companies Registration Office (CRO). They can do this online by submitting the A1 form on the CRO website.

However, some entities need to register their company with the CRO but still employ staff members.

Step 2: Employment Tax Registration

Employers must register with the Irish revenue by completing the TR2 form. The TR2 form enables a business for corporation tax, income tax, PRSI/PAYE, VAT, and Relevant Contract Tax (RCT). The form is sent to the regional Revenue Registration Unit.

In some cases, employers can also complete the registration process via their tax advisor using an online form. This can significantly reduce the processing time.

Step 3: Registering for PPS (Personal Public Service Number)

The PPS number acts as the registration number for businesses.

Step 4: Become Familiar With Irish Employment Law

Thirdly, employers need to learn about Ireland’s payroll requirements.

Employers must comply with statutory requirements when processing payroll in any country. Laws around payroll processing in Ireland affect an employee’s paycheck and should be appropriately processed.

Some of them are:

• Minimum wage
• PRSI contributions
• USC
• Income tax

Step 5: Choose In-House Or Outsourced Solution

Employers who have prior experience processing payrolls in Ireland can benefit from reviewing the latest legislation, purchasing the necessary payroll software, and incurring administrative costs.

Especially more extensive operations might opt to hire a payroll specialist in the first round of hiring.

Others, however, may find that enlisting the services of an outsourced payroll specialist is a sensible and cost-effective option for producing accurate calculations, meeting statutory obligations, and doing one of the most critical functions of a fledgling business.

Step 6: Assess The Suitability Of Your Bank Account

Employment tax liabilities must be reported to Revenue as soon as possible after they are calculated. In most cases, they are due for payment to Revenue by the 23rd day of the following month.

Employers can make these payments manually through wire transfers, BACS, or EFT.

The business should have a bank account that is *SEPA compliant to automate the process.

Revenue Online Service (ROS) uses the employer’s SEPA account’s BIC and IBAN to create a Debit Instruction, allowing Revenue to deduct funds on the billing date.

Payroll contributions in Ireland are made by both employees and employers.

When processing payroll, employers need to be aware of the following deductions:

Income tax

Income tax is levied at 20-40%, depending on the salary.

Universal Social Charge (USC)

USC is a tax levied when an employee’s income is higher than 13,000 euros.

Pay Related Social Insurance (PRSI)

PRSI contributions are used to fun social security payments- maternity leaves, carer’s leave, healthcare

Local Property Tax (LPT)

Employees can report to employers any property tax they pay, which employers can deduct from their employee’s salaries.

Income tax

Employers must also stay cognizant of income tax slabs to process payroll in Ireland.

Payroll regulations in Ireland dictate that employers must process payrolls weekly or monthly. By the end of the month, employers are supposed to pay their employees.

There are no payroll rules regarding 13th salaries.

Businesses in Ireland can carry out payroll processes in the following ways:

• Remote payroll – The parent company’s payroll can process payroll for employees in Ireland.  Employers would need to be wary of local payroll rules when processing payroll on a remote basis.
• Internal payroll – Businesses with a subsidiary in Ireland can process payroll for their employees internally or in-house.  Hiring HR professionals familiar with Irish employment and compliance laws is imperative.
• Outsource payroll processing – Small and large businesses can outsource payroll to third parties to save time and costs. This allows companies to focus on core business activities and forget about the hassles of paying employees on time.

Every employer must understand all entitlements and responsibilities concerning an employee’s termination.

When terminating an employee, employers must comply with the Unfair Dismissals Acts 1977 to 2015. According to the Act, employees are terminated under fairgrounds when they are dismissed for:

• Incompetence
• Redundancy
• Workplace misconduct
• Breaking the law

The minimum statutory period of notice employees are entitled to depends on how long they’ve worked for the employer. In some cases, notice periods are stipulated in the employment contract and may entitle the employee to a more extended notice period.

Redundancy or Severance Pay

When employees are dismissed on business closure or reduction in the company’s workforce, they are entitled to redundancy pay..

Employers must abide by payroll rules under The Redundancy payment Acts 1967 to 2014 when processing payments for redundancy. According to the Act, employees are entitled to a statutory minimum to a redundancy payment. However, the minimum entitlement applies only if the employee has worked for two years before termination.

If eligible for redundancy, employers must pay in the following ways:

• The pay every two weeks for every year of service since the employee attained legal working age, and
• One additional week’s pay

Redundancy pay is capped at 600 per week.

If the employee’s salary was below the national minimum wage, the employer must calculate redundancy pay according to the minimum wage for every two weeks of service every year.

When processing payroll, redundancy payments are paid in lumps without being subjected to any payroll tax deductions.

Ireland Payroll Processing Company

In Ireland, payroll processing companies enable employers to offload, making accurate and timely payouts to parent company employees. Depending on their resources and capabilities, employers choose a way to process payroll.

Some businesses use payroll software and process payouts in-house. Generally, such companies would have the HR and accounting expertise.

Otherwise, companies outsource payroll to payroll processing companies to ensure payrolls are processed compliantly.