Understanding Payroll in Ireland: What Global Companies Need to Know About Ireland Payroll
Mar 12, 2017
Ireland offers multinational companies a business-friendly tax environment, highly educated workforce, and the fastest-growing economy in the European Union – making it a prime location for global expansion.
Like other European nations, Ireland’s economic future will be impacted by British citizen’s recent vote to vacate to the EU. Ireland is dependent on the UK mainland for trade, so global companies with import/export operations there will be keeping a close eye on how Brexit plays out. They should also keep close watch over the nation’s nuanced, shifting, and (in some instances) complex payroll laws and business regulations.
For example, Ireland recently made it possible for companies engaging in research & development in Ireland to take advantage of a 6.26 percent corporate “knowledge development box” (KDB) tax rate for revenue and royalties derived from intellectual property held in Ireland. However, Ireland in turn made paying taxes more costly and complicated for global organizations by increasing landfill levies and adding new disclosure requirements for filing income tax returns.
As these and other changes impact global companies, working with a trusted global payroll solution can help multinational organizations maintain compliance with the Ireland payroll guidelines. Read on for a primer on the key considerations to know.
A company is required to have an Irish legal entity established in order to process a payroll in Ireland. For multinationals, registering as a Limited Company with the Companies Registration Office (CRO) typically takes 2-4 weeks.
From there, the organization needs to obtain a company seal and register with the Revenue Commissioners in order to satisfy its VAT tax and social insurance requirements. While payroll and social insurance (PAYE/PRSI) registration is immediate, VAT registration takes 5-10 days for approval. Setting up an in-country bank account is not necessary as it is not mandatory to make payments to employees from an in-country bank account.
Employment relationships in Ireland are governed by an extensive statutory framework of country laws and EU directives. Employment contracts are not legally required, but employers are generally obliged to furnish employees with a statement (at minimum) of the main terms and conditions of employment. However, a probationary period will only be effective if expressly mentioned in a contract.
To hire a foreign worker, the employer or employee must obtain a General Employment Permit based on the offer of employment. General Employment Permits are not issued in instances where the granting of a permit would mean that more than 50% of a company’s employees are non-European nationals.
Nearly all income is liable to tax in Ireland, and employers deduct tax on employee’s income from his or her wages in compliance with the Pay As You Earn (PAYE) system. Income taxes range from 20 to 40 percent based on the individual’s salary and circumstances. New employees in Ireland require a Personal Public Service (PPS) number in order to receive credits for their income tax and social security obligations. If the employer must process payroll for the employee before a PPS number is obtained, he or she will be taxed 40% on all earnings until the tax credits are established.
The Universal Social Charge (USC), implemented in 2011, is an additional tax on employee’s gross income and benefits-in-kind from all sources, before any tax reliefs, capital allowances, losses, or pension or social security contributions. It is charged at a progressive rate of 2-8% depending on employee income; employees cannot use tax credits to reduce USC payments.
Social security contributions from both employer and employee are also required to satisfy Pay Related Social Insurance (PRSI) obligations. PRSI payments cover a range of social welfare benefits and employee contributions are determined by “class” (i.e., nature of work) and income. The individual’s income level determines how tax credits are applied to employees’ payment obligations. Employers contribute to PRSI at a rate of 8.5 to 10.5 percent for Class A employees (the most common classification).
The minimum wage in Ireland increased to €9.25 an hour on January 1, 2017 from the earlier minimum of €9.15 an hour. As a common practice, many employers offer increased hourly pay for those who work unsocial (or “unsociable”) hours, such as night or weekend shifts. While Irish Labour Law stipulates that the maximum average weekly working hours (including overtime) over a 4-month period cannot exceed 48 hours, there are no legal guidelines around overtime as it is subject to the guidelines of an employment contract or collective agreement.
An 8-hour day, Monday-Friday workweek is common across Ireland. Employers are required to give employees a pay slip (either hard copy or electronic) that shows the gross wages before tax in addition to all of the deductions from their pay. Payroll records must be retained for 6 years.
Ireland legislation provides a basic annual leave entitlement of 4 weeks, paid to the employee in advance at the normal weekly rate. On termination of employment, payment in lieu of untaken accrued annual leave is typically required. Full time employees are entitled to public holiday benefits.
Female employees are entitled to a paid maternity leave of 26 consecutive weeks plus 16 weeks unpaid maternity leave. Paternity leave is not provided for in Irish legislation, but employees who have been with an employer for over a year are eligible for unpaid parental leave of eighteen weeks each for both parents. An employee has no legal entitlement to sick pay; it is at the discretion of the employer.
|Date||Ireland's Public Holiday Schedule|
|January 1st||New Years Day|
|March 17th||St. Patrick's Day|
|Monday after Easter Sunday||Easter Monday|
|First Monday in May||May Bank Holiday|
|First Monday in June||June Bank Holiday|
|First Monday in August||August Bank Holiday|
|Last Monday in October||October Holiday (Halloween)|
|December 25th||Christmas Day|
|December 26th||St. Stephen's Day|
Although payroll in Ireland presents a number of challenging requirements and regulations, multinationals in the country can achieve ongoing success and streamlined operations with the right global payroll strategy. The support of an international payroll managed services partners can be highly valuable for global companies as they look to launch or expand payroll in Ireland in compliance with all applicable requirements.
This article is for informational purposes only and not intended to convey or constitute legal or any other advice. It is not a substitute for advice from a qualified professional.