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What global businesses need to know about payroll in Ireland
Ireland’s attractiveness to international businesses has only increased, now that its English-speaking neighbor, the United Kingdom, has left the European Union. Thanks to Ireland’s EU membership and a very low corporate tax rate of 12.5%, it’s no surprise that the banks of the River Liffey in Dublin are packed with offices of multinationals. Google, IBM, Facebook, Twitter, Microsoft, Vodafone, Oracle, and Amazon are just a few of the big names that have established a significant business presence in the country.
After being badly hit by the financial crisis of 2008 and 2009, Ireland’s economy has grown well over the last decade or so, with even the COVID pandemic failing to make a dent in its success. Its GDP figure of around $530 billion for 2022 is more than double what it was just eight years previously. Ireland also boasts a highly educated workforce with a strong work ethic; a friendly and forward-thinking attitude; and strong historical links with the United States in particular.
But if you want to take advantage of all the opportunities of doing international business in Ireland, then it’s vital you understand the ins and outs of business, employment and payroll. This guide covers all the basics.
Getting Started
Businesses looking to get started in Ireland must register their branch within 30 days at the Companies Registration Office (CRO) and pay the filing fee: this is either €40 if done through a paper form, or €20 if completed online using the CORE (Companies Online Registration Environment) platform. If registering as a limited company, you will be required to pay/remit Corporation Tax, Income Tax, PRSI social security and the Universal Social Charge (more information on these later in this guide).
Requirements for registration vary slightly between countries inside and outside the European Economic Area (EEA), although the filing fee remains the same in either case. However, Ireland is keen to promote start-ups from non-EEA countries (which, following Brexit, includes the United Kingdom) through STEP, its Start-up Entrepreneur Programme: businesses with minimum funding of €50,000, capable of creating at least ten jobs in Ireland, and meeting various other criteria are invited to apply.
Employment Considerations
Employment law in Ireland is detailed and precise, and so it’s useful to gain at least a working knowledge of it before you start hiring. Good places to start include the Workplace Relations Commission, the Irish Business and Employers Confederation (IBEC), the Irish Small and Medium Enterprises Association (ISME), and the Small Firms Association. Additionally, the Department of Employment Affairs and Social Protection maintains several Intreo offices, which offer employment and income support, and provide a range of useful services for employers.
A key distinction in Irish employment law is whether a worker is engaged through a “contract of service” or a “contract for services.” Individuals on the former are entitled to the full extent of protections under employment law. Those on the latter are independent contractors who are not guaranteed all of the same rights as employees.
Employers must provide full written terms and conditions of employment within two months of an employee’s start date. Probationary periods typically last for a minimum of three months, but can run up to as long as a year with the employee’s agreement.
Compensation and Severance
Ireland’s national minimum wage has increased a number of times in recent years. There was a substantial increase on 1 January 2024, the rate going up by €1.40 to a minimum of €12.70 an hour (approx. £11.00; $13.70). This main rate applies to workers aged 20 and over, but rates are also going up for 19-year-olds to €11.43 an hour (approx. £9.85; $12.30); for 18-year-olds to €10.16 (approx. £8.75; $11.00); and for workers under 18 to €8.89 (approx. £7.65; $9.60). The minimum wage does not apply to people employed by close family members or on statutory apprenticeships.
There may be more increases in the future: there is a Living Wage campaign in Ireland which has suggested that the minimum for 2023/24 should be at least €14.80 an hour.
Most businesses in Ireland run working weeks of 39 hours, spread across Mondays to Fridays. Normal working hours of 9am to 5:30pm, with a one-hour closure at lunchtime, are common. Working weeks must not exceed 48 hours over a rolling four-month average, and statutory rest periods are defined by EU directives.
There is no specific pay rate laid down in law for overtime, so this must be agreed between employee and employer. However, it is expected that work on Sundays in particular is rewarded with a premium. It’s also important to note that work-life balance is valued very highly in Ireland, and so working late nights or weekends to complete tasks that can wait until the following business day is uncommon.
Termination notice periods vary from one week (for workers serving between three months and two years) to eight weeks (for workers serving 15 years or more). Severance pay is not a legal requirement, but in the event of redundancy, those who have two years’ service or more are entitled to two weeks’ pay per year of service plus one extra week’s pay. This entitlement is capped at €600 (approx. £520, $650) per week of pay. This is a minimum entitlement for severance pay, however, better terms over and above this can be negotiated and agreed in contracts.
Tax & Withholding Considerations
Income tax is deducted by employers directly from employees’ salaries through the Pay As You Earn (PAYE) system, which employees can access online through the Revenue website. Ireland has now implemented real-time reporting of pay and taxes via the Employer Submission Mechanism, meaning employers now have to submit the approved payroll file to Revenue before employees can be paid.
There are two tax bands, 20% and 40%, although as in the United States, the threshold between these two bands varies, depending on relationship/marital status. As of December 2023, the 40% threshold kicks in for a single or widowed person without children at €40,000 (approx. £34,500; $43,000). For a married couple with one household income, the threshold is €49,000 (approx. £42,000; $53,000), and for a two-income married couple it’s €80,000 (approx. £69,000; $86,000).
The amount of tax relief an employee is entitled to is defined by Ireland’s comprehensive tax credit system, which gives annually updated rates of relief for varying statuses of age, personal life and disability.
Social security (PRSI) contributions are 4% by the employee, and 11.05% by the employer (although the latter rate reduces to 8.8% for employees who earn less than €441 a week (approx. £380; €475). Employees are also required to pay the Universal Social Charge, which must also be withheld by employers from their employees’ weekly or monthly salaries and paid through the PAYE system. Rates of contribution vary between 0.5% for the first €12,012 (approx. £10,300; $13,000) of annual salary, up to 8% on earnings above €70,044 (approx. £60,500; $75,500).
Most Irish residents can access healthcare for free, or for a small fee, although many employers choose to offer subsidized health insurance schemes so that employees may cover themselves for private care. The Irish state retirement age for pension purposes is currently 66, after which they can receive state pension if they have made sufficient social security contributions.
Holiday and Leave Considerations
Employees who work at least 1365 hours a year (39 weeks of a 35-hour week) are entitled to four weeks’ paid leave per year, although this can be increased if employer and employee contractually agree. Part-time workers get an annual leave entitlement of 8% of the total hours they’ve worked.
Pregnant women and new mothers can take up to 26 weeks of paid maternity leave and receive €262 (approx. £225; $285) a week; this must include the two weeks immediately before the due date and the four weeks after it. They can also take a further 16 unpaid weeks after the end of their paid maternity leave if they so wish. In the event of a mother dying shortly after the birth, maternity leave can be transferred to the father.
Paternity leave entitlement in Ireland, for fathers or non-birthing partners, is seven weeks; this is usable in one block at any point within the first six months after birth. Employers are not required to provide paternity pay, but fathers who have made enough social security contributions will receive state paternity benefits. Additionally, parents can also take up to 26 unpaid weeks of parental leave up until a child turns 12.
Ireland introduced statutory sick pay, at the rate of three days per year, at the beginning of 2023. This entitlement will rise to five days in 2024, seven days in 2025, and ten days from 2026 onwards. This is paid at either 70% of the employee’s normal pay rate, or €110 per day (approx. £95; $120), whichever is the lowest. These paid sick days do not necessarily have to be taken consecutively, but a medical certificate confirming the illness is required.
Ireland has ten public holidays each year (the majority of which are Mondays) in which most businesses are closed, while Good Friday is also similarly observed by most businesses. Days off in lieu or extra day’s pay are often given for fixed-date holidays like Christmas that fall on weekends, although this is not compulsory. It’s also important to bear in mind that Sunday is still widely considered a day of rest in Ireland, especially outside Dublin and other major cities. Many shops and petrol stations still close on Sundays, although restaurants and pubs generally open.
In Summary
There’s lots to love about doing business in Ireland: a low corporate tax rate, straightforward tax and employment laws, English as a main language, and a highly educated workforce. However, ensuring compliance with all payroll and employment regulations is a must. With the aid of an effective global payroll partner, you can ensure you meet all necessary requirements right from the start, and enjoy all the advantages Ireland has to offer.
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.