Country Payroll Spotlight: 7 Key Facts about Payroll in Ireland
As part of our continuing effort to help payroll professionals everywhere address the complexity of global payroll, we’re asking our internal experts about the unique challenges and requirements of processing payroll in some key countries. In this spotlight, we take a closer look at Ireland, the innovative island nation known for its charming people, practical creativity, and thousand welcomes. Here, our local payroll expert offers seven insights for multinational employers looking to learn more about processing payroll in Ireland.
What do global organizations need to know before setting up their payroll in Ireland?
Ireland is very welcoming of foreign businesses and investment, but employment law and taxation requirements are quite detailed and specific. Companies looking to expand into the country should be sure to follow the correct steps to set up their business and take the time to understand what’s required. For example, a local entity is required to process payroll; however, payments do not need to be made from an Irish bank account.
Companies must obtain an Irish tax registration number and register for the Revenue Online Service (ROS). To process payroll, they’ll need to register for PAYE, which is the Pay As You Earn taxation system used in Ireland. Payroll reporting requirements changed substantially at the start of 2019, so it’s important for companies to check that they’re using up-to-date information when planning a move into Ireland.
Can you describe a unique challenge or requirement for global payroll in Ireland?
Understanding the various tax bands and rates, and the social contributions that need to be calculated and paid on behalf of every employee can be challenging for payroll teams just getting started in Ireland. Tax bands are set every year, and income up to the established thresholds is taxed at the standard rate of 20%, with any additional income taxed at 40%. That sounds straightforward enough, but there are several tax credits and relief schemes that can alter employees’ tax liability, so it’s vitally important to maintain accurate employee data.
The vast majority of Irish employees pay the Universal Social Charge (USC), a sort of catch-all tax used for social benefits and services, such as the health service. Many also make automatic contributions to the Social Insurance Fund, which is known as PRSI. These contributions are withheld directly from employees’ pay every cycle through the PAYE system. However, employers must stay up to date on these tax implications because the responsibility of ensuring all workers in Ireland receive basic employment rights rests with them.
How can global enterprises benefit from doing payroll in Ireland?
While it can take getting used to, the Irish system benefits from a straightforward approach to payroll and taxation. The country has implemented modern, real-time reporting of pay and taxes, and employees themselves can view their tax and contribution amounts via a self-service portal on the Revenue website. In general, the legislation affecting payroll is clear and equitable, and most workers understand what to expect on their payslips, regardless of how satisfied they may be with the amounts deducted. Additionally, there are a number of resources available to help employers understand and meet their obligations around employment and payroll.
Why is Ireland a good location for multinational organizations?
The list of benefits for multinationals operating out of Ireland is a compelling one. Logistically, Ireland provides easy access to both Europe and America. Financially, the nation offers a low rate for corporate tax, as well as valuable incentives and tax credits for business initiatives like research and development. Culturally, it’s a warm and welcoming country with highly educated, skilled workers who are at ease interacting with international colleagues and customers. In recent years, Ireland has become a global hub for technology and innovation, and its strong rebound from the economic recession is continuing with one of the top growing GDPs in the region.
How have the recent changes in compliance regulations and implementation of GDPR affected payroll operations in Ireland?
As the international home of many data-reliant global organizations, Ireland always had to keep up with data protection capabilities and requirements. In the lead-up to GDPR, in addition to introducing programs to help business leaders and entrepreneurs prepare for the new law, the government and local agencies worked to educate employees and citizens about their rights under the new legislation. So beyond ensuring accurate, secure data management throughout the payroll process, payroll teams must be prepared to support employees exercising their rights under GDPR. A key part of staying compliant and avoiding penalties going forward will be proper data maintenance and optimized payroll processing, so that’s the focus for many payroll teams.
What is the typical payroll window in Ireland, and what can organizations do to shorten that cycle?
The large majority of payrolls in Ireland are processed on a monthly basis, although we also run weekly, semi-monthly, and even quarterly payrolls. Although the average calendar window for processing is just under one work week, there really is no typical window. The length of the payroll cycle depends on the frequency, size, and complexity of the specific payroll. One way payroll teams can reduce the time required to process a payroll is to ensure the timely input of accurate, complete data into the payroll system.
Ireland recently overhauled its system for pay reporting, continuing the global trend toward digital, real-time reporting. How has this impacted payroll operations in Ireland, and what should employers know?
The modernized PAYE system was introduced in January 2019 and enables direct communication between payroll and Revenue by way of the ROS system. Effectively, the new system eliminates the “P forms” previously used by payroll departments to document and report employee earnings and taxes, and instead relies on the digital, real-time transfer of payroll information.
Although the change doesn’t alter how payroll is processed in general, it has made a dramatic difference to the way teams facilitate that processing. As payroll departments face key employee events for the first time, such as leavers or new benefit claims, they have to process the information in a new way. It’s important for employers and managers to understand that may take some time to adapt to. The upside is that the new system provides valuable real-time employee data and reduces year-end processes.