Understanding Payroll in Ireland: What Global Companies Need to Know About Ireland Payroll
Sandwiched between the North Atlantic Ocean and Great Britain, and sharing its land mass with the UK territory of Northern Ireland, the Republic of Ireland is a perfect blend of old and new. Its population of just under five million people are proud of their friendliness, hospitality and sense of humor, but Ireland also possesses a hard-working, well-educated workforce and a forward-thinking attitude.
Ireland’s economy had enjoyed sustained growth ever since it joined the European Union in 1973, until it was badly hit by the global economic crisis of 2008 and 2009. After a few difficult years, however, the Irish economy has bounced back well: annual GDP rose by almost 70% between 2012 and 2019, by which time it had reached $381 billion. Ireland currently enjoys the fastest-growing economy in the EU, although the full effects of COVID-19 had yet to manifest themselves at the time of writing.
In recent years, many large multinational businesses - including many tech companies - have been attracted to Ireland by its relatively low corporate tax rate of 12.5%, the lowest rate in western Europe by a significant margin. Its capital Dublin, has even been dubbed the ‘Silicon Valley of Europe’ by many. Ireland’s use of a major global currency (the Euro) and its position as an English-speaking country also stand out as advantages. But to make sure you can maximize the potential of these advantages, it’s important to understand the particulars around Irish payroll. This guide sets out the basics:
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 of €60 (approximately £55, $70). 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. After the end of the Brexit transition period on 31 December 2020, companies from the United Kingdom will have to complete a non-EEA registration.
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 six months, but can be extended to 12 months.
Compensation and Severance
As of 1 February 2020, Ireland’s national minimum wage is €10.10 per hour (approx. £9.10, $11.40), although reduced rates apply for workers under the age of 20. The minimum wage does not apply to people employed by close family members or on statutory apprenticeships.
Most businesses in Ireland run working weeks of between 35 and 40 hours. 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. £540, $680) per week of pay.
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.
There are two tax bands, 20% and 40%, although as in the United States, the threshold between these two bands varies between single people, married couples and widows. As of 2020, these range between €35,300 (approx. £31,800; $39,800) for a single person without children, to €44,300 (approx. £39,700; $49,600) for a person who is married. 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.
Beginning in January 2019, Ireland implemented real-time reporting of pay and taxes via the Employer Submission Mechanism. While the pay process in general remains unchanged, employers now have to submit the approved payroll file to Revenue before employees can be paid.
Similarly, the Universal Social Charge (USC) 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. £10,800; £13,600) of annual salary, up to 8% on earnings above €70,044 (approx. £63,200; $79,000).
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 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.
Pregnant women and new mothers can take up to 26 weeks of paid maternity leave and receive €245 (approx. £220; $275) a week. They can also take a further 16 unpaid weeks if they so wish. In the event of a mother dying shortly after the birth, maternity leave can be transferred to the father.
Paid entitlement for paternity leave is two weeks at any time within six months after the birth, paid at the same rate as maternity leave. Additionally, parents can also take up to 22 unpaid weeks of parental leave up until a child turns 12.
There is no statutory requirement for employers to provide paid sick leave to employees that are ill. Workers who find themselves off sick long-term are able to apply for Illness Benefit if they have made sufficient social security contributions. This can last up to two years, and the rate of benefit varies depending on usual wages. The highest rate is €203 (approx. £185, $230) per week, for workers who usually earn €300 (approx. £270, $340) a week or more.
Ireland has nine public holidays each year 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.
Ireland’s corporate tax rate makes it an attractive prospect for multinational businesses, and its tax and employment laws are relatively straightforward compared to some other markets. However, these laws are very thorough and demand strict compliance. 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.