Learning how to do payroll in Ireland starts with registering your business with the national Pay As You Earn (PAYE) system and the Pay Related Social Insurance (PRSI), and then getting your employer registration number. After that, the process is similar to the US, but be aware that there are more tax requirements and social obligations in Ireland, such as:
- Maximum weekly work hours capped at 48
- Mandatory paid parental leave
- Mandatory sick leave
- Severance requirements for workers with certain years of service
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Use these seven steps as a guide on how to do payroll in Ireland.
Step 1: Set Up Your Business as an Employer
To do payroll in Ireland, the first thing you need to do is register your business with the Office of Irish Revenue Commissioners. This is where you register with the PAYE and PRSI systems, and where you’ll receive your employer registration number. This information is required to make tax deductions and process payroll correctly, so it must be completed before you hire your first international employee. Make sure you start this process as soon as you know you want to expand your business into Ireland, as this can take up to six months to complete.
If you’re not a resident of Ireland, and you don’t have any owners or directors of your company who are residents of the European Economic Area (EEA), you must take an extra step. You’ll need to purchase the non-EEA Director bond, which protects your company against wrongdoing, non-compliance, and other liability matters.
You will also need a new bank account. You don’t need an Irish bank account, but you need an EU bank account or one from the Single European Payments Area (SEPA). If you plan to hire only Irish citizens, setting up a bank account in Ireland is your best bet.
Step 2: Establish Your Payroll Process & Policies
You’ll want to create a structured process to follow so you don’t miss any vital payroll steps. Consider the following:
- Pay schedule: How frequently will you pay employees? Monthly is most common in Ireland, but you can also pay weekly.
- Type of employees: Full- vs part-time?
- Tracking time: How will you track employee hours, and how will it be reported to you?
- Benefits: What benefits will you offer? Who pays for them? How will you manage the payroll deductions?
- Taxes: How often will you need to pay taxes? What tax rates will you pay? How often do you need to remit taxes and to what agencies?
- Payroll processing and calculations: Will you calculate payroll by hand, Excel, or use a payroll service or software?
- Paychecks: Will you write manual checks, use pay cards, pay via direct deposit, or pay in cash?
The typical Irish workweek is 8 a.m. to 5 p.m., Monday through Friday, with a one-hour lunch break. The full-time workweek is 39 hours. The Irish Organization of Working Time Act 1997 restricts maximum working hours to 48 per week, averaged over four months. The law also states that employees must receive at least one window of 24 hours of rest every seven days, and unless a contract or collective bargaining agreement states otherwise, the 24-hour rest period must include a Sunday. Employees must be given 11-hour rest periods between working shifts.
Ireland does not require overtime pay for hours worked beyond 39 in a workweek. However, many employment contracts and collective bargaining agreements negotiate overtime pay. Some companies also provide overtime pay regardless of contract as an incentive for workers.
To ensure your company processes payroll in Ireland effectively, it’s important that you have policies on the following:
- Benefits: What benefits are required, and how do you remit payments?
- Leaves: What leaves are required to be paid vs unpaid, and at what rates?
- Overtime: At what rate do you need to pay employees’ overtime, and for how many hours?
- Absences: How do you track absences and know whether they’re paid or unpaid, excused or unexcused?
- Holidays: What holidays are paid and at what rate?
Step 3: Determine Salaries & Ensure Compliance
The cost of living in Ireland is similar to the US, currently about 7% less expensive. The average annual salary in Ireland is about €44,200 ($47,200). When determining what you’re going to pay your Irish workers, consider their experience and skills, in addition to the cost of living. You may be able to save a little money by having Irish workers, but you’ll still need to pay competitive rates to ensure you attract and retain the best talent.
Payroll & Employment Law Compliance
Ireland has similar employment and payroll compliance laws to the US and follows many of the employment laws set forth by the EU. It’s vital that you understand the differences and nuances of Irish employment law so that you remain compliant.
Written contracts are not required in Ireland, though companies frequently use them. While that may be the case, employers are required to provide employees with a written statement of terms of employment. This document must be given to employees within five days of starting a new job.
Here’s what must be included in this document:
- Company full name and address
- Employee full name and address
- Physical work location or, if remote, a statement of such
- Date employment commenced
- Job title
- Expected duration of employment, if temporary
- Rate of pay calculation and frequency of pay
- Normal working hours and days
- Probation period and conditions, if applicable
- Terms and conditions relating to overtime
Employee classification is extremely important in Ireland. The Office of Irish Revenue Commissioners has published a Code of Practice on Determining Employment Status. In it, it’s clear that there is no obvious definition of what makes an employee, but rather many factors for determining whether a worker is an employee or a contractor.
- The worker is under the control of another person who directs how, when, and where they work
- The worker supplies labor only
- The company pays the worker a fix hourly, weekly, or monthly wage
- The company supplies all materials and equipment to do the job
- The worker cannot subcontract the work
- The worker takes no financial risk in doing the work
- The worker has set working hours that generally remain the same
- The company provides sick pay, paid time off, and extra pay for overtime
- The company makes payroll deductions
While not every factor must be met, the more of these items that apply to a worker, the more likely they are an employee. To be clear, you can partner with an Irish independent contractor—just make sure they’re actually a contractor and not an employee.
Here’s where Ireland diverts from other EU countries—there is no minimum wage in Ireland. Instead, the country allows companies and unions to determine a minimum wage through collective bargaining agreements.
Ireland bases the workweek on 39 hours over five days. As mentioned above, the maximum hours allowed for an employee is 48, averaged over four months.
It’s also important to note that employees in Ireland are entitled to rest periods between working shifts. You must provide your workers with at least 11 hours of uninterrupted rest in every 24 hour block and at least one day of rest per week that must include a Sunday.
Under the Organization of Working Time Act 1997, Irish employees are entitled to four weeks of paid leave per year. Employers may increase this amount of time off.
Federally regulated employees are entitled to several paid holidays each year. If a holiday falls on a non-working day, employees are entitled to a holiday with pay on the working day immediately before or after the holiday.
- New Year’s Day
- First Monday in February
- St. Patrick’s Day
- Easter Monday
- First Monday in May
- First Monday in June
- First Monday in August
- Last Monday in October
- Christmas Day (Dec. 25)
- St. Stephen’s Day (Dec. 26)
Besides these annual holidays, there are also several bank holidays during the summer months. While there’s no requirement to close during those holidays, most businesses reduce their hours or shut down, giving employees some extra time to spend with their families.
Note that when you’re looking for specific bank holidays, make sure you’re looking at holidays for the Republic of Ireland. You may see holidays listed for Northern Ireland, which is part of the United Kingdom. While the cultures are similar, Northern Ireland and the Republic of Ireland celebrate different holidays.
Maternity leave in Ireland is 26 weeks or 156 days, not including Sundays. At least two weeks must be taken before the due date. A mother can take up to 16 weeks off before the due date. While 26 weeks of maternity leave is paid through the PRSI, mothers may take an additional 16 weeks of unpaid maternity leave after using all 26 weeks.
The entitlement for paid maternity leave only applies to employees who have met at least one of the following conditions:
- At least 39 weeks of PRSI paid in the 12 months leading up to the first day of maternity leave
- At least 39 weeks of PRSI paid since starting work and at least 39 weeks of PRSI paid in the same or previous tax year
- At least 26 weeks of PRSI paid in the same and previous tax year
For 2023, the standard weekly maternity leave payment is €262. Note that this amount increases annually.
Fathers are entitled to up to two weeks of paternity leave. Employers are not required to pay employees out on paternity leave, though they may, and it may be negotiated through an employment contract or collective bargaining agreement. If paid through PRSI, paternity leave pays €262 per week.
Ireland also provides for parent’s leave of up to seven weeks that must be taken during the first two years of the child’s life. This benefit will provide €250 per week for each parent.
Ireland recently passed a law mandating sick leave for employees. The Statutory Sick Pay scheme is being phased in over four years:
- 2023: 3 sick days
- 2024: 5 sick days
- 2025: 7 sick days
- 2026: 10 sick days
The sick pay is provided through Irish employers and must provide 70 percent of the employee’s normal pay, up to a maximum of €110 per day. Companies may have their own sick leave programs, but it must be more generous than the Statutory Sick Pay.
If an employee is out sick longer than 30 days, sick leave is provided by the government. Sick pay provided by the government is a maximum of 4550kr ($428.61) per week. Note that this amount increases annually. Employees can receive this benefit for up to 22 weeks within a nine-month period. To qualify for the government paid sick leave, an employee must have been employed for at least 240 hours in the last six months.
Companies can terminate employees subject to an employment contract or collective bargaining agreement with notice and a written explanation for termination. If an employee is being terminated for misconduct, the employer must have provided the employee with a written warning and time to correct the issues before terminating them.
Unless specified otherwise in an employment contract or collective bargaining agreement, notice of termination is required as follows:
- 13 weeks to two years of employment: 1-week notice
- Two to five years of employment: 2-week notice
- Five to 10 years of employment: 4-week notice
- 10 to 15 years of employment: 6-week notice
- 15 years or more of employment: 8-week notice
Severance pay is not required in Ireland. Companies must pay terminated employees for any work not yet paid, and they must pay any accrued but unused leave.
Redundancy pay, however, is required. It’s set to a limit of €600 per week. Employees are eligible for redundancy pay if they’ve lost their job because their employer is closing or reducing staff. Employees are eligible for redundancy pay if they’ve worked at least two years for the same employer. If eligible, an employee will receive two weeks’ pay for every year of service, plus one additional week’s pay. Redundancy pay is paid to the employee as a lump sum.
Step 4: Collect Employee Data & Forms
As with US-based employees, you’ll need to collect certain data from your Irish employees. This often includes:
- Employee’s full name
- Employee’s permanent address in Ireland
- Identification proving the employee’s identity
- Employee’s Personal Public Service (PPS) number like a US Social Security number
- Copy of the employee contract or collective bargaining agreement
- Bank account information
Step 5: Collect Time Sheets & Calculate Payroll
When a business first launches, it often uses paper time sheets. The best and most effective way to keep track of employee hours is to use time tracking software. Your employees clock in and out electronically, and your managers can review and approve time sheets before they get to your payroll team for processing.
Once payroll gets the time sheets, it should still review them for accuracy. A second set of eyes to spot any glaring errors is crucial to ensuring your company runs payroll correctly each time. It’s easier to fix these errors before running payroll, and it creates a smoother process for everyone involved.
When calculating your Irish payroll, you’ll need to account for tax and payroll deductions. Missing these will leave you out of compliance and could cause costly fines and penalties from Irish government agencies.
Tax | Employer Share | Employee Share |
|---|---|---|
8.80% to 11.05% | 4.00% | |
0% | 0.50% to 11% |
Besides these payroll withholdings, you’ll also need to withhold appropriate income tax from your employee’s paychecks. Irish taxes are high by US standards but fairly straightforward.
There is a standard tax rate of 20% for income up to these annual income limits:
- Single person: €40,000
- Married with one income: €49,000
- Married with two incomes: €80,000
- One parent family: €44,000
For all amounts earned above these income amounts, employees pay 40% income tax. Helpfully, the Irish government provides employers with information about each employee’s tax credits, USC rates, PRSI rates, and more. Given by the Revenue Commissioners Office, each employer receives a Revenue Payroll Notification. It’s a requirement that you use this notification to calculate your Irish payroll.
Step 6: Pay Employees
Now that you’ve reached the point of calculating your payroll, it’s time to pay your international employees. Make sure you’re following the pay schedule you’ve previously outlined.
If you have just a single worker or handful of employees in Ireland, you may want to outsource to a local payroll provider in Ireland. It will be licensed and familiar with Irish payroll laws and processes. While you’ll pay a fee, it’ll likely be worth your time for just a few workers.
However, if you have more employees or plan on dramatically expanding your Irish workforce, you may want to do payroll in-house. Make sure you or your payroll team are familiar with Irish payroll laws and deductions to ensure you’re deducting the right amounts from an employee’s paycheck and sending tax payments to the right Irish government authorities.
Step 7: Document & Store Your Payroll Records
Payroll records in Ireland must be kept for at least three years. Your payroll records should include, at a minimum:
- The dates of employment and rate of pay
- The frequency of pay
- Deductions
- Employee’s name, address, PPS number, and a statement of duties
- Total regular and overtime pay
- Net employee pay
- Copy of employment contract
- Leave taken
Bottom Line
Doing payroll in Ireland for the first time is straightforward but cumbersome. With similar processes to the US, however, you’ll find it won’t take long to get the hang of it. Just make sure you take your time and set everything up correctly from the start.
