01 9680663 info@cleargroup.ie

How to set up an employee payroll in Ireland: a simple guide

Aug 18, 2023 | Payroll

If you are hiring staff for your business, you need a firm understanding of how the Irish payroll system works and the various tasks involved in running payroll successfully.

Navigate Irish employee payroll in eight easy steps

This guide outlines – in simple English – the key steps involved in setting up a payroll in Ireland. We’ll show you how to properly handle employee pay, tax deductions, and reporting obligations, ensuring smooth operations and legal compliance for your business.

Step 1: Register as an employer for PAYE

Your first step is to register as an employer for Pay As You Earn (PAYE) with Irish Revenue. The form you use to do this (TR1, TR2, TR1 (FT), TR2 (FT), or PREM Reg) will depend on your current situation – for example, whether you are a limited company or sole trader, or if you are already registered for other taxes. You can find full details about registration and links to the different forms on the Revenue website.

Upon successful registration, you will be assigned an 8-character employer tax registration number. The registration process generally takes between one and four weeks from the time of application. It’s important to note that international companies can choose to register solely as an employer for payroll tax without simultaneously enrolling for corporation tax or value added tax (VAT) if they do not meet the eligibility criteria.

If you aren’t an Irish company but are an international organisation looking to pay employees in Ireland, head over to our blog Payroll in Ireland: what international companies need to know about Irish payroll.

Step 2: Determine your payroll frequency

Selecting an appropriate payroll frequency is an important next step. The choice often depends on the industry in which your business operates. For instance, sectors such as hospitality, which includes restaurants and hotels, will typically opt for weekly or fortnightly payrolls. Conversely, technology firms, pharmaceutical companies, and manufacturing businesses commonly operate monthly payrolls.

Step 3: Establish your payroll dates

Next, define the specific paydays for your employees. You might opt for a weekly payday, such as a Friday, or a monthly payment date, like the 28th of each month. When a monthly payment date coincides with a weekend, ensure that employees are compensated on the previous working day (usually a Friday).

Step 4: Secure PRSI Numbers for all employees

To be paid in Ireland, an employee must possess a Personal Public Service (PPS) number – which is always 7 numbers followed by either one or two letters. If any of your employees are new to working in Ireland, they will need to apply for a PPS number. PPS numbers are issued by the Department of Social Protection, and applications can be made online at MyWelfare.ie.

While an employee is waiting for their number to be issued, you can still pay them via payroll using their name and date of birth. However, they will be taxed at a high rate until their number has been issued and Revenue has sent you their tax credit certificate showing the tax credits to deduct. This is known in Ireland as ‘emergency tax’.

Step 5: Engage a reliable payroll provider to set up your payroll

You’re now ready to select a reputable payroll provider and set up your payroll. Running payroll involves deducting income tax, Pay Related Social Insurance (PRSI), Universal Social Charge (USC), and Local Property Tax (LPT) from your employees’ earnings. This is necessary because Ireland operates a tax at source, or pay as you earn (PAYE), system. Income tax is charged on all wages, fees, perks, profits, and most types of interest.

All payments and deductions must be taxed in line with Irish tax regulations. Your payroll service provider will review remuneration and advise of the appropriate treatment.

Step 6: Submit payroll reports to Revenue

It is your responsibility to regularly report each payroll to Revenue through a Payroll Submission Report (PSR). Most employers will do their reporting online using Revenue Online Services, or ROS.ie. On this platform, you can upload a payroll file, complete one online, or use payroll software to automatically submit the PSR. You can also see your Statement of Account, which details your submissions and how much you owe in payroll taxes.

If you have chosen to outsource your payroll, your payroll bureau or payroll service provider will manage this reporting and payment process on your behalf.

Enhanced Reporting Requirements: From 1st January 2024, Revenue is bringing in additional reporting requirements for employers. This will involve reporting payments for travel and subsistence, remote working (e-working), and tax-free small benefits (falling under the Small Benefit Exemption) on or before the date of payment.

Step 7: Consider how you will pay your employees

As Ireland operates the euro (EUR) as its currency, setting up and maintaining a euro bank account that supports Single Euro Payments Area (SEPA) transfers and direct debits is advisable. If you don’t intend to have a euro account, you will need to discuss currency payment options with an experienced payroll provider. Ireland has two main business banks – Bank of Ireland (BOI) and Allied Irish Banks (AIB). There are also some online euro business accounts available from providers such as Revolut or Wise.

If you only have a few employees, you can pay individual salaries manually via an Electronic Funds Transfer (EFT). However, if you have a larger number of employees, it is more efficient to use a single bulk payment file, which is uploaded to your bank in order to deliver all employee payments in one go. An advantage of a single bulk payment file is that any employees who can view bank account transactions (for example, finance department employees) will not be able to see what individual employees are paid, maintaining confidentiality in the payroll

Step 8: Remit payroll taxes to Irish Revenue

Your Online Statement of Account in ROS details your liability, collections, and balance for each period. It also shows your payment due date, which will be the 14th of the month following the period in question, or the 23rd if paying online. Some employers pay monthly and others will pay quarterly. For example, if you are a quarterly payer, your liability for salaries paid between 1st April and 30th June will be due by 23rd July (if paid online).

Like all taxes, it’s important to pay your liabilities promptly to maintain your tax clearance status. Note that it can take three to five working days for payments to appear on your Statement.

A payroll bureau service will help you set up as an Irish employer

If you don’t want to manage the various aspects of payroll yourself, partnering with an expert payroll service provider ensures a stable payroll system while guaranteeing adherence to tax regulations and compliance. An outsourced payroll firm will set up and manage a payroll system in Ireland that supports both your business and your employees.

If you would like advice and support around setting up your payroll in Ireland, Clear Group would be happy to help you. We operate a nationwide service and work with large and small businesses. Get in touch to find out more.