If you are an international company that plans to operate in Ireland, it’s vital that you receive the necessary support in relevant areas of legislation, regulation, tax, and compliance requirements. One area where this is especially true is when employing people in Ireland. Working with a trusted global payroll solution can help international organisations to maintain compliance with Irish payroll regulations. If you are an Irish company looking to employ people for the first time, find out how in our blog How to set up an employee payroll in Ireland: a simple guide.
Ireland offers multinational companies a business-friendly tax environment, highly educated workforce, and one of the fastest-growing economies in the European Union. It’s a prime location for global expansion. For example, the Knowledge Development Box (KDB) gives companies engaging in research and development (R&D) in Ireland a 6.26% Corporation Tax (CT) relief on revenue and royalties derived from intellectual property held in Ireland.
Let’s look at the key considerations for overseas companies who need to employ people in Ireland.
Employing people in Ireland
Employment relationships in Ireland are governed by an extensive statutory framework of country laws and EU directives. Employers are obliged to furnish employees with a statement (at minimum) of the main terms and conditions of employment, typically in the form of an employment contract. A probationary period will only be effective if expressly mentioned in a contract.
To hire a foreign worker, the employer or employee must obtain a General Employment Permit based on the offer of employment. General Employment Permits are not issued in instances where the granting of a permit would mean that more than 50% of a company’s employees are non-European nationals.
Tax considerations for employees in Ireland
Nearly all income is liable to tax in Ireland, and employers deduct tax on an employee’s income from their wages, in compliance with the Pay As You Earn (PAYE) system. Income taxes range from 20% to 40% based on the individual’s salary and circumstances. New employees in Ireland require a Personal Public Service (PPS) number in order to receive credits for their income tax and social security obligations. If the employer needs to process payroll for the employee before a PPS number is obtained, they will be taxed at 40% on all earnings until the tax credits are established – this is called emergency tax.
The Universal Social Charge (USC) is an additional tax on an employee’s gross income and benefits-in-kind from all sources, before any tax reliefs, capital allowances, losses, pension contributions, or social security contributions. It is charged at a progressive rate of between 0.5% and 8% depending on employee income. Employees cannot use tax credits to reduce USC payments. If an employee earns less than €13,000, their effective rate of USC is €0.
Social security contributions from both the employer and employee are also required to satisfy Pay Related Social Insurance (PRSI) obligations. PRSI payments cover a range of social welfare benefits and employee contributions are determined by “class” (i.e., the nature of the work) and income. Employers contribute to PRSI at a rate of 8.5% to 10.5% for Class A employees (the most common classification). Employee rates range progressively from 0% to 4%, with 4% being applicable in most cases.
Compensation considerations for employees in Ireland
The minimum wage in Ireland is €11.30 per hour (since 1st January 2023). Many employers offer increased hourly pay for those who work unsocial hours, such as night or weekend shifts. While Irish labour law stipulates that the maximum average weekly working hours (including overtime) over a 4-month period cannot exceed 48 hours, there are no legal guidelines around overtime, which is subject only to the guidelines of an employment contract or collective agreement.
A work week consisting of eight-hour days from Monday to Friday is common across Ireland. Employers are required to give employees a payslip that shows the gross wages before tax in addition to all the deductions from their pay. Payroll records must be retained for six years.
Leave considerations for employees in Ireland
Irish legislation provides a basic annual leave entitlement of four weeks, paid to the employee in advance at the normal weekly rate. On termination of employment, payment in lieu of untaken accrued annual leave is typically required. Full-time employees are entitled to public holiday benefits.
Public holiday entitlement for full-time employees in Ireland
|Date||Public Holidays in Ireland|
|1st January||New Year’s Day|
|First Monday in February, or 1st February if the date falls on a Friday||St Brigid’s Day|
|17th March||St Patrick’s Day|
|Monday after Easter Sunday||Easter Monday|
|First Monday in May||May Bank Holiday|
|First Monday in June||June Bank Holiday|
|First Monday in August||August Bank Holiday|
|Last Monday in October||October Holiday (Halloween)|
|25th December||Christmas Day|
|26th December||St Stephen’s Day|
Female employees are entitled to maternity leave of 26 consecutive weeks, plus 16 additional weeks of maternity leave if requested. Paternity leave gives new parents two weeks off, but employees who have been with an employer for over a year are eligible for unpaid parental leave of 26 weeks each for both parents. Employees are also entitled to statutory sick pay of three days leave per year, 70% of normal pay up to a maximum of €110 per day.
A managed service to handle employee payroll in Ireland
Although payroll in Ireland presents a number of challenging requirements and regulations, international firms in the country can achieve ongoing success and streamlined operations with the right global payroll strategy. Operating a payroll in a new country can be complex, and require a significant investment of time and training. Understanding local payroll legislation, rules and regulations can be problematic, unless you have training and experience in the jurisdiction. The support of an international payroll services partner can be highly valuable for global companies as they look to launch or expand payroll in Ireland in compliance with all applicable requirements.
Outsourced payroll specialists with experience working with international companies can help you with:
- Registering as an overseas employer in Ireland
- Irish tax advice for your company and your employees, to ensure maximum tax savings
- Pensions, private health care, and company car payments
- Direct payments to your employees in euros.
- Currency transfers, which means you can pay employees in Ireland directly from your own bank account.
If you are located overseas and have employees working in Ireland, Clear Group can manage all your payroll needs. We can help you set up, and manage, your complete payroll function in Ireland. We know all the rules and regulations and will take care of everything – ensuring you can provide a proficient payroll service to each of your international employees. Talk to us today by calling + 353 1 968 0663, or send us a message.