What is the payroll process in Ireland?
Hiring staff in Ireland means you are an employer and you need to operate a payroll process in order to pay your staff. We take you through everything you need to know about how to do payroll in Ireland.
Payroll is a list of your business’ employees and the amount of money that needs to be paid to them over a specific time-frame. It also includes the calculation and distribution of your employees’ wages and taxes.
You can choose to either run your payroll inside your business or you can choose to outsource your payroll to professionals.
Whether you will be outsourcing your payroll or running it in-house it’s important to know the basics of what is involved in a payroll.
How do I register as an employer in Ireland?
Before you hire your employees, you will need to register as an employer with Revenue. You can register as an employer online with Revenue Online Service (ROS), or myAccount. This can be done at any time, but before you hire your first employee. You can outsource PAYE tax registration to a professional who can also look after your payroll processing.
If you have not registered as an employer but Revenue has reason to believe you should be registered, they can automatically register you. If you’re not sure if you should register, you should speak to an accountant about your situation.
An accountant can register your business for employers taxes and you can also outsource payroll to them.
What taxes do employers pay?
As an employer, you deduct taxes from your employees' wages every time you pay them. This tax is then paid to Revenue through the Collector-General's Division. Payroll details are reported to Revenue on or before each date the employee is paid.
Here we go through the different taxes an employer deducts from their employees' wages.
Income Tax/Pay As You Earn (PAYE)
The amount of income tax per employee depends on how much they are being paid. There are different cut-off points depending on the employees personal circumstances, such as are they single, married or widowed? Before the income tax rate is calculated, employees are allowed to use tax credits or reliefs to reduce the amount of income that is subject to income tax. It is the employees responsibility to ensure that the correct tax credits are applied to their employment. Revenue tells employers an individuals tax credits because each employee will have different personal circumstances that affect their income tax rate. In general, there are two rates of income tax – 20% and 40%.
Universal Social Charge (USC)
If an employee’s income is above a certain threshold (€13,000 in 2019), the employer needs to deduct USC from employees wages. USC is generally calculated at an 8%. There is certain income, such as payments from the Department of Employment Affairs and Social Protection (DEASP), are exempt from paying USC. USC rates are allocated to employees through Revenue so it is an employees responsibility to tell Revenue of their personal circumstances. Then Revenue tells employers an individuals USC rate.
Pay Related Social Insurance (PRSI)
PRSI is used to fund social welfare payments. It’s paid by employees and employers in Ireland. The value of PRSI paid depends on how much you pay each employee.
Each time an employee is paid – they make a ‘PRSI contribution’. In other words, PRSI is deducted from every wage. Employers collect PRSI contributions from employees pay on behalf of Revenue and pay the employees PRSI plus the employer’s PRSI when paying PAYE liability to Revenue.
PRSI contributions are made up of two payments:
1) Employer’s share. The amount of PRSI an employer pays which is added to an employers PAYE tax liability.
2) Employees share. The amount of PRSI which an employer deducts from an employees wages on behalf of Revenue.
Local Property Tax (LPT)
If your employee is the owner of a property, they can choose to pay their LPT at the source of their income (i.e. their job). An employee can tell Revenue that they wish to pay their LPT at the source and in turn, Revenue will communicate the rate of LPT to deduct from their wage each month.
Revenue Payroll Notification (RPN)
The RPN is how employers know how much tax each employee should pay. It notifies employers of any tax credits and cut-off point for your employees.
Generally, any payroll system (such as Brightpay) will retrieve the necessary RPN’s as part of their normal payroll process. If you don’t use a payroll system, you can obtain RPN’s through Revenue’s Online System.
If you’re unable to retrieve the necessary RPN, you must charge emergency tax on your employees wages.
If you need help processing payroll, we have a team of payroll experts who can help you pay your employees.
What do I need to make a payroll submission to Revenue?
Employees need to register for PAYE
Employees need to have Personal Public Service Number (PPSN) and they should be registered for PAYE. If they are not registered, you will not receive their RPN. This means you will need to charge tax on an emergency basis.
Amount of gross pay
You should know the employee's gross pay (ie. pay before tax). Holiday pay, overtime, bonuses or commission is also included in gross pay.
Statutory deduction details (i.e. taxes paid)
The RPN notifies employers of the income tax rate, USC, PRSI and LPT to pay per employee.
Employee payment details
Employers need to establish when they pay employees - this is usually weekly or monthly.
As an employer, you can operate an approved occupational pension scheme for your employees. If you operate a pension scheme, you need a pension tracing number. You can also offer benefit in kind (BIK) for medical insurance premium and you’ll need to input the total amount of medical insurance paid by you.
What are the benefits of outsourcing your payroll?
Peace of mind that your payroll is compliant.
Our expert payroll team are always up to date with new Revenue regulations.
Save time and focus on other aspects of your business.
We'll take care of payroll so you don't have to.
Confidence that your employees are being paid correctly.
Avoid mistakes in payroll processing by outsourcing to professionals.
Greater security than operating payroll in house.
Don't worry about other employees finding sensitive information about other employees.
We offer Payroll Services for €39+VAT per month.
Our specialists can take care of your business’ payroll for you with costs as little as €39 + VAT per month for up to 5 employees.