As a small business owner in Ireland, managing payroll sits right at the top of your priority list. Whether you’re wrestling with payroll software or considering your first hire, running payroll isn’t exactly straightforward – and it certainly eats into your time.

This guide will help you navigate the payroll challenges that keep many small business owners awake at night. The good news? After a few months of getting your payroll system sorted, the routine becomes second nature. We’ll walk you through how small business payroll operates in Ireland, cover the basics of payroll taxes, and explore when outsourcing your payroll might be the smartest move you’ll make.

If outsourcing payroll is already on your mind, you’re thinking like a seasoned entrepreneur.

How Small Business Payroll Actually Works in Ireland

When you hire employees to handle operations, customer service, sales, or marketing, you must include them on a payroll. It’s an inevitable part of growing your business, which means understanding how your payroll system works isn’t optional for any small business owner.

Setting up payroll for small business success starts with investing in reliable payroll software that seamlessly integrates with your accounting software. Think of it as the foundation that everything else builds on.

Who Actually Counts as an Employee?

Here’s where payroll for small businesses gets a bit tricky. Irish employment law makes a crucial distinction that every business owner needs to understand: “contract for services” versus “contract of services.” They sound nearly identical, but this difference determines who gets employment protections, who appears on your payroll run, and who manages their own tax affairs.

The Definitions

Contract of service: These are your actual employees, protected by employment legislation. This is essentially hiring “in-house” – they’re part of your team, and you’ll need to deduct taxes from their wages and make payroll payments through the PAYE system.

Contract for service: These are independent contractors or self-employed individuals. They’re not considered employees under employment legislation and handle their own tax responsibilities. This is the “outsourcing” approach – you pay them as external service providers.

Getting this distinction right matters enormously. It determines whether someone appears on your payroll and whether you pay them through PAYE. Don’t forget to archive all important documents like tax forms. Our post on PAYE tax system modernisation covers the latest updates you need to know.

Understanding PAYE: The Backbone of Irish Payroll

What exactly is the PAYE tax system?

PAYE (Pay As You Earn) is how tax deductions work on employee salaries in Ireland. When you pay your employees, you must calculate and deduct income tax, PRSI, and USC from their wages, then pay this over to Irish Revenue on their behalf. Modern payroll software can report PAYE information online in real time and integrates smoothly with your accounting software.

How do you register as an employer with Irish Revenue?

Registering with Revenue is step one. You literally cannot hire staff and run payroll for your small business until you become a registered employer in Ireland. Whether you operate as a partnership, sole trader or limited company, if you plan to hire staff, you need employer registration.

Revenue provides an eRegistration facility – you’ll need to be registered for either Revenue Online Service (ROS) or myAccount to use this tool. Paper-based applications are also available, though the online route is significantly faster.

Q: How often should I pay employees?

Your pay period is entirely up to you as the employer. Most businesses choose weekly, fortnightly, 4-weekly, or monthly cycles. We generally recommend a monthly payroll run purely to reduce the admin burden – you’ll only need to run payroll calculations, produce payroll reports, make submissions to Revenue, and process payroll payments once a month.

If you outsource your payroll, you’ll find that monthly payroll services for small businesses cost significantly less than weekly or fortnightly alternatives.

When do payroll details need to be submitted to the revenue?

You must submit payroll details every time you make a payroll run, and the information must be submitted on or before the date you actually pay your staff. The income tax, PRSI, and USC tax liability from that payroll run becomes due for payment by the middle of the following month.

How do you determine your tax liability?

Revenue generates a statement of liability by the 5th day of the following month after your payroll submission. This statement appears on your Revenue Online Service account, and you’ll receive a letter at your business address. The statement includes your total PAYE tax liability based on your payroll submissions.

What happens after receiving your statement of liability?

Once you receive your statement of liability, accept it and pay the amount due to Revenue. Employers must file and pay monthly returns for PAYE tax liability by the 23rd day of the following month (when filed online). Paper forms have an earlier deadline – the 14th day of the following month.

If you miss these deadlines, you may face interest on late payments and penalties for breaching PAYE rules. Staying compliant isn’t just about avoiding tax penalties – it’s about maintaining your business reputation and peace of mind.

What taxes must employers deduct in Ireland?

As a small business owner in Ireland, you’re responsible for paying tax liability to Revenue through the Employer’s PAYE Return. Each employee’s tax calculation depends on their pay amount and how they’ve allocated their tax bands and credits through their myAccount profile on the Revenue website.

Income Tax (IT)

This payroll tax varies based on employee earnings. The standard rate of income tax is 20%, with a higher rate of 40%. From January 2025, the standard rate cut-off point increased to €44,000 for single individuals (up from €42,000 in 2024). Generally, all employment income is subject to income tax, though employees can claim tax relief for items like pension contributions.

Since 2019, new rules make it each employee’s responsibility to ensure correct tax credits are applied. As the employer, you download each employee’s tax profile from Revenue for every payroll run. Most PAYE employees have a personal tax credit (€2,000) and an employee tax credit (€2,000) as minimum deductions from 2025 (increased from €1,875 each in 2024). If these don’t appear in an employee’s tax profile download, they’ve likely allocated these credits to another employment or their spouse.

Universal Social Charge (USC)

If an employee’s income exceeds €13,000 annually, you must deduct USC from their wages. The USC rates for 2025 are structured as follows: 0.5% on income up to €12,012, 2% on income from €12,012 to €27,382, 3% on income from €27,382 to €70,044 (reduced from 4% in 2024), and 8% on income above €70,044. This creates a progressive system that ensures fairness across different income levels.

Pay Related Social Insurance (PRSI)

This payroll tax funds social welfare payments and requires contributions from both employees and employers in Ireland. PRSI calculations depend on each employee’s pay level and consist of two components:

Employers’ PRSI: From January 2025, employers pay 8.9% Class A PRSI on weekly earnings up to €527, and 11.15% on weekly earnings above €527. This represents an additional cost – if you hire someone at €20 per hour, your real cost is €20 plus employer PRSI.

Employees’ PRSI: From October 2024, employees pay 4.1% PRSI on all earnings above €352 per week (with a further 0.1% increase scheduled for October 2025). This is the amount you deduct from employee wages and pay to Revenue on their behalf – it doesn’t cost you extra as the employer.

Most PAYE workers fall under the standard Class A, which determines their social welfare entitlements. Class A covers jobseekers benefit, illness benefit, maternity benefit, sick leave, and importantly builds their record for state pension entitlement.

Local Property Tax (LPT)

If your employee owns property, they can choose to pay their property tax through the PAYE process. Your responsibility involves informing Revenue that the employee wishes to pay LPT through PAYE, then communicating the rate so it can be deducted from their wage.

Should you outsource your payroll function?

Payroll systems for small businesses can be genuinely challenging. As an employer, you’re responsible for your payroll function unless you choose to outsource the processing payroll. If your attention is needed elsewhere (and let’s be honest, it always is), or you’re not confident about getting every detail right, it might be time to explore the benefits that payroll services can provide.

Employer Responsibilities When Managing Payroll In-House

When you make payroll submissions, you need to:

Ensure your employees are registered for PAYE
Know the gross pay amount for each employee
Ensure statutory deduction details (payroll taxes paid) are correct
Understand additional details you must report to Revenue when applicable
Verify employee payment details are accurate
Generate accurate payslips for each payday
Maintain a payroll calendar to ensure employees are paid on time
Handle tax filing requirements and submit tax forms
Automate where possible to save time and reduce errors
Provide phone support to employees who need to access their pay information online
Stay up-to-date with new rules from Irish Revenue
Ensure your payroll system runs smoothly for growing your business

Benefits of Outsourcing Payroll

Compliance confidence: Knowing your payroll stays compliant with all current Revenue regulations gives you genuine peace of mind. Many small business owners worry about making costly mistakes – professional payroll services eliminate this concern.
Time freedom: Save time and energy so you can focus on more important aspects of your business while experts manage your payroll system. Time tracking becomes simpler when you’re not juggling multiple management tools.
Accuracy assurance: Having confidence that your employees receive the correct pay amounts, and mistakes aren’t costing your small business money. Professional payroll service providers use sophisticated systems that reduce human error.
Enhanced security: Greater security comes with professional outsourcing payroll service – no sensitive employee information gets released inappropriately. Licensed insurance typically covers professional services.
Technology advantages: Access to advanced features like mobile app functionality, employee self-service portals where employees can access their pay information, and seamless integration with your existing systems.
Expert support: A dedicated support team provides hr support when you need it, with chat support and phone support available during business hours. Many providers offer a 30-day free trial to test their systems.
Scalability: Whether you have one employee or twenty, a professional payroll provider scales with your business. The system suits your business needs as you grow.
Additional services: Many providers offer payroll and hr services combined, including workers’ comp assistance, time tracking integration, and comprehensive bookkeeping services.

Ready to Transform Your Small Business Payroll?

As a small business owner in Ireland, you might be tempted to handle everything yourself, but payroll for your small business can consume a significant portion of your time, even with good payroll software.

Think about it: every hour you spend wrestling with payroll setup, tax calculations, or filing requirements is an hour you’re not spending on growing your business. Every late payment worry or compliance concern adds unnecessary stress to your already demanding schedule.

Professional payroll services for small businesses don’t just handle the mechanics – they provide strategic advantages. You get access to experts who understand the nuances of Irish tax law, the latest changes in regulations, and best practices that keep your business running smoothly.

The beauty of outsourcing your payroll lies in the transformation it creates. Instead of being bogged down by admin tasks, you can focus on what matters most: serving your customers, developing your products, and building your team. Your employees receive professional service with reliable payslips, accurate deductions, and timely payment service.

Take some weight off your shoulders and let SCK Group help. We work with many small business owners who’ve discovered that professional payroll management isn’t an expense – it’s an investment in their business’s future. We also specialise in Irish payroll for UK companies, ensuring seamless compliance across both jurisdictions.

Speak to us about your payroll options. We provide scalable payroll processes that grow with your requirements, whether you’re a startup with your first hire or an established business looking to streamline operations.

Contact us to learn more about how we can simplify your payroll management and give you back the time you need to focus on what you do best.