Payroll can be a complicated issue, particularly for companies with employees in different countries. If you are a UK company with employees based in the Republic of Ireland, there are steps you need to take to be payroll compliant. Even if you don’t have premises in Ireland, you must adhere to Ireland’s specific requirements and legislations for the employees who work here. If you don’t, you could be in for a hefty penalty, not to mention the additional stress and hassle.
Basic Payroll Requirements
If you have employees working in Ireland, you will need to:
- Register your company for Irish payroll taxes through the Revenues online portal.
- Process monthly or weekly payroll and pay taxes to the Irish Revenue. Note that you are only required to pay Irish payroll tax on a salary which relates to the work which the employee carries out whilst physically in Ireland. For example, if they work in Ireland 4 days a week and 1 day in the UK, 4/5ths of their salary is subject to Irish payroll taxes.
- Submit monthly and year-end payroll tax returns in line with Irish legislation (see below)
Differences Between UK And Irish Payroll Systems
While the general payroll processes are much the same, there are several key things that you must be aware of if you have employees working in Ireland.
Tax Year
Payroll Returns
As in the UK, you are required to report payroll details each time an employee is paid, either on or before the date of payment. However, on top of the amount of income tax deducted, there are a couple of other deductions that must be made in Ireland. These are as follows:
Universal Social Charge (USC)
Applicable to most people who make more than €13,000 per year, USC was introduced to replace Ireland’s income levy and health levy. USC is charged as a percentage of an employee’s gross income according to their salary. The rates range from 0.5% to 11%, and you can see a full breakdown of those rates here.
Pay Related Social Insurance (PRSI)
PRSI covers a range of social welfare benefits and is compulsory for most employees over the age of 16 and under the age of 66. The amount of PRSI to be paid will again depend on the employee’s gross income but also on the nature of the work carried out. This determines the employee’s social insurance class, and you can find more information about the classes and rates on the Citizens Information website. Another thing to bear in mind is that both the employee and the employer are responsible for PRSI.
Are There Any Exemptions To Payroll Taxes?
If an employee is working in Ireland for a limited time, for instance on a short-term contract, then you may not be required to pay payroll taxes in Ireland. Here are the different scenarios for short-term work:
- If an employee is working in Ireland for less than 60 days, you will not need to pay payroll taxes and in most cases do not even need to notify Irish Revenues that the work is taking place.
- If an employee is working in Ireland for more than 60 days but less than 183, then you can apply for an exemption to Irish payroll taxes as long as the following conditions are met:
- Irish Revenue must be notified within 21 working days of taking up duties in Ireland.
- You will need to provide evidence that the employee pays payroll taxes in the UK by, for example, supplying a copy of their payslip
You will have to sign a declaration confirming that if a payroll liability arises at a later stage that you will pay the taxes which are owed
If an employee is physically working in Ireland for more than 183 days of the year then they are considered a tax resident and the Irish payroll requirements must be adhered to.
If you have been granted exemption from Irish payroll tax, be aware that you will still have to file monthly payroll returns as detailed above. However, these will simply be to declare that you have no tax liability.
Differences Between UK And Irish Employment Law
As with payroll taxes and systems, the rules employers must usually follow are those of the country where the work is being physically carried out, not the country where the company headquarters are based. Here are some differences between the UK and Ireland that you will need to keep in mind.
Minimum Wage
There is a slight difference in minimum wage between the UK and Ireland to take into consideration. In 2022, the National Minimum Wage in Ireland is €10.50 per hour for all employees aged 20 or over. From 1st January 2023, the minimum wage will increase in Ireland to €11.30 for people aged 20 and over. In the UK, from 1st April 2022 the National Living Wage is £9.50 per hour for employees aged 23 and over.
You may also want to read out guide to PAYE modernisation as well.
Annual Leave
In the UK, full-time employees must receive at least 28 days of paid annual leave, equivalent to 5.6 weeks. In Ireland, full-time employees are entitled to a minimum of 4 weeks paid annual leave.
Public Holidays
Employers in the UK can choose which of the 8 bank holidays to include within their statutory holiday requirement (the 28 days mentioned above). In Ireland, there are 10 public holidays (increased from 9 in 2022). Full-time employees are entitled to benefit for public holidays, and their employer can decide whether they get:
- Paid leave on the day of the public holiday
- A day of paid leave within a month of the public holiday
- An additional day of paid leave
- An additional day’s pay
This will depend on the employee’s work pattern and what kind of business it is. For example if the business is closed on the public holiday and an employee would normally be due to work, then they get their normal day’s pay. But if the business is open and an employee works, he/she is entitled to either paid time off or an additional day’s pay.
Sick Pay
In the UK, employers are obliged to pay their eligible staff Statutory Sick Pay (SSP) for a period of up to 28 weeks. Up until the end of 2022, employees in Ireland have no legal right to be paid while on sick leave, though employers can introduce their own policy if they wish. Alternatively, employees can claim Illness Benefit from the Department of Employment Affairs and Social Protection. Starting from 1st January 2023, employees in Ireland will have a right to paid sick leave for up to 3 sick days per year. This will increase to 5 days in 2024, 7 days in 2025 and 10 days in 2026. Statutory sick pay is 70% of normal salary to be paid by employers (up to a maximum of €110 per day). To be entitled to paid sick leave under the new scheme, employees must be working for the employer for at least 13 weeks. Employees will also need to be certified by a GP as unfir to work.
Maternity And Paternity Leave
Maternity and paternity pay in the UK is paid by the employer, with mothers entitled to 52 weeks leave, 39 of which are paid. In Ireland, the maternity leave entitlement is 26 weeks of paid leave, with the option of claiming a further 16 weeks of unpaid leave. However, this must be claimed from the Department of Employment Affairs and Social Protection. In both the UK and Ireland, fathers are entitled to 2 weeks paid paternity leave.
Pension
Employers in the UK are obliged to provide a workplace pension scheme and automatically enrol their staff into it upon employment. Employees do have the option to opt out, but must be re-enrolled every three years. In Ireland there is no obligation for employers to provide a pension scheme, although they are obliged to offer employees access to a type of pension called a PRSA. However, there are plans to introduce automatic enrolment in Ireland, similar to the UK, with an estimated start date for auto enrolments commencing in 2024.
Conclusion
Navigating tax and payroll for multi-national companies can be a challenge, with many different factors to take into consideration. That’s why having a capable and experienced accountant on your side can make a world of difference. At SCK Group, we offer a fully managed payroll service for the UK and International organisations expanding into Ireland, even if you have only one employee. With our expertise in multi-national businesses, we can help ensure that you are payroll compliant. Interested in finding out more? Head over to our contact page and we’ll get back to you as soon as we can.
