How To: Irish Payroll for UK Company Employees in Ireland

You are a UK company, and you have just hired someone in Ireland. Or maybe you already have a team member who has relocated across the Irish Sea. Either way, you have hit a question that is more complicated than it looks: do you need to run Irish payroll?

The short answer, in most cases, is yes. And the longer answer involves Irish tax law, Revenue obligations, permanent establishment risk, double taxation agreements, and a payroll process that works differently from the UK system you are used to.

This is not a guide for large multinationals with dedicated global mobility teams. This is for UK companies, often SMEs, who have found themselves with employees in Ireland and need to understand what that means practically. What you need to set up, what you need to pay, and what happens if you get it wrong.

When Does a UK Company Need Irish Payroll?

The trigger is straightforward: if someone is working in Ireland, Irish tax law generally applies to the income they earn while working there. It does not matter that the employer is based in the UK. What matters is where the work is performed.

Under Irish tax legislation, an employer (including a foreign employer) who has employees working in Ireland is obliged to operate Irish payroll and deduct Irish income tax, USC, and PRSI from their pay. This is the PAYE system, and it applies regardless of where the employer is incorporated.

There are limited exceptions. Short-term business visitors may be exempt under the Ireland-UK Double Taxation Agreement if they meet all of the following conditions:

They are present in Ireland for fewer than 183 days in the tax year
The remuneration is paid by an employer who is not resident in Ireland
The remuneration is not borne by a permanent establishment of the employer in Ireland

If all three conditions are met, you may not need to operate Irish payroll for that individual. But if the employee is based in Ireland, works from Ireland day to day, or is present for more than 183 days, the exemption almost certainly does not apply, and you need to register.

The Double Taxation Agreement Between Ireland and the UK

The Ireland-UK Double Taxation Agreement (DTA) exists to prevent the same income from being taxed twice, once in Ireland and once in the UK. It does not eliminate the obligation to deduct and pay Irish tax. It determines which country has the primary right to tax specific income.

For employment income, the general rule under the DTA is that the country where the work is performed has the taxing rights. If your employee works in Ireland, Ireland gets to tax that income. The UK may also have a claim if the employee is UK tax resident, but relief is available under the DTA to ensure the income is not taxed twice.

In practice, this means:

The employee’s Irish income is subject to Irish income tax, USC, and PRSI through the Irish payroll
If the employee is also UK tax resident, they declare the Irish income on their UK tax return and claim credit for Irish tax paid
The employer’s obligation is to operate Irish payroll correctly; the employee handles any cross-border personal tax filing

The interaction between Irish tax obligations and UK tax residency rules is nuanced, and both Revenue and HMRC have their own requirements.

What Is Permanent Establishment, and Why Should You Care?

This is the risk that keeps tax advisors busy. A permanent establishment (PE) is a fixed place of business through which a company carries on its activities. If your UK company is found to have a permanent establishment in Ireland, it could be subject to Irish corporation tax on the profits attributable to that establishment.

Having employees in Ireland does not automatically create a permanent establishment, but it can. The risk increases if:

The employee has authority to conclude contracts on behalf of the UK company in Ireland
The employee operates from a fixed office or workspace in Ireland
The Irish operations represent a significant, ongoing part of the company’s business rather than a temporary or auxiliary function

The DTA defines what constitutes a permanent establishment, and Revenue applies these rules actively. The practical lesson: get advice before you structure anything. The difference between “employee working remotely from Ireland” and “permanent establishment in Ireland” can come down to how the role is defined and how much authority the employee has.

Registering as an Employer in Ireland

If you are a UK company that needs to run Irish payroll, you must register as an employer with the Irish Revenue Commissioners. This is a separate registration from anything you have with HMRC.

The Registration Process

Apply for an Irish tax registration number. UK companies employing staff in Ireland need to register with Revenue using a TR2 form (for companies). This gives you an Irish employer tax reference number.
Set up access to ROS. Revenue’s Online Service (ROS) is the platform through which you submit payroll data, request Revenue Payroll Notifications (RPNs), and make tax payments. You will need a digital certificate to access ROS.
Appoint an Irish agent (optional but recommended). Many UK companies appoint an Irish payroll provider or accountant to act as their agent with Revenue. This makes practical sense because the agent handles the day-to-day payroll management and Revenue correspondence on your behalf.
Request RPNs for your employees. Before you can run your first Irish payroll, you need Revenue Payroll Notifications for each employee. These contain the employee’s tax credits, rate bands, and PRSI class, which you use to calculate the correct deductions.

Do You Need an Irish Company or Bank Account?

No to both, strictly speaking. A UK company can register as an employer in Ireland without setting up an Irish subsidiary, and Revenue can accept tax payments from non-Irish accounts. However, an Irish bank account makes SEPA payments to employees smoother, and if your Irish operations grow, setting up a local entity may eventually make sense.

PAYE Modernisation: How Irish Payroll Works

Irish payroll operates under PAYE Modernisation, which Revenue introduced in 2019. If you are used to the UK’s Real Time Information (RTI) system, the concept is similar: employers report payroll information to Revenue in real time, on or before each pay date.

Here is how the payroll process works:

Before Each Pay Run

Check for updated RPNs. Revenue may update an employee’s tax credits or rate bands during the year. Always use the most current RPN.
Calculate gross pay. This includes salary, bonuses, overtime, and any benefit in kind.
Apply deductions. Calculate PAYE (income tax), USC, and employee PRSI using the rates and credits from the RPN.

The Deductions

PAYE (Income Tax): Irish income tax is charged at 20% on income up to the standard rate cut-off point and 40% above it. The cut-off point depends on the employee’s circumstances and is specified in their RPN. The calculation is cumulative across the tax year.

USC (Universal Social Charge): A separate tax charged at tiered rates (0.5%, 2%, 4%, and 8%) on gross income. Employees earning under €13,000 per year are exempt.

PRSI (Pay Related Social Insurance): Most employees pay Class A PRSI at 4% of gross pay. Employer PRSI is charged at 11.05% on earnings above €441 per week (8.8% at or below that threshold). Employer PRSI is a cost to the employer, not a deduction from the employee.

On the Pay Date

Submit a Payroll Submission Request (PSR) to Revenue through ROS or your payroll software. This reports all pay and deduction details for each employee.
Pay the employee their net pay (gross pay minus PAYE, USC, and employee PRSI).
Issue a payslip. Irish law requires payslips showing gross pay, the nature and amount of each deduction, and net pay.

After the Pay Date

Revenue sends a Payroll Submission Response confirming receipt.
Pay payroll taxes to Revenue. PAYE, USC, employee PRSI, and employer PRSI are payable monthly by the 14th of the following month (23rd if filing and paying through ROS).

PRSI Obligations for UK Companies

PRSI (Pay Related Social Insurance) is Ireland’s social insurance system. It funds State pensions, maternity benefit, illness benefit, and other social welfare payments.

For Irish employees of UK companies, the question of which country’s social insurance applies depends on where the employee works:

If the employee works exclusively in Ireland, Irish PRSI applies. The employee pays Class A PRSI at 4%, and the employer pays employer PRSI at 11.05% (or 8.8% for lower earners).
If the employee works in both Ireland and the UK, EU social security coordination rules (which continue to apply under the UK-EU Trade and Cooperation Agreement) determine which country’s system applies. Generally, the employee pays social insurance in their country of residence if they work substantially (25% or more) there.
If the employee is temporarily posted from the UK to Ireland, a Certificate of Coverage (A1 certificate) may exempt them from Irish PRSI, meaning they continue to pay UK National Insurance instead. This typically applies for postings of up to 24 months.

Getting PRSI wrong is one of the most common payroll management errors for UK employers in Ireland. If you have employees splitting time between countries, get specialist advice.

Shadow Payroll: What It Is and When You Need It

Shadow payroll is a parallel payroll calculation that exists purely for tax compliance purposes. It does not involve actually paying the employee through two payroll systems. Instead, it tracks the tax that would be due in one country while the employee is actually paid through the other country’s payroll.

For UK companies with employees in Ireland, shadow payroll typically works like this:

The employee is paid through the Irish payroll (the “real” payroll), with Irish PAYE, USC, and PRSI deducted
A UK shadow payroll is maintained to track the UK tax position, ensuring HMRC obligations are met if the employee has UK tax residency or UK-source income
No actual payment is made through the shadow payroll; it is a reporting and compliance mechanism

Not every situation requires shadow payroll. If your employee lives and works exclusively in Ireland with no UK tax residency, you may only need Irish payroll. But if there is any cross-border element, shadow payroll ensures neither Revenue nor HMRC is left out of the picture.

Practical Setup Steps for UK Companies

If you need to set up Irish payroll, here is the roadmap:

Confirm your payroll obligations. Consider the 183-day rule, the DTA, and permanent establishment risk. Get professional advice at this stage; it saves money later.
Register with Revenue. Complete the TR2 registration. Allow two to four weeks for processing.
Appoint a payroll provider. Unless you have in-house Irish payroll expertise, appoint an Irish accountancy firm or payroll provider to manage submissions, calculations, and compliance.
Collect employee information. You’ll need each employee’s PPS number, address, start date, salary details, and bank account information.
Request RPNs and run your first payroll. Your provider will request RPNs from Revenue and set up the calculations.
Establish ongoing processes. Set up a payroll calendar with clear responsibilities for who provides data, runs payroll, and handles Revenue payments.

Common Pitfalls for UK Companies

These are the mistakes we see repeatedly:

Assuming UK payroll covers Irish employees. It does not. Running someone through UK PAYE alone leaves you non-compliant with Revenue.
Ignoring permanent establishment risk. “We just have one person in Ireland” is not a defence if that person signs contracts or makes strategic decisions from Ireland.
Delaying registration. Revenue expects compliance from the start of employment. Retrospective registration means retrospective tax liabilities, interest, and penalties.
Getting PRSI wrong. Applying UK National Insurance instead of Irish PRSI (or vice versa) creates problems for both employer and employee.
Forgetting employer PRSI. At 11.05%, this is significantly higher than UK employer NI and must be budgeted for.
Ignoring Irish employment law. Irish employees are subject to Irish law on minimum wage, annual leave, and termination. Your payroll must reflect these statutory requirements.
DIY without local expertise. The Irish PAYE system has important differences from the UK system in how tax credits, USC, and submissions work.

Frequently Asked Questions

Can a UK company employ someone in Ireland without setting up an Irish company?

Yes. You can register the UK company directly with Irish Revenue as an employer and run Irish payroll from the UK entity. You do not need to incorporate an Irish subsidiary simply to employ staff in Ireland, though there may be reasons to do so as your Irish operations grow.

How much does it cost to run Irish payroll for a small number of employees?

An Irish payroll provider typically charges €30 to €80 per employee per month, covering calculations, Revenue submissions, payslips, and compliance. A modest cost relative to the risk of non-compliance.

What happens if we don’t register for Irish payroll?

Revenue can pursue the UK company for unpaid payroll taxes plus interest and penalties. The employee may also lose tax credits and social insurance coverage.

Does the employee need an Irish PPS number?

Yes. Every employee on Irish payroll needs a Personal Public Service (PPS) number. If the employee is moving to Ireland, they can apply for one at their local PPS office. UK citizens have the right to work in Ireland under the Common Travel Area agreement.

How does the Double Taxation Agreement prevent double taxation?

The DTA allocates taxing rights between the two countries. For employment income, the country where the work is performed generally has the primary right to tax. If the employee is also UK tax resident, they claim a credit for Irish tax paid on their UK return.

What if the employee splits time between Ireland and the UK?

This adds complexity. You may need to operate payroll in both jurisdictions, or use shadow payroll, depending on the split and the employee’s tax residency. The social insurance position also needs to be determined under EU coordination rules. Get specialist advice for split arrangements.

Is there a minimum number of employees before Irish payroll is required?

No. Even one employee working in Ireland triggers the obligation. There is no minimum threshold.

Getting It Right from the Start

Irish payroll for UK companies is manageable, but it’s not something to muddle through. Revenue expects compliance from day one, and the interaction between Irish and UK tax systems requires careful handling.

If you’re a UK employer with employees in Ireland, or planning to hire here, we can help you get set up correctly, from Revenue registration through to ongoing payroll management.

Contact us to discuss your situation. We’ll assess what you need and give you a clear plan for getting your Irish payroll running smoothly.

The information provided in this article is for general guidance and informational purposes only. It does not constitute professional accounting, tax, or financial advice, and should not be relied upon as a substitute for advice tailored to your specific circumstances. While we take care to ensure the content is accurate and up to date at the time of publication, legislation, tax rates, thresholds, and compliance requirements in Ireland can change.