A Simple Guide to Payroll in Ireland

Running payroll should not be the thing that keeps you up at night. But for many employers in Ireland, it is. The rules are detailed, the deadlines are strict, and the consequences of getting it wrong range from penalties to very uncomfortable conversations with Revenue.

Whether you are setting up payroll for the first time, taking over from someone who “handled it in a spreadsheet,” or just trying to understand what your payroll provider is actually doing on your behalf, this guide covers the full payroll process from registration through to year-end obligations. No jargon where it is not needed. Practical steps you can actually follow.

What Payroll Actually Involves

At its core, payroll is the process of paying your employees correctly and making sure the right taxes are deducted and sent to Revenue. That sounds simple enough. In practice, it means:

• Calculating each employee’s gross pay (salary, overtime, bonuses, benefit in kind)
• Applying the correct tax credits and rate bands to work out the right deductions
• Deducting PAYE (income tax), USC (Universal Social Charge), and PRSI (social insurance)
• Calculating employer PRSI on top of what you deduct from the employee
• Issuing a compliant payslip to each employee
• Reporting everything to Revenue on or before each pay date
• Keeping records of every calculation, every payment, and every submission

Every employer in Ireland is legally required to do all of this, every single pay period. There are no exceptions for small businesses.

PAYE Modernisation: Real-Time Reporting

If you are new to payroll in Ireland, the most important thing to understand is PAYE Modernisation, which Revenue introduced in January 2019. Before that, employers reported payroll information to Revenue at year end. Now, you report every payroll payment in real time, on or before the date you pay your employees.

This means Revenue knows what every employee earns, what deductions were made, and what taxes are owed, as it happens. There is no end-of-year reconciliation in the traditional sense. The data Revenue holds is built up pay period by pay period.

For employers, this means your payroll system must be capable of submitting payroll data electronically to Revenue through their online systems. Manual calculations submitted on paper are no longer an option for most businesses.

Registering as an Employer

Before you can run payroll, you need to register as an employer with Revenue through ROS or by submitting a TR1 form (sole traders) or TR2 form (companies). This signs you up to operate the PAYE system, meaning you’re responsible for deducting income tax, USC, and PRSI from each employee’s pay and remitting it to Revenue.

RPNs and How the PAYE System Works

The PAYE system is built around Revenue Payroll Notifications, or RPNs. These are the documents that tell you, the employer, how much tax credit and what rate bands apply to each employee. You need an RPN for every person on your payroll.

Here is how it works in practice:

1. You request RPNs from Revenue through ROS or your payroll software. You do this using the employee’s PPS number and other details.
2. Revenue sends you the RPN, which contains the employee’s tax credit, standard rate cut-off point, USC rate bands, and PRSI class.
3. You apply these to calculate deductions each time you run payroll.

RPNs are updated automatically when an employee’s circumstances change, so always use the most recent one. If you don’t have an RPN for an employee, you must apply emergency tax, which is significantly higher.

Calculating PAYE, USC, and PRSI

This is the heart of the payroll process. For each employee, on each pay date, you need to calculate three separate deductions from their gross pay, plus one employer contribution on top.

PAYE (Income Tax)

PAYE is the income tax deducted from each employee’s pay. The amount depends on:

1. The employee’s tax credit (from their RPN)
2. The standard rate cut-off point (from their RPN)
3. The tax rates: 20% on income up to the cut-off point, 40% above it

The calculation uses a cumulative basis. You work out total tax due from 1 January to the current pay date, subtract what’s already been deducted, and the difference is this period’s tax deduction. This ensures employees aren’t overtaxed or undertaxed as the year progresses.

USC (Universal Social Charge)

USC is a separate tax deduction that applies to gross income. The rates for 2024 are:

Employees earning less than €13,000 per year are exempt from USC. The calculation is also cumulative, similar to PAYE.

PRSI (Pay Related Social Insurance)

For most employees, PRSI is charged at Class A. The employee contribution is 4% of gross pay. There is no upper earnings limit.

Employer PRSI is charged on top of this at 11.05% on weekly earnings above €441 (a reduced rate of 8.8% applies to earnings of €441 or below per week). This is an additional cost to the employer, not a deduction from the employee’s pay.

Employer PRSI is often the forgotten cost of employment. When budgeting for a new hire, employers must account for this on top of the gross salary.

Net Pay

After deducting employee PAYE, USC, and PRSI from gross pay, what remains is net pay. This is what is actually paid to employees each period. The gap between gross and net is often a shock for new starters, and for employers who hadn’t factored in the full cost including employer PRSI.

Payslip Requirements

Every employer in Ireland is legally required to provide a payslip to each employee. Under the Payment of Wages Act 1991, a payslip must include:

1. Gross pay before any deductions
2. The nature and amount of each deduction (PAYE, USC, PRSI, pension contributions, etc.)
3. Net pay after all deductions

A payslip must be provided on or before the pay date in paper or electronic format. Failure to provide compliant payslips is a statutory breach that can result in complaints to the Workplace Relations Commission.

Pay Frequency Options

There is no legal requirement to pay employees at a specific frequency. Employers in Ireland typically choose one of the following:

1. Weekly: Common in retail, hospitality, and trades. Higher admin burden but preferred by many hourly workers.
2. Fortnightly: A middle ground. Less common but used by some employers.
3. Monthly: The most common frequency for salaried employees. Lower admin, one payroll run per month.

Whichever frequency you choose, you must submit payroll data to Revenue on or before each pay date. Your payroll system needs to be configured for the correct frequency, as the cumulative tax calculations depend on it.

Setting Up Your Payroll System

If you are setting up payroll for the first time, here is what you need in place:

1. Register as an Employer

As covered above, register through ROS or via TR1/TR2 form.

2. Collect Employee Information

For each employee, you need:

– Full name and address

– PPS number

– Start date

– Agreed salary or hourly rate

– Bank account details for payment

– Revenue Employment ID (assigned when you look up their RPN)

3. Request RPNs

Use ROS or your payroll software to request an RPN for each employee before running your first payroll.

4. Choose a Payroll System

You have three main options:

Payroll software: Products like Sage Payroll, BrightPay, and Thesaurus Payroll are widely used by employers in Ireland. They handle tax calculations, payslip generation, and Revenue submissions, and are updated each year for budget changes.

Cloud payroll platforms: Browser-based options handle all calculations and submissions. Popular with smaller employers who want simplicity.

Outsourced payroll: Many employers outsource to a payroll provider or accountant who handles everything. You simply provide the hours or salary details each period. For businesses with more than a few employees, this is often the most practical option.

5. Set Up a Payroll Calendar

Know your pay dates, your submission deadlines, and your Revenue payment dates. Missing a submission is treated as a compliance failure under PAYE Modernisation.

Running Payroll: The Monthly Process

Here is what a typical monthly payroll run looks like for an employer in Ireland:

Before the pay date:

1. Gather any variable pay data (overtime, bonuses, commissions, absences)

2. Check for updated RPNs from Revenue

3. Enter data into your payroll system

4. Run the payroll calculation

5. Review the output: check gross pay, deductions, and net pay for each employee

6. Approve the payroll

On or before the pay date:

7. Submit your Payroll Submission Request (PSR) to Revenue through ROS or your payroll software

8. Pay your employees (bank transfer, typically by BACS or SEPA)

9. Issue payslips

After the pay date:

10. Revenue will send a Payroll Submission Response confirming receipt

11. Pay your payroll taxes to Revenue (PAYE, USC, employee PRSI, and employer PRSI)

Revenue collects payroll tax monthly. Payment is due by the 14th of the following month (or the 23rd if paying and filing electronically through ROS). For smaller employers, Revenue may allow quarterly payments.

Benefit in Kind

If you provide employees with non-cash benefits such as a company car, health insurance, accommodation, or other perks, these are treated as benefit in kind (BIK) and are subject to PAYE, USC, and PRSI. The value of the benefit must be included in the employee’s pay for tax purposes.

BIK calculations can be complex. A company car, for example, is valued based on the original market value, CO2 emissions, and business kilometres driven. Revenue has detailed guidance on benefit in kind for each type. Getting BIK wrong is one of the more common payroll errors and tends to surface during audits.

Payroll Obligations Beyond Tax

Managing payroll isn’t just about tax deductions. Employers must also ensure compliance with:

1. Minimum wage: All employees must be paid at least the statutory minimum wage rate. Rates are updated annually on gov.ie.
2. Pension auto-enrolment: Ireland is introducing auto-enrolment for pensions, which will add a new deduction and employer contribution to the payroll process.
3. Statutory leave: Payroll must correctly handle annual leave, public holidays, sick leave (under the Sick Leave Act 2022), maternity, paternity, and parent’s leave.
4. Employment records: Under the Organisation of Working Time Act 1997, you must keep records of hours worked and leave for at least three years.

Year-End Obligations

Under PAYE Modernisation, there is no separate year-end return to file. Because you have been submitting payroll data in real time throughout the year, Revenue already has a complete picture.

However, you should still carry out a year-end review:

1. Check all submissions to ensure every pay period was correctly submitted
2. Review for errors before 31 March of the following year, when the year is “finalised”
3. Update for budget changes as new tax rates and PRSI changes take effect from 1 January

Common Payroll Mistakes

These are the errors we see most frequently:

1. Missing submission deadlines. Under PAYE Modernisation, submissions must be made on or before the pay date. Late submissions trigger compliance interventions from Revenue.
2. Using outdated RPNs. RPNs can change during the year. If you’re not checking for updates, you may be applying the wrong employee’s tax credits or rate bands.
3. Ignoring employer PRSI. Social insurance is not just the employee’s 4%. Employer PRSI at 11.05% must be budgeted for and paid on time.
4. Getting BIK wrong. Company cars, health insurance, and small gifts have specific rules. Misclassifying benefit in kind is a common audit finding.
5. Incomplete payslips. A payslip must show gross pay, each deduction, and net pay. “Net amount only” payslips are not compliant.
6. Not keeping records. Payroll records must be retained for six years. “We changed software and lost the data” is not a defence Revenue will accept.

When to Outsource Payroll

For many employers, outsourcing payroll is the smartest decision they make. Consider it if you don’t have a dedicated payroll person, if you have complex BIK or variable pay arrangements, or if you’re spending more time on payroll admin than on running your business.

A good payroll provider handles all calculations, Revenue submissions, payslip generation, and compliance. Many accountancy firms offer payroll as part of their service, which is particularly efficient because your payroll data feeds directly into your accounts.

Frequently Asked Questions

How do I register as an employer in Ireland?

Register through Revenue’s Online Service (ROS) at ros.ie. If you have already registered for tax using a TR1 or TR2 form, you can add employer registration to your existing record. Revenue will set you up to operate the PAYE system.

What is the difference between PAYE and USC?

Both are deductions from an employee’s pay, but they’re separate taxes. PAYE is income tax, calculated based on the employee’s tax credit and rate bands. USC is charged at flat tiered rates on gross income. Both are deducted by the employer and paid to Revenue.

Do I need payroll software?

Yes, in practice. PAYE Modernisation requires real-time electronic submission. Payroll software or a payroll provider is essential for any business running payroll for their employees beyond one or two staff.

How often do I need to submit payroll information to Revenue?

Every time you pay your employees. If your pay frequency is monthly, you submit monthly. If weekly, you submit weekly. The submission must be made on or before the pay date.

What happens if I make a payroll error?

Corrections can be submitted through ROS or your payroll software. The sooner you correct an error, the better. Revenue tracks discrepancies and may intervene if patterns of errors emerge.

Can I run payroll myself or do I need a payroll provider?

You can run payroll yourself using payroll software, especially for small teams. But as your team grows or your payroll becomes more complex, a payroll provider or your accountant can handle it more reliably and free up your time.

What is the cost of employer PRSI?

Employer PRSI is currently 11.05% of the employee’s gross pay for earnings above €441 per week (8.8% for earnings at or below that threshold). This is a cost to the employer on top of the employee’s salary. It is one of the most commonly underestimated costs of employment.

Get Your Payroll Right from the Start

Payroll is not something you can figure out as you go. The obligations are clear, the deadlines are strict, and Revenue is watching in real time. Getting it right from the start is far cheaper than fixing errors after the fact.

If you need help setting up or managing payroll, our team can handle the full process for you, or review your current setup to make sure everything is in order.

Talk to us about your payroll. We’ll take a look at what you need and give you a straight answer on the best way to handle it.

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.