How to hire and pay an employee in Ireland – Guide to Irish payroll and employment law

Ireland offers a business-friendly environment, with its competitive corporate tax rates and skilled workforce. However, hiring and paying employees in Ireland involves navigating the country’s specific employment laws, payroll regulations, and benefits requirements. This guide provides a comprehensive overview for international businesses seeking to establish or expand operations in Ireland.

Understanding Irish employment laws

Key legislative frameworks

Irish employment law is governed by several key pieces of legislation. Employers must adhere to the following:

1. The Employment Equality Acts 1998–2015
   Prohibits discrimination in hiring and employment practices based on gender, age, race, disability, religion, and other protected characteristics.
2. The Organisation of Working Time Act 1997
   Regulates working hours, rest periods, holidays, and night work.
3. The Terms of Employment (Information) Acts 1994–2014
   Requires employers to provide written statements of employment terms within five days of an employee starting work.
4. The Minimum Wage Act 2000
   Sets the national minimum wage, currently €11.30 per hour (as of 2025).
5. Unfair Dismissals Acts 1977–2015
   Outlines fair grounds for dismissal and employees’ rights to challenge unfair dismissals.

Steps to hire an employee in Ireland

1. Register your business

Before hiring employees in Ireland, your business must:

• Register with the Revenue Commissioners (Revenue) for tax purposes.
• Obtain a Personal Public Service Number (PPSN) if operating as a sole trader.
• Register with the Companies Registration Office (CRO) if operating as a limited company.

2. Draft compliant employment contracts

Irish law mandates written employment terms. A contract should include:

• Job title and description
• Start date and probation period (if applicable)
• Salary and pay frequency
• Working hours and leave entitlements
• Notice periods for termination

3. Meet recruitment obligations

Employers must comply with anti-discrimination laws and ensure fair hiring practices. If hiring non-EU nationals, a General Employment Permit or Critical Skills Employment Permit may be required.

Irish payroll system – Setting up and managing payroll

1. Registering for PAYE

Employers in Ireland must operate Pay As You Earn (PAYE) to deduct income tax, Universal Social Charge (USC), and Pay Related Social Insurance (PRSI) from employees’ wages. This requires:

• Registration with Revenue for PAYE.
• Access to Revenue Online Service (ROS) for filing payroll information.

2. Calculating employee pay

Payroll calculations in Ireland must include:

• Income tax: Deducted at standard (20%) or higher (40%) rates, depending on the employee’s earnings.
• Universal Social Charge (USC): Applies progressively, with rates from 0.5% to 8%.
• Pay Related Social Insurance (PRSI): Employers contribute 11.05%, and employees contribute 4%, subject to thresholds.

3. Using payroll software

Many businesses use payroll software or outsource payroll to ensure compliance with:

• Real-Time Reporting (RTR): Employers must report payroll data to Revenue on or before each payday.
• Payroll Year-End Process: Includes filing annual returns and providing employees with a Revenue Payroll Notification (RPN).

Employment benefits and entitlements in Ireland

Statutory benefits

Employees in Ireland are entitled to a range of statutory benefits, including:

1. Annual leave
   A minimum of 4 weeks’ paid leave per year.
2. Public holidays
   Employees are entitled to 9 public holidays annually, with either a day off or additional pay.
3. Sick leave
   Statutory Sick Pay (SSP) introduced in 2022 mandates up to 3 days of paid sick leave (increasing to 10 by 2026).
4. Maternity and paternity leave
   • Maternity leave: 26 weeks of leave with an additional 16 weeks unpaid. Employers are not required to pay employees during this time, but they can claim Maternity Benefit from the Department of Social Protection.
   • Paternity leave: 2 weeks with Paternity Benefit available.
5. Redundancy pay
   Employees with over two years of continuous service are entitled to statutory redundancy pay.

Additional employee benefits

Many employers in Ireland provide enhanced benefits, including:

• Private healthcare plans
  Subsidising or fully covering health insurance for employees.
• Pension schemes
  While not mandatory, offering contributions to private pensions can attract top talent.
• Wellness programmes
  Supporting employee wellbeing through gym memberships, mental health support, or flexible working.

Tax considerations for employers and employees

Employer obligations

• Corporation Tax: Ireland’s low corporate tax rate of 12.5% applies to most trading income.
• VAT: Standard rate of 23% applies to most goods and services, though reduced rates exist for specific sectors.

Employee obligations

• Income Tax Credit: Employees can claim credits to reduce their tax liability.
• Social insurance contributions: Employees’ PRSI contributions fund state benefits like pensions and unemployment support.

Best practices for hiring and paying employees in Ireland

1. Leverage local expertise
   Partner with local payroll providers or legal consultants to navigate compliance requirements effectively.
2. Invest in HR technology
   Use digital tools to streamline recruitment, payroll, and benefits administration.
3. Monitor legislative changes
   Stay updated on employment law changes to avoid penalties and foster good employee relations.
4. Offer competitive packages
   Provide enhanced benefits and flexible working arrangements to attract and retain top talent in a competitive labour market.

Conclusion

Hiring and paying employees in Ireland involves a detailed understanding of employment law, payroll obligations, and benefits entitlements.

By ensuring compliance and providing competitive compensation packages, businesses can tap into Ireland’s talented workforce while maintaining operational efficiency.

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