Managing payroll correctly is a legal obligation for employers in Ireland. If you have employees, you must comply with the PAYE (Pay As You Earn) system, which ensures that Income Tax, USC (Universal Social Charge), and PRSI (Pay Related Social Insurance) are deducted from employees' wages and paid to Revenue.
This guide covers:
✔️ What PAYE is and how it works
✔️ Employer obligations under Irish payroll tax laws
✔️ How to calculate and report PAYE deductions
✔️ Payroll deadlines and common compliance mistakes
1. What is PAYE?
PAYE (Pay As You Earn) is Ireland’s system for collecting Income Tax, USC, and PRSI directly from employee wages. As an employer, you withhold the correct amount from employees’ salaries each time you process payroll and submit it to Revenue.
💡 This ensures employees meet their tax obligations without needing to file an annual tax return unless they have additional income sources.
2. Employer Payroll Tax Responsibilities
If you hire staff in Ireland, you must:
📌 Register as an employer with Revenue before paying employees
📌 Calculate & deduct PAYE, USC, and PRSI from salaries
📌 File real-time payroll reports to Revenue before every payment
📌 Pay payroll taxes to Revenue on time each month
Failure to comply can result in penalties, interest charges, and Revenue audits.
3. PAYE Components Explained: What Employers Deduct
When processing payroll, three main deductions apply:
| Payroll Tax | What It Covers | Who Pays? |
|---|---|---|
| Income Tax | Main tax on employee earnings | Employee |
| USC (Universal Social Charge) | Applies to most income over €13,000 per year | Employee |
| PRSI (Pay Related Social Insurance) | Social insurance for pensions, benefits, and state support | Employee & Employer |
PRSI Employer Rates
✔️ Employers pay 8.8% PRSI for employees earning less than €441 per week
✔️ Employers pay 11.05% PRSI for employees earning more than €441 per week
💡 Employers have an additional PRSI liability, meaning payroll costs are higher than just the gross salary.
4. How to Register for PAYE as an Employer
Before paying employees, you must register for PAYE with Revenue.
Steps to Register:
1️⃣ Log in to ROS (Revenue Online Service)
2️⃣ Go to Manage Tax Registrations
3️⃣ Select Employer PAYE/PRSI Registration
4️⃣ Complete and submit the online form
💡 You’ll receive a PAYE Employer Number, which you use for payroll reporting.
5. How to Process Payroll & Report PAYE
Payroll in Ireland operates under Real-Time Reporting (RTR), meaning you must report employee wages and deductions to Revenue before payment.
Payroll Processing Steps:
✔️ Calculate employee wages (gross pay)
✔️ Apply tax credits and cut-off points (from Revenue)
✔️ Deduct PAYE, USC, and PRSI
✔️ Submit a Payroll Submission Request (PSR) to Revenue before payment
✔️ Transfer net wages to employees
✔️ Pay Revenue the deducted taxes
💡 You must use payroll software or Revenue’s free payroll system (ROS Payroll Reporting) for compliance.
6. Payroll Tax Deadlines: When to Pay Revenue
Employers must pay PAYE, USC, and PRSI to Revenue either:
✔️ Monthly (by the 23rd of the following month)
✔️ Quarterly (if your annual PAYE bill is under €28,800)
💡 Late payments result in interest charges and penalties, so it’s essential to meet deadlines.
7. Common Payroll Compliance Mistakes & How to Avoid Them
Many employers make payroll errors that can lead to penalties. Here are the most common:
❌ Not registering for PAYE before hiring employees
✔️ Register as an employer with Revenue before paying staff.
❌ Incorrectly calculating PAYE, USC, and PRSI
✔️ Use Revenue’s payroll tax tables or payroll software to ensure accuracy.
❌ Missing Payroll Submission Deadlines
✔️ Submit Payroll Submission Requests (PSR) before each wage payment.
❌ Failing to update employee tax details
✔️ Always get a Revenue Payroll Notification (RPN) for new hires.
❌ Late payments to Revenue
✔️ Pay PAYE taxes by the 23rd of the following month to avoid penalties.
8. How to Reduce Payroll Costs & Maximise Efficiency
Managing payroll efficiently can save time and reduce costs. Here are some tips:
✅ Use Payroll Software
Payroll software automates calculations, tax deductions, and Revenue reporting. Options include:
✔️ BrightPay
✔️ Sage Payroll
✔️ Xero Payroll
✅ Consider Outsourcing Payroll
If payroll is too complex, outsourcing to an accountant or payroll provider can ensure compliance.
✅ Claim Employer PRSI Relief
Certain startup businesses and employment schemes allow PRSI reductions.
Final Thoughts: Get PAYE Right from the Start
Understanding PAYE and payroll taxes is crucial for any business with employees in Ireland. Staying compliant with deductions, tax rates, and Revenue reporting ensures you avoid fines and payroll issues.
📌 Need help with payroll processing or PAYE compliance? Gahan Accounting can assist with payroll management, Revenue reporting, and tax efficiency strategies.
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