Communicating pay rises in Ireland
Reviewed by Mellow Editorial Team, HR & payroll content team
A pay rise conversation handled well builds trust; handled badly, it creates resentment that outlasts the raise itself. Here is how to communicate compensation changes clearly and fairly in an Irish employment context.
Be clear about what is actually changing
Before you say anything to an employee, know the exact numbers yourself. A gross salary increase looks very different net of income tax, USC and PRSI — and employees will notice the gap if you have not explained it.
At the standard rate, income tax is 20% up to roughly €44,000 for a single person, then 40% above that. On top of that, employees pay USC at banded rates of 0.5%, 2%, 3% and 8%, plus PRSI at approximately 4.1%. A €3,000 gross increase for someone already in the higher tax band will land as something closer to €1,500–€1,600 net per year. That is not a reason to delay the conversation — it is a reason to have it honestly.
If the increase pushes an employee's earnings across the standard rate cut-off point, flag that explicitly. Part of their raise will be taxed at 20%, the portion above the threshold at 40%. Employees who have not encountered this before can feel blindsided when they see their first payslip after the change.
Give the news in person first, paperwork second
In Ireland there is no legal requirement to give a pay rise in any particular format, but best practice is consistent: tell the person directly, then confirm it in writing.
The in-person conversation (or a video call for remote staff) gives the employee a chance to ask questions and avoids the cold impression of receiving a letter or email with no prior discussion. It also lets you explain the reasoning — performance, market adjustment, cost-of-living change, or a role expansion — which matters more to long-term motivation than the number itself.
The written confirmation should follow within a few days. It needs to state the new gross salary, the effective date, and whether any other terms are changing. Under the Terms of Employment (Information) Acts, employees are entitled to be notified of any change to their terms in writing within one month. A simple letter or a signed addendum to the employment contract satisfies this.
Update payroll before the effective date
A common mistake is telling an employee their new salary applies from the first of the month, then missing the payroll cut-off and paying the old rate. That erodes confidence immediately.
In Ireland, payroll submissions go to Revenue through ROS on or before each payday under the real-time reporting rules. If you run payroll through a bureau or platform, flag the change in advance of the submission deadline — not the day before payday. Build in enough lead time to handle the Revenue update, recalculate tax credits if relevant, and issue a corrected payslip on time.
If the effective date has already passed and you owe back-pay, treat it as a separate once-off payment on the payslip with a clear label. Employees should never have to ask whether back-pay has been included.
Handle the conversation when you are not giving a rise
Sometimes you need to communicate that a salary review has resulted in no change, or a smaller increase than the person expected. This is harder but equally important to do well.
Be direct about the outcome before explaining it. Starting with a long preamble before getting to "no change" is frustrating to sit through and damages credibility. Give the actual reason — budget constraints, the role not yet at the level required, a market benchmark that does not support an increase — and be specific about what would need to be different for the outcome to change next time.
Document these conversations too. If a dispute arises later, or the employee leaves and cites the pay conversation as a grievance, having a record of what was discussed protects the business.
Keep an eye on what is coming
From 2026 onwards, employers and employees in Ireland will be drawn into the My Future Fund pension auto-enrolment scheme in phased tranches. Contributions will be deducted through payroll and matched by employers, which means the total cost of an employment package is shifting. When communicating pay, particularly for new hires or during annual reviews, it is worth building pension contributions into how you present the overall package — not to obscure the salary figure, but to give an accurate picture of total compensation.
Similarly, statutory annual leave in Ireland is four working weeks. If a pay rise triggers a change in how holiday pay is calculated (because it is based on normal weekly remuneration), make sure that flows through correctly in your payroll system and is reflected accurately on payslips.
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