Irish payroll explained for small businesses
Reviewed by Mellow Editorial Team, HR & payroll content team
Running payroll in Ireland means registering as an employer with Revenue, calculating income tax, USC and PRSI for each employee, and submitting a real-time report to Revenue on or before every payday. Here is how each part works in practice.
Registering as an employer
Before you pay anyone, you need to register as an employer with Revenue. You do this through ROS (Revenue Online Service). Once registered, Revenue assigns you an employer registration number, which you use for all future payroll submissions.
Each employee also needs to be linked to your payroll. They should give you their PPS number so that Revenue can issue a Tax Credit Certificate (TCC) for them. The TCC tells you which tax credits and rate bands apply to that individual. Without it, you must operate emergency tax — a higher rate that costs your employee more and creates extra administration for you.
How Irish income tax works
Ireland does not use a personal allowance system. Instead, it uses tax credits. Every employee gets a set of credits that reduce the tax they actually owe, rather than reducing the income that is taxed.
Tax is charged at two rates. Income up to approximately €44,000 (for a single person) is taxed at the standard rate of 20%. Income above that threshold is taxed at the higher rate of 40%. The exact band can vary depending on an employee's personal circumstances — for example, a married couple with one income gets a wider standard-rate band — so always use the figures on the employee's TCC rather than assuming.
The practical calculation is: gross pay taxed at the appropriate rate or rates, then subtract the employee's tax credits to arrive at the tax actually due.
USC and PRSI
Two further deductions apply on top of income tax.
Universal Social Charge (USC) applies to gross income above a low threshold. The rates are banded: 0.5% on the first portion, then 2%, then 3%, and 8% on income above the highest band. The USC bands and thresholds can change in each Budget, so always verify the current figures in Revenue's guidance at the start of a new tax year.
PRSI (Pay Related Social Insurance) funds social welfare entitlements. For most employees on a standard employment contract, Class A applies. The employee pays approximately 4.1% of gross pay. The employer pays approximately 11.15% of gross pay on top of that — this is an additional cost to the business, not a deduction from the employee's wages. Employer PRSI is a significant element of total employment cost and is worth factoring in when budgeting for a new hire.
Real-time reporting to Revenue
Ireland operates a real-time payroll reporting system. Every time you run payroll, you must submit a Payroll Submission Request (PSR) to Revenue through ROS on or before the date you pay your employees. You cannot submit after the fact without it being treated as a late filing.
The PSR includes each employee's gross pay, the income tax, USC and PRSI deducted, and the employer's PRSI contribution. Revenue uses this data to monitor compliance and to keep employees' tax records up to date automatically.
At year end, there is no separate P35 return to file — real-time reporting replaced that. You do need to issue each employee with a P60 equivalent (now called an Employment Detail Summary), which Revenue generates automatically from the submissions you have already made. Employees can view their own summary through myAccount.
Annual leave and payroll administration
Statutory annual leave in Ireland is four working weeks per year. How you handle leave accrual in your payroll system affects how you calculate holiday pay, particularly for employees with variable hours. Holiday pay is based on normal weekly earnings, so for irregular hours it requires an average calculation rather than a flat figure.
For small businesses running payroll manually or on a spreadsheet, annual leave and variable pay are often where errors creep in. If your team has straightforward fixed salaries, the calculation is simpler. If you have part-time or hourly staff, it is worth building a clear process from the start.
Pension auto-enrolment from 2026
Ireland's pension auto-enrolment scheme, My Future Fund, is being introduced from 2026. Under this scheme, eligible employees will be automatically enrolled into a pension, with contributions from the employee, the employer and the State. This will add a new layer of payroll calculation and administration for employers. The contribution rates will phase in gradually over several years, so the cost impact will grow over time rather than arriving all at once.
If you are setting up payroll now or reviewing your processes, it is worth building awareness of auto-enrolment into your planning, even if the immediate administrative change is modest.
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