Running a pay review in Ireland
Reviewed by Mellow Editorial Team, HR & payroll content team
A pay review in Ireland is a structured process of assessing and adjusting employee salaries, typically against market data, internal equity and business affordability. Done well, it protects retention and keeps your payroll compliant with how Revenue expects pay changes to be processed.
Decide the timing and scope first
Most Irish employers run pay reviews annually, often aligned to either the calendar year or their financial year. Some run a second, smaller mid-year review for high performers or to address specific retention risks.
Before you start, agree on the scope: are you reviewing all staff, a specific department, or only those past their probation period? Are you looking at base pay only, or does the review include bonuses, benefits or allowances? Being clear on this up front prevents scope creep and keeps decisions consistent.
Set a budget envelope before individual decisions are made. It is far easier to allocate increases fairly when managers know the ceiling from the start, rather than making promises and discovering later the numbers do not add up.
Benchmark against the Irish market
A pay decision made without market data is a guess. Benchmarking tells you whether you are paying above, at or below the rate for a given role in Ireland.
Useful sources include published salary surveys from Irish recruitment agencies (many release annual guides by sector), sector-specific employer body data, and job advertisement analysis for comparable roles. Where possible, filter data by location — Dublin salaries for technical or financial roles often sit meaningfully higher than equivalent roles in regional cities.
When benchmarking, compare like for like: job title alone is not enough. Consider level of responsibility, team size, sector and the total package including pension, health insurance and leave entitlements. A candidate weighing up two offers will do this calculation; your review should too.
Understand the tax impact of a salary increase
Every permanent pay increase flows through payroll and hits the employee's tax position immediately on the next payroll run.
Ireland does not use a personal allowance system. Instead, employees receive tax credits — the most common being the Personal Tax Credit and the Employee Tax Credit — which reduce the actual tax liability. Income is taxed at 20% up to roughly €44,000 (for a single person in 2026/27), and at 40% above that. This means an employee already earning above the standard rate band will keep only 60 cent of every additional euro before USC and PRSI.
USC is charged in bands: 0.5%, 2%, 3% and 8%, depending on the income level. PRSI at Class A is approximately 4.1% for the employee. When you add these together, an employee in the higher income tax band faces a combined marginal deduction rate that is well above 50%. Worth communicating clearly to staff so a €3,000 increase does not come as a disappointment on their first payslip.
On the employer side, PRSI runs at approximately 11.15% on employee earnings, so factor that cost into your budget calculation — a salary increase costs the business more than the headline number.
Process the change correctly through payroll
Once increases are approved, every change must be processed accurately and on time. Revenue operates a real-time payroll reporting system: employers must submit payroll information on or before each payday via ROS. There is no batching changes after the fact without risk of a compliance issue.
In practice this means your payroll cutoff deadlines become critical during a pay review cycle. If you are running reviews for a large team, stagger sign-offs to avoid all changes landing in the final 48 hours before payroll runs.
If any employees receive a backdated increase — for example, the review was agreed in May but effective from April — the backdated amount needs to be handled as a lump sum payment in the period it is paid, and reported accordingly. Do not attempt to adjust prior-period submissions unless your payroll system handles this correctly.
Pension contributions should also be reviewed at the same time. If contribution rates are expressed as a percentage of salary, an increase in base pay automatically increases the pension deduction too — confirm with employees that this is understood and reflected in their updated payslip. With auto-enrolment under the My Future Fund scheme now in operation from 2026, contribution amounts are tied to earnings and will adjust accordingly.
Document decisions and communicate them properly
Every pay decision made during a review should be documented: the rationale, the comparator data used, the approval chain and the effective date. This protects you if a decision is ever questioned — including under equal pay provisions, which apply in Ireland and require you to be able to justify pay differences between employees doing like work.
Communication matters as much as the number itself. Employees who understand why they received a particular increase — or why the review resulted in no change — are more likely to accept the outcome than those left to speculate. A brief, honest conversation from a line manager, backed by a written confirmation of the new salary and effective date, is the baseline standard.
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