Statutory deductions in Ireland, explained
Reviewed by Mellow Editorial Team, HR & payroll content team
Statutory deductions in Ireland are the amounts an employer is legally required to withhold from an employee's pay and remit to Revenue. The three main deductions are income tax, Universal Social Charge (USC), and PRSI — each calculated differently and each with its own rules.
Income tax
Ireland taxes income using a two-rate system, not a personal allowance. The standard rate is 20%, which applies up to roughly €44,000 for a single person. Earnings above that threshold are taxed at 40%.
What makes the Irish system different is the use of tax credits. Rather than reducing the amount of income that is taxable, credits reduce the tax liability itself. Every employee has a Tax Credit Certificate (TCC) issued by Revenue, which tells you their rate band and credit entitlements. You apply these figures when running payroll — it is not something you calculate yourself from scratch.
For a new employee, always ask them to register the employment on myAccount so Revenue can issue a TCC. Until you receive one, you must operate emergency tax, which is significantly less favourable for the employee. Emergency tax can cause friction early in employment, so it is worth telling new starters to sort this promptly.
Universal Social Charge (USC)
USC applies to gross income above €13,000 per year. If an employee earns €13,000 or less in the year, they are exempt entirely. Above that, USC is charged in bands:
- 0.5% on the first portion of income
- 2% on the next band
- 3% on the following band
- 8% on income above the highest threshold
The exact band thresholds are set each tax year in the Budget and reflected in your payroll software. USC is calculated on gross pay before pension contributions, unlike income tax where approved pension contributions can reduce the taxable amount.
Medical card holders and some other categories are subject to reduced USC rates. Revenue flags these exemptions on the employee's TCC, so the same rule applies: check the cert.
PRSI
PRSI is the mechanism that funds social welfare entitlements. Most employees in standard employment fall under Class A, which means:
- The employee pays approximately 4.1% on their gross earnings
- The employer pays approximately 11.15% on the employee's gross earnings
The employer contribution is a real cost on top of salary. When you are budgeting a hire, you need to account for that 11.15% on top of the agreed gross. On a €50,000 salary, that is an additional employer PRSI liability of roughly €5,575 per year, before any other on-costs.
PRSI class can vary — directors with certain shareholdings, proprietary directors, or employees over a certain age may fall into different classes with different rates. If you have any doubt about the correct class, check with Revenue or a payroll professional before processing.
Real-time reporting to Revenue
Since 2019, Irish payroll operates on a real-time basis through the Revenue Online Service (ROS). Every time you pay an employee, you must submit a payroll submission on or before the payment date. There is no end-of-month catch-up — the submission must happen before or on payday.
This means your payroll process needs to be timely and accurate. Errors can be corrected through amended submissions, but late or missing submissions attract Revenue scrutiny. If you are running payroll across multiple countries or entities, Ireland's real-time requirement is one of the stricter regimes to stay on top of.
You remit the tax and PRSI collected — both employee and employer portions — to Revenue on a monthly or quarterly basis, depending on the size of your payroll. Revenue assigns you a payment frequency when you register as an employer.
Pension deductions from 2026
Auto-enrolment is being introduced in Ireland under the My Future Fund scheme. From 2026, eligible employees will be automatically enrolled in a workplace pension, with contributions from the employee, the employer, and the State.
This will add a new mandatory deduction to manage in payroll. The rates start low and step up over time. Employer contributions will be an additional cost of employment, similar to how PRSI works today. Payroll systems will need to handle the new deduction, and employers will need to communicate clearly with staff about what is being deducted and why.
A note on accuracy
The figures above — income tax rates, USC bands, PRSI rates — are the framework, but the exact thresholds and credit amounts are updated annually in the Budget. Always run payroll against the current year's published rates, and make sure your payroll software is updated at the start of each tax year. Using last year's figures, even slightly, leads to under or over-deductions that need to be corrected later.
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