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Pension Scheme

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Income Tax

Income Tax

Irish residents reach their state pension age once they reach 66, but pensioners will only receive the full amount if their social insurance contributions are up to date Several changes have been made to the state pension scheme recently, including the introduction of the Total Contributions Approach (TCA) to calculating pensions There is also now a new Home­caring credit (2018, updated 2020), which provides workers credited contributions for up to 20 years if they have spent time out of the workforce while raising children or in caring roles.

There is more useful, detailed information about the TCA approach to state pensions on the Citizens information website

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Paid leave

Irish law stipulates entitlements around paid leave, although some provisions to it can be amended by employers with employees’ agreement Any separate amendments are superseded by the law, however, regardless of whether the employee agreed to the terms Therefore, for example, if a male employee agreed in the past to waive his right to paternity leave, under Irish employment law, he will still be entitled to statutory paternity leave

Full­time employees are entitled to a minimum of four weeks paid annual leave The employer may decide when annual leave can be taken (e g according to staffing levels and busy/quieter periods), but should also acknowledge their employee’s need or wishes Some employers will allow employees to carry over annual leave to the following year, but this is not such common practice in Ireland

Maternity Leave

The employee’s contact of service ought to include explanation about paid maternity leave, as it is the legal right of all female employees, regardless of the duration of their employment or the hours they are contracted to work per week The basic period of maternity leave provides 26 weeks leave along with an additional 16 weeks of unpaid leave Employers are not legally obliged to provide employees paid leave for the 26­week duration, but many will qualify for state maternity benefit for the 26 weeks The extra 16­week period is not normally eligible for state maternity benefit

Adoptive mothers are entitled to 24 weeks adoptive leave, again with an additional 16 weeks of unpaid leave and many may qualify for the Department of Social Protection’s (DSP) adoptive benefit over the 24 weeks

A lone male adoptive parent equally is entitled to take adoptive leave and is also eligible to apply for the state adoptive benefit

Paternity Leave

Often the employee’s contact of service will include explanation about paid paternity leave New parents, including the father of the child, are entitled to two weeks paternity leave any time within the first six months after the birth or adoption of a child Employers are not obliged to award male employees paid paternity leave, although many will qualify for the paternity benefit from the DSP

Other Allowances

Additional leave entitlements for employees in Ireland, include:

Carer’s leave of between 13 and 104 weeks An employee may qualify for the carer’s benefit or the carer’s allowance from the DSP

Parental Leave of up to 18 weeks to care for qualifying children

Sick leave, but whether this is on full pay is up to the employer Therefore, the terms should be addressed in the contract of service or terms and conditions of employment

Outbooks offers an efficient, accurate and secure payroll service that is fully compliant with Revenue, the DSP, and Irish employment law.

Outbooks’ Capabilities

Payroll Processing

Outbooks’ fully managed payroll solution handles the complex tasks so that you can focus on your business

Regulatory Compliance

With a wealth of experience and expertise in payroll in Ireland (and internationally), we make sure your business is always acting in accordance with Irish labour law employment and tax legislation

From the outset, Outbooks can help with registration as an employer and act as your agent If you’re already registered, then we’ll look after the change in agent and handle everything on your behalf

Preparing to deduct income tax from employees in Ireland

Registration of Employees

To deduct income tax from employees, the employee must first have been given a personal public service number (PPSN) and be registered for PAYE

Since payroll will not receive the employee’s RPN until the employee registers and this would mean that the employee will be charged emergency tax, this is something to be avoided since no employee is happy to be on emergency tax The registration for PPSN is, therefore, something to be prioritised before the employee’s start date and we’d suggest that it’s one of those new­joiner enrolment jobs that might be best done alongside the contract of service prior to your employee starting work with your company

Revenue Payroll Notification (RPN)

Once the employee has been issued with an RPN, this provides the necessary information about what to deduct from the employee’s wages: the correct Income Tax, Universal Charge, and Local Property Tax

Employers’ responsibilities

Employers operating under PAYE must deduct taxes from employees’ wages every time they are paid It is imperative that the payroll calculations are correct and that the payment details on how much tax was paid by the employer/employee are reported to Revenue correctly

Employers hold the tax deducted and then pay Revenue what they owe through an employer’s PAYE return Likewise, Outbooks will submit the receipts for payroll to our client – the employer –and issue payslips in hard copy and/or electronically to the employer’s employees

Other details that must be reported to Revenue via employers

Occupational/workplace pension scheme / medical insurance

Employers in Ireland can operate an approved occupational pension scheme for employees Any employer that operates a workplace pension scheme will need a pension tracing number to operate it with the law Employers can also provide a benefit in kind (BIK) for a medical insurance premium and the total amount of medical insurance paid by you the employer with need to be computed by payroll.

Gross pay

Payroll should know the employee’s gross pay (pay before tax); holiday pay entitlement, overtime, bonuses or commission are also included in gross pay

Correct employee payment details

Employers need to establish when employees are paid and inform payroll – is it weekly, bi­weekly, monthly? It is important that the employee has provided the correct bank details, that employees are regularly invited to provide updates of their details, and that the payment method used to pay employees is 100% secure

Benefits information

Company share­based remuneration, taxable benefits, and amounts contributed by the employer to retirement schemes should all be communicated to Revenue in a payroll submission

Income tax (IT)

The rate of income tax rate an employee must pay will depend on their salary Whether the employee is single, married or widowed, and other personal circumstances, will also determine the different rates of income tax an employee is due to pay on their salary

Before the employee’s income tax rate is calculated, the personal tax credits or reliefs that relate to the individual to reduce the amount of their income that is subject to income tax must be calculated. These might include personal circumstances noted above (carer’s allowances etc.) but equally could include contributions to private pension schemes or health insurance premiums However, the onus is on employees/individual taxpayers to inform Revenue via their ROS accounts of any tax credits and reliefs they are eligible to claim

While it is an employees’ responsibility to ensure that the correct tax credits are applied to their employment, Revenue communicates an employee’s tax credits to employers Thus, then it is the employer’s payroll system that becomes responsible for making sure that each employee’s income tax rate – which will relate to their differing personal circumstances, which will affect their income tax rate – is calculated correctly and correct to the letter. This is important for compliance reasons and also for employer­employee relations

Universal Social Charge (USC)

If an employee’s income is above a certain threshold (€13,000 in 2022), the employer will need to deduct USC from the employee’s wages

The rates of USC depend on the employee’s salary

Revenue allocates USC rates to the employee, but again, it is the responsibility of the employee to tell Revenue about their circumstances, for Revenue to inform the company, for the company to inform payroll, and for payroll to allocate the correct amount threshold.

Pay­related Social Insurance (PRSI)

PRSI funds social welfare payments in Ireland The amount of PRSI an employee must pay depends on their salary This is a tax that both employees and employers must pay each time an employee is paid, so PRSI contributions are made up of two payments:

1 Employers’ PRSI – the PRSI an employer pays which is added to an employer’s PAYE tax liability

2 Employees’ PRSI – the PRSI an employer deducts from an employee’s wages on behalf of Revenue

Local Property Tax (LPT)

Employees who own property in Ireland can elect to pay their local property tax (LPT) at source via PAYE

Once an employee notifies Revenue that they wish to pay their LPT at source, Revenue will communicate the rate of LPT to deduct via PAYE each month

As you can see, there is quite a lot to do with Payroll and it is quite a responsibility Outbooks look after payroll for hundreds of businesses internationally and in Ireland. We will make sure that employees are paid accurately and on time, we will ensure that there are no errors in your systems or processes, and we will also file your PAYE return with Revenue

When do PAYE returns need to be filed with Revenue?

Employers are required to file monthly returns for PAYE and pay whatever they owe by the 23rd day of the following month if they are filing and paying online via ROS: January returns, for example, are to be filed and paid by 23 February

A paper form is still accepted, but this would only give you until the 14th of the month to file and pay the PAYE liability

In the event of not having set up your online Revenue (ROS) PAYE account, Outbooks would assist you in setting it up, it is far more secure and a lot less hassle to switch over your payroll systems and processes to the digital model

What does PAYE stand for?

What does PAYE stand for?

How does the pension system operate Ireland?

What are the rules governing hours worked?

What is the law on dismissing an employee?

If PAYE returns are not filed on time is it serious, is there any leeway?

What are tax credits?

What are tax exemptions?

What are tax reliefs?

How does someone apply for tax reliefs, credits and returns?

If I outsource the payroll of my company to Outbooks, will the fee be tax deductible?

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