Understanding online payroll in Ireland

Published Monday 26 October 2026

Table of contents

• What is payroll?
• How does payroll work?
• Payroll taxes and deductions in Ireland
• Irish payroll essentials
• How to choose payroll software
• How to set up payroll for your small business
• Types of employee pay
• Payroll record-keeping requirements
• Payroll compliance: Your responsibilities as an employer
• Simplify your payroll with Xero
• FAQs on payroll

Key takeaways

• Payroll is the process of calculating and paying employee wages while deducting Pay As You Earn (PAYE), Pay Related Social Insurance (PRSI), and Universal Social Charge (USC) each pay cycle.
• In Ireland, employers must register with the Revenue Commissioners, report pay on or before each pay date, and handle MyFutureFund pension contributions for enrolled employees.
• Choosing cloud-based payroll software can help you automate tax calculations, reduce manual errors, and save time on every pay run.
• Irish employment and tax law requires you to keep payroll records for at least six years, so a reliable system is essential from day one.

What is payroll?

If you employ anyone in Ireland, payroll is one of the first responsibilities you need to get right. Understanding what it involves helps you stay compliant and pay your team accurately.

Payroll is the process of calculating employee wages, withholding the correct taxes and contributions, and distributing pay on time. It covers everything from gross pay calculations to filing returns with the Revenue Commissioners.

For small businesses, payroll also includes tracking hours worked, managing leave entitlements, and issuing payslips. Each of these steps must follow Irish employment law and Revenue requirements.

Getting payroll right protects your business from penalties and builds trust with your employees. It also gives you a clear picture of your labour costs, which feeds directly into your financial planning.

How does payroll work?

Running payroll follows a repeating cycle each pay period. Once you understand the steps, the process becomes straightforward to manage.

1. Gather employee information

Before your first pay run, collect each employee's Personal Public Service Number (PPSN), tax credit certificate details, and bank account information. You also need to register as an employer with the Revenue Commissioners through Revenue Online Service (ROS).

2. Track hours and attendance

Record the hours each employee works during the pay period. This includes regular hours, overtime, sick leave, and annual leave. Accurate time tracking is the foundation of correct pay calculations.

3. Calculate gross pay

Gross pay is the total amount an employee earns before any deductions. For salaried employees, divide the annual salary by the number of pay periods. For hourly employees, multiply hours worked by the hourly rate and add any overtime or bonuses.

4. Deduct taxes and contributions

Apply the required tax deductions from each employee's gross pay. In Ireland, this means calculating PAYE income tax, PRSI contributions, and USC. Your employee's Revenue Payroll Notification (RPN) tells you the correct tax credits and rate bands to apply.

5. Calculate net pay

Net pay is what the employee takes home after all deductions. Subtract PAYE, PRSI, USC, and any other deductions such as pension contributions from the gross pay figure. This is the amount you transfer to the employee's bank account.

6. Pay your employees

Transfer the net pay amount to each employee by the agreed pay date. Most Irish businesses use electronic bank transfers. You must also provide each employee with an itemised payslip showing gross pay, deductions, and net pay. A payslip template can help you include all the required details.

7. Submit payroll reports to Revenue

Under Ireland's PAYE Modernisation system, you must submit a Payroll Submission Request (PSR) to Revenue on or before each pay date. This reports each employee's pay and deductions in real time. You also need to remit the taxes you've withheld to Revenue by the 23rd of the following month if you file and pay through ROS.

8. Keep detailed records

Store all payroll records securely after each pay run. This includes pay calculations, tax deductions, payslips, and Revenue submissions. You'll need these records for audits, employee queries, and end-of-year reconciliation.

Payroll taxes and deductions in Ireland

Ireland has specific tax obligations that every employer must understand. Getting these deductions right is essential for staying compliant with Revenue.

PAYE (Pay As You Earn) is the income tax system that requires employers to deduct tax from employee wages at source. Ireland uses a cumulative tax system with two rate bands: the standard rate of 20% and the higher rate of 40%. The amount each employee pays depends on their tax credits and rate band, both detailed in their Revenue Payroll Notification.

PRSI (Pay Related Social Insurance) funds social welfare benefits such as the State Pension, illness benefit, and maternity benefit. Both employer and employee pay PRSI contributions. The rates depend on the employee's earnings and their PRSI class. Most private sector employees fall under Class A.

USC (Universal Social Charge) is a tax on gross income that applies to most employees earning more than €13,000 per year. USC has multiple rate bands, starting at 0.5% and increasing with income. Unlike PAYE, USC is calculated on gross income before pension deductions.

Employer PRSI is a cost your business pays on top of wages, separate from the PRSI you deduct from your employee's pay. From 1 October 2026, Class A employer PRSI is 11.4% on weekly earnings above €552 and 9.15% on weekly earnings of €552 or less, while employees pay 4.35%. The €552 threshold rises to €600 from 1 January 2027, so build both rates into your budget.

Pension auto-enrolment is now live in Ireland. MyFutureFund launched on 1 January 2026, and the National Automatic Enrolment Retirement Savings Authority (NAERSA) runs it. The scheme enrols employees aged 23–60 who earn more than €20,000 a year and aren't already paying into a pension through payroll.

In years 1–3, you contribute 1.5% of gross pay and your employee matches it, with contributions calculated on earnings up to €80,000. To meet your employer obligations under MyFutureFund, you need to:

• register on the MyFutureFund employer portal
• act on each Automatic Enrolment Payroll Notification (AEPN) that NAERSA sends you
• deduct employee contributions and add your employer contribution each pay period
• pay contributions to NAERSA on each pay date
• tell employees when they've been enrolled

With PRSI and pension contributions both coming out of gross pay, use an income tax calculator to estimate the impact of deductions on employee take-home pay.

Irish payroll essentials

Correct deductions are one half of an accurate pay run; the other half is reporting on time with up-to-date employee data. These essentials help you get both right every pay period.

Report pay in real time under PAYE Modernisation

Under PAYE Modernisation, you report each employee's pay and deductions to Revenue on or before every pay date. Revenue sees each pay run as it happens, so your records and theirs stay in step all year. If you pay weekly, that means 52 submissions a year, each one matching the payslips you issue.

Retrieve the latest RPN before each pay run

An employee's RPN can change during the year, for example, when they claim a new tax credit or start a second job. Retrieve the latest RPN before every pay run so you apply the current credits and rate bands. Your employee is then taxed correctly from the first pay day after any change.

Plan for the 2027 PRSI threshold change

Budget 2027, announced on 6 October 2026, raises the employer PRSI threshold from €552 to €600 a week from 1 January 2027. Employees earning €600 a week or less then attract the 9.15% reduced rate. Take an employee on €580 a week: employer PRSI is €66.12 at 11.4% now and €53.07 at 9.15% from January, saving you €13.05 a week.

Check minimum wage and sick pay rules

Your gross pay figures also need to meet Irish employment law. Check the latest minimum wage rates in Ireland before each new rate takes effect. When an employee is off ill, process statutory sick pay in Ireland through payroll with the usual deductions.

How to choose payroll software

The right payroll software can cut down the manual work in each pay cycle. It can also help reduce the risk of costly errors and missed deadlines.

Look for software that handles Irish payroll requirements out of the box. This means automatic PAYE, PRSI, and USC calculations, plus direct integration with Revenue Online Service for payroll submissions.

Online payroll software gives you access from anywhere, so you can run payroll from your phone or laptop. It also means automatic updates when tax rates or legislation change, keeping you compliant without extra effort.

Consider how the software fits with your existing tools. Payroll that connects to your accounting software reduces double entry and gives you a single view of your business finances. Look for features that match your needs:

• automatic tax calculations for PAYE, PRSI, and USC
• Revenue Online Service integration for real-time reporting
• payslip generation and distribution
• leave management and holiday tracking
• pension contribution management
• employee self-service access

How to set up payroll for your small business

Setting up payroll for the first time takes some preparation. Follow these six steps to get your payroll running smoothly from the start.

1. Register as an employer with Revenue

Register your business as an employer through Revenue Online Service (ROS). You'll receive your employer tax registration number, which you need before making any payroll submissions. Registration is free and can be completed online.

2. Collect employee details

Gather each employee's PPSN, contact details, bank account information, and start date. Request a Revenue Payroll Notification for each employee through ROS. This document provides the tax credits and rate bands you need to calculate their deductions correctly.

3. Choose your pay frequency

Decide how often you'll pay your employees: weekly, fortnightly, or monthly. Monthly pay is common for salaried staff in Ireland. Your choice affects how you calculate pay and when you submit payroll reports to Revenue.

4. Set up your payroll system

Choose payroll software or engage a payroll bureau to handle your pay runs. Enter each employee's details, tax information, and pay rates into the system. Run a test payroll to confirm calculations before your first real pay date.

5. Run your first payroll

Calculate gross pay, apply deductions, and submit your Payroll Submission Request to Revenue on or before the pay date. Transfer net pay to each employee and issue their payslip. Double-check all figures against the Revenue Payroll Notification before submitting.

6. Set up ongoing processes

Create a payroll calendar so you meet every pay date and Revenue deadline. Set reminders for monthly tax remittances, which are due by the 23rd of the following month for ROS users. Review your payroll process after the first few cycles and adjust where needed.

Types of employee pay

Employees in Ireland can be paid in different ways depending on their role and contract. Understanding these pay types helps you set up payroll correctly.

Salaried pay is a fixed annual amount divided equally across pay periods. Salaried employees receive the same amount each pay day regardless of hours worked. This is common for office-based and professional roles.

Hourly pay is calculated by multiplying the hours worked by an agreed hourly rate. Ireland's national minimum wage sets the floor for hourly rates. You must track hours accurately and pay overtime where contractually agreed.

Commission-based pay is linked to performance, typically sales targets. Some employees receive commission on top of a base salary, while others work on commission only. All commission payments are subject to the same PAYE, PRSI, and USC deductions as regular pay.

Bonuses are one-off or periodic payments on top of regular wages. Bonuses are fully taxable and must be processed through payroll with the correct deductions applied. Common examples include performance bonuses, holiday bonuses, and profit-sharing payments.

Payroll record-keeping requirements

Irish law requires you to keep detailed payroll records for a minimum of six years. Meeting this requirement protects you during Revenue audits and Workplace Relations Commission inspections.

Under the Payment of Wages Act 1991 and the Organisation of Working Time Act 1997, you must retain records of each employee's wages, hours worked, deductions, and leave entitlements. Revenue also requires you to keep copies of all payroll submissions and tax calculations.

Store records securely, whether digitally or in hard copy. Digital records are easier to search, back up, and produce during an audit. Cloud-based payroll software automatically archives each pay run, making record-keeping far simpler.

At the end of each tax year, reconcile your payroll records with Revenue's records. File your employer's annual return and confirm that all PAYE, PRSI, and USC amounts balance. Address any discrepancies promptly to avoid penalties.

Payroll compliance: Your responsibilities as an employer

As an employer in Ireland, you have legal obligations that go beyond simply paying wages on time. Staying on top of compliance helps you avoid fines, penalties, and disputes.

Revenue obligations: you must register as an employer, deduct the correct PAYE, PRSI, and USC from each employee, submit payroll reports on or before each pay date, and remit taxes monthly. Late submissions or underpayments can result in interest charges and penalties.

Employment law: the Workplace Relations Commission (WRC) enforces minimum wage legislation, working time regulations, and leave entitlements. You must comply with the National Minimum Wage Act, the Organisation of Working Time Act, and the Terms of Employment (Information) Acts. Give each employee a written statement of five core terms of employment within five days of their start date, and the full written terms within one month.

Payslip requirements: under the Payment of Wages Act, you must give every employee a written payslip showing gross pay, all deductions, and net pay. Payslips can be provided in paper or electronic format.

Data protection: payroll data contains sensitive personal information. Under the General Data Protection Regulation (GDPR), you must store it securely, limit access to authorised personnel, and retain it only for as long as legally required. Have a clear data retention policy for payroll records.

Simplify your payroll with Xero

Payroll runs smoothly when you have the right tools. You can automate calculations, stay compliant with Revenue, and give your employees confidence that they're paid correctly.

Run your pay in a connected payroll app such as BrightPay, which sends each pay run's figures into Xero as journals. Your wages, PRSI, and pension costs then sit alongside the rest of your finances in Xero, giving you an up-to-date view of business costs. Spend less time on admin and more time running your business when you get one month free.

FAQs on payroll

Here are answers to some frequently asked questions about payroll for small businesses in Ireland.

What is the difference between payroll and salary?

Payroll is the entire process of calculating wages, withholding taxes, and distributing payments to all employees, whether salaried, hourly, or commission-based. Salary refers specifically to the fixed annual amount a salaried employee earns.

Can I do payroll myself?

Yes, many small business owners in Ireland manage their own payroll using software that automates PAYE, PRSI, and USC calculations and submits reports directly to Revenue. As your team grows, you may consider outsourcing to a payroll bureau or accountant.

How often should you run payroll?

In Ireland, most businesses pay employees weekly, fortnightly, or monthly, with monthly pay common for salaried staff. Whatever frequency you choose, you must submit a Payroll Submission Request to Revenue on or before each pay date.

Is payroll part of HR or accounting?

Payroll sits at the crossroads of HR and accounting: HR manages contracts and leave, while accounting handles tax calculations and reporting. In small businesses, one person often covers both, which is why connecting your payroll app to your accounts cuts down on double entry.

What happens if you get payroll wrong?

Payroll errors can lead to underpayment or overpayment of wages, incorrect tax deductions, and compliance issues with Revenue, including interest charges and potential fines. If you spot a mistake, correct it promptly and submit an amended payroll report through ROS.