Irish Payroll Process: Your Complete Bookkeeping Guide

THE IRISH PAYROLL PROCESS

Introduction to Irish Payroll Process

Running payroll in Ireland is one of the most important responsibilities for any business, and it directly connects to the bookkeeping process. Payroll is not just about paying employees on time—it’s about ensuring compliance with Irish tax laws, recording transactions accurately, and maintaining financial transparency. For bookkeepers, mastering the Irish payroll process means being able to manage employee wages, apply statutory deductions, and file the correct reports with Revenue, all while keeping a clean set of books.

In Ireland, payroll management requires bookkeepers to handle various calculations, including gross salary, PAYE (Pay As You Earn), PRSI (Pay Related Social Insurance), and USC (Universal Social Charge). Each of these deductions must be tracked carefully, posted to the correct bookkeeping accounts, and reconciled against payroll records. Without accurate bookkeeping, businesses risk errors in tax filings and employee dissatisfaction, which can impact both compliance and trust.

Another essential aspect of the Irish payroll process is the use of the PAYE Modernisation system, which requires real-time reporting of employee income and deductions to Revenue. Bookkeepers play a key role here, ensuring that every payslip issued aligns with accurate journal entries, trial balances, and ultimately the business’s financial statements. This highlights how payroll is not just an administrative task—it is a core component of bookkeeping in Ireland.

Whether you are a small business owner, an accountant, or a freelance bookkeeper, understanding the Irish payroll process is vital for smooth operations. From calculating wages to posting payroll expenses in the general ledger, each step builds the foundation for reliable bookkeeping. This guide will walk through the Irish payroll process with examples, showing how proper payroll bookkeeping ensures compliance and supports better financial decision-making.

Step 1: Pre-Employment and Registration

Before you can pay an employee, you must ensure all necessary registrations are in place.

Employer Registration

• Register with Revenue: Your business must be registered as an employer with the Revenue Commissioners through the Revenue Online Service (ROS). This is a legal requirement to operate a payroll.

Employee Setup

• Gather Employee Information: Collect essential details from your new employee, including their full name, address, and Personal Public Service Number (PPSN).
• Request a Revenue Payroll Notification (RPN): Before the first payday, you must obtain a Revenue Payroll Notification (RPN) for the employee. The RPN is an electronic file that replaces the old P2C tax certificate. It provides crucial information needed to calculate an employee's pay, including:
• Tax credits.
• Standard Rate Cut-Off Point (SRCOP) for both Income Tax and Universal Social Charge (USC).
• Any previous pay and tax deducted in the current tax year (if applicable).
• Submit a New Employment Notification: Report the new employee's details to Revenue through your payroll software or ROS on or before their first payday.

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Step 2: Running the Payroll

This is the core of the payroll process, where calculations and deductions are made for each pay period (e.g., weekly, fortnightly, or monthly).

Key Payroll Components

Every Irish payslip contains several key elements, both for gross pay and deductions.

• Gross Pay: The total pay before any deductions. This includes basic salary, overtime, bonuses, and any taxable benefits-in-kind (BIKs).
• Statutory Deductions: These are mandatory deductions required by law.
• PAYE (Pay As You Earn) Income Tax: This is the income tax deducted directly from an employee's gross pay. It is calculated using the employee's tax credits and Standard Rate Cut-Off Point (SRCOP) provided in the RPN.
• PRSI (Pay Related Social Insurance): This is a social security contribution. Both the employer and the employee contribute. The employee's contribution is a percentage of their gross pay and funds social welfare benefits like pensions, unemployment benefits, and maternity leave. The employer also pays a separate, non-deductible PRSI contribution.
• USC (Universal Social Charge): This is a tax on gross income. It is applied to income above a certain threshold and is charged at different rates depending on the income level.
• LPT (Local Property Tax): If an employee chooses to pay their LPT through their salary, this is deducted as a statutory deduction.
• Voluntary Deductions: These are deductions agreed upon by the employee, such as pension contributions, medical insurance, or union fees.

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Step 3: Real-Time Reporting to Revenue

This is the most critical part of the modern Irish payroll system.

Payroll Submission

• Submit a Payroll Submission: On or before the day you pay your employees, you must submit a Payroll Submission Request (PSR) to Revenue.
• Details Included: This submission includes a breakdown of each employee's pay, all statutory deductions (PAYE, PRSI, USC), and other relevant information for that specific pay period. This real-time reporting replaces the old, annual P35 and P60 forms.

Revenue's Response

• Monthly Statement: After the end of each month, Revenue will issue a statement to the employer. This statement summarizes all the payroll submissions made for that month and shows the total amount of tax, PRSI, and USC due.
• Review and Payment: You have until the 14th of the following month to review the statement. The total amount due must be paid to Revenue by this date.

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Step 4: Post-Payroll and Record Keeping

After the payment and reporting cycle, you must fulfill your record-keeping obligations.

• Provide Payslips: You are legally required to provide a payslip to each employee for every pay period. This can be in either paper or electronic format and must clearly show all earnings and deductions.
• Maintain Records: Employers must keep detailed records of all payroll information for at least six years to ensure compliance with audits and inspections from Revenue.
• End-of-Year: Since the introduction of Real-Time Reporting, there is no longer a requirement for P60 forms. Instead, employees can access their Employment Details Summary (EDS) through their myAccount on the Revenue website. This summary provides all the relevant information for the tax year.

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Key Takeaways

• Real-Time Reporting is Mandatory: Every payroll run requires a submission to Revenue on or before payday.
• RPN is Essential: Always retrieve the latest RPN for each employee before processing payroll to ensure correct tax and USC deductions.
• Payslips are a Legal Requirement: You must provide a clear and detailed payslip to your employees for every payment.
• Compliance is Key: Failure to comply with the above steps can result in penalties from Revenue. Professional payroll software is highly recommended to automate and simplify these complex tasks.

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The Irish Payroll Process

A Visual Guide to PAYE & Real-Time Reporting (RTR)

The 4-Step Payroll Lifecycle

1

Registration

Register as an employer with Revenue and gather new employee details, including their PPSN, to request a Revenue Payroll Notification (RPN).

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2

Calculation

Calculate gross pay and apply all statutory deductions (PAYE, PRSI, USC) based on the RPN data for the relevant pay period.

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3

Post-Payroll

Issue payslips to employees, maintain all payroll records for a minimum of six years, and manage year-end compliance digitally.

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4

Reporting

Submit all pay and deduction details to Revenue via a Payroll Submission Request (PSR) on or before every single payday.

Decoding an Irish Payslip

Payslip Composition

A significant portion of gross pay is allocated to statutory deductions required by law. The remainder is the employee's net, or "take-home," pay.

Statutory Deductions Breakdown

Statutory deductions are comprised of three main components: Income Tax (PAYE), Social Insurance (PRSI), and the Universal Social Charge (USC).

The Real-Time Reporting (RTR) Flow

1. Employer Action

On or before payday, submit a Payroll Submission Request (PSR) to Revenue.

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2. Revenue System

Revenue processes the real-time submission for each employee.

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3. Employer Review

By the 5th of the next month, review the monthly statement issued by Revenue.

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4. Payment Due

Remit the total liability to Revenue by the 14th of the month.

Key Compliance Responsibilities

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Issue Payslips

Provide a clear, detailed payslip to every employee for every single pay period, either electronically or in print.

6 Years

Maintain Records

All payroll data must be securely stored and be accessible for a minimum of six years to comply with potential Revenue audits.

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Digital Year-End

The traditional P60 form is obsolete. Employees now access their Employment Details Summary (EDS) via their online Revenue account.