Payroll changes for Irish employers to know about in 2024

The good news for employees is that they will see an increase in their first pay package in 2024, as many of the measures from Budget 2024 kick in.

But what does that mean for you as an employer?

This article discusses those payroll changes and what employers should do to prepare. It also discusses any other changes coming into force in 2024.

Here’s what we cover:

• Increase in minimum wage
• Income tax changes
• Increased statutory sick pay and parent’s leave
• Setting up of pension auto-enrolment
• Implementation of Enhanced Reporting Requirements
• Check if your payroll software needs to be updated
• Final thoughts

Increase in minimum wage

Since 1 January 2024, the standard minimum wage has risen by €1.40 to €12.70, an increase of 12%.

Meanwhile, those who are:

• 19 years old get €11.43
• 18 years old get €10.16
• Under 18 get €8.89.

The increase on the standard minimum wage means someone working a 39-hour week will receive an additional €55 in basic pay.

For employers, this is another wage increase, following on from yearly increases over the past few years.

Income tax changes

Increase in threshold for top rate of income tax

The point at which employees pay the top rate of tax has risen by €2,000 to €42,000.

This means a single person on a salary of more than €42,000 will see their annual income rise by €400, while a married couple/civil partners will see an increase of €800.

Reduction in the 4.5% rate of Universal Social Charge

For the first time since Budget 2019, there has been a change in the Universal Social Charge (USC).

The USC rate of 4.5% fell to 4% on 1 January 2024.

Also, the entry threshold of the 4% rate has been raised from €22,920 to €25,760. This increase ensures that those who benefit from the rise in the minimum wage stay within the two lower USC rate bands.

It also means a modest benefit for every taxpayer with income above those levels.

In addition, the USC cap of 2% for medical card holders with income of less than €60,000 per annum has been extended by two years, to 31 December 2025.

Increase in tax credits

Personal and employee PAYE tax credit have increased by €100 each to €1,875. This has the effect of reducing an employee’s tax liability.

This also applies to the self-employed, where the earned income credit is either €1,875 or 20% of qualifying earned income – whichever is lower.

There have been increases to the home carer tax credit and single person child carer tax credit of €100 each, with the credits being €1,800 and €1,750 respectively for those that qualify.

The incapacitated child tax credit has increased by €200 to €3,500. This credit had been left unchanged in the past five years, despite increases in other tax credits.

Grant Thornton outlined some possible scenarios with the income tax changes.

For example, a single person on an income of €36,000, with no children, will be better off by €322 in 2024. Whereas for a so-called squeezed middle-income couple with two incomes of €45,000, they will have €1,534 more in their pockets.

Increase in Pay Related Social Insurance

In October 2024, Pay Related Social Insurance (PRSI) for employees and employers will increase by 0.1%.

While this is a minimal rise, there are plans for further increases in future budgets.

Increased statutory sick pay and parent’s leave

Entitlements to statutory sick pay for most employees increased from three days to five on 1 January 2024.

Under the Sick Leave Act 2022, employees are entitled to 70% of their regular pay for days missed through illness up to a maximum of €110 per day.

To qualify, the employee must have 13 weeks’ continuous service and is also required to provide medical certificates.

Parent’s leave is increasing in August 2024 by two weeks and parents will then be entitled to nine weeks.

Though this isn’t a direct cost increase, it can make life difficult.

“It’s particularly challenging for small businesses, where extended parent’s leave can mean the absence of key employees for up to seven (and soon nine) weeks in a two-year period,” says Ciaran Guilfoyle, who owns Galway-based payroll company easypayroll.ie.

“This is in addition to the statutory holiday time of eight weeks over a two-year period,”

Setting up of pension auto-enrolment

A potential extra cost for employers will be the introduction of a pension auto-enrolment scheme.

It was initially pencilled in to come into force during the second half of 2024.

However, it’s now due to start from January 2025.

This will apply to those employees that aren’t paying into a pension, are aged between 23 and 60, and earn between €20,000 to €80,000 per year.

Under the scheme, the employee and employer will initially pay 1.5% of the employee’s salary to the pension scheme, with this increasing to 6% by year 2034.

Implementation of Enhanced Reporting Requirements

Enhanced Reporting Requirements came into effect on 1 January 2024.

While this isn’t a tax change or an additional cost, it’s a considerable extra administrative burden, particularly at the initial stage of inputting your employees’ details on to the online Revenue platform.

Enhanced Reporting Requirements focus on three tax-free payments:

• Travel and subsistence payments
• Small benefits falling under the Small Benefit Exemption
• The remote working daily allowance of €3.20.

Up to the end of 2023, as an employer, you were just obliged to keep records of these payments and Revenue could ask for them if it wanted to.

However, these payments now must be reported to Revenue in real time throughout the tax year.

Check if your payroll software needs to be updated

If you have not already done so, you need to immediately update your payroll software to account for these tax changes.

You should also check with your vendor, as this might happen automatically if you’re using cloud software.

Final thoughts

For employees, the extra money in their pockets will be welcome, especially after the excesses of Christmas. In particular, middle income earners will benefit.

That being said, it will probably not go far enough to relieve the pressure on the squeezed middle, who for instance bore the brunt of recent mortgage interest rate increases, on top of inflation.

For employers, the costs of these changes will vary.

For instance, if you’re an employer with a significant number of employees on the minimum wage, the impact will be significant.

This is on top of other costs such as increased statutory sick pay entitlements for employees and possible pension contributions later in 2024.

However, if your company consists mainly of higher-paid employees, who probably also have pensions, the costs will be minimal.

Also, as Ciaran Guilfoyle pointed out, these costs are easier to bear for larger companies: “There seems to be a perception among officials that these changes and additional benefits do not significantly impact employers.

“However, there is a notable disconnect between the realities faced by large multinational companies and small, family run businesses in Ireland.

“For smaller businesses, these changes represent a substantial operational and financial challenge.”

Editor’s note: This article was first published in January 2024 and has been updated for relevance.