How to Run Payroll in Ireland - Step-by-Step Guide for Employers 2026

The most widely used payroll software in Ireland - BrightPay, Thesaurus Payroll Manager, Sage Payroll, and CollSoft - all handle the steps below automatically. But understanding what’s happening under the hood keeps you compliant and saves you from costly Revenue errors.

This guide walks through every step of running payroll in Ireland in 2026, from registering as an employer to year-end obligations.

Understanding Your Payroll Obligations as an Irish Employer

Since January 2019, Irish payroll has operated under PAYE Modernisation - Revenue’s real-time reporting system. Every time you pay an employee, you must submit a Payroll Submission Request (PSR) to Revenue on or before the payment date.

There is no annual P35 return under PAYE Modernisation. Instead, Revenue gets your data in real time, every pay period.

You also have obligations under:

• The Payment of Wages Act 1991 - payslips for every employee
• The Organisation of Working Time Act 1997 - working time records
• Enhanced Reporting Requirements (ERR) since January 2024 - non-taxable benefit reporting
• The Sick Leave Act 2022 - statutory sick pay tracking
• PRSI - employer and employee social insurance contributions

Step-by-Step: How to Run Payroll in Ireland

Step 1: Register as an Employer with Revenue

Before you can pay anyone, you must register as an employer:

1. Log in to Revenue Online Service (ROS)
2. Go to Register for Taxes → Employer (PAYE/PRSI)
3. Revenue will issue your Employer Registration Number (your PPS/tax number + “W” suffix)

If you’re using payroll software, you’ll enter this number in the setup. It identifies you for all PSR submissions.

Step 2: Get Each Employee’s Revenue Payroll Notification (RPN)

Before processing payroll for a new employee, you must retrieve their Revenue Payroll Notification (RPN) from ROS. The RPN contains:

• The employee’s tax credits
• Their rate band (standard 20% cutoff point)
• Any additional tax due (e.g. underpayments from previous employment)
• PRSI class

RPNs update automatically when Revenue changes an employee’s tax details. Good payroll software fetches updated RPNs before every pay run. Always use the most current RPN - Revenue can update them without notifying you directly.

For new employees who haven’t provided a PPSN: Use emergency basis tax (higher rate, no credits) until you receive their RPN.

Step 3: Calculate Gross Pay

Add up all pay elements for the period:

• Basic salary or hourly wages
• Overtime
• Bonuses and commissions
• Benefit-in-Kind (BIK) - company cars, health insurance, and other taxable benefits must be included in gross pay for tax purposes. Use Revenue’s BIK guidelines for the correct annual values.

Step 4: Deduct PAYE Income Tax

Using the employee’s RPN:

1. Apply 20% (standard rate) to income within their rate band
2. Apply 40% (higher rate) to income above the rate band
3. Subtract their tax credits from the gross tax figure
4. The result is the net PAYE due for the period

Example (single employee, €45,000/year, monthly payroll):

• Monthly gross: €3,750
• Standard rate band: €3,025/month (2026 rate)
• Tax at 20% on €3,025 = €605
• Tax at 40% on €725 = €290
• Total gross tax = €895
• Less monthly credits (e.g. €291.67 personal + €291.67 PAYE credit) = €583.34
• Net PAYE = €311.66

Step 5: Deduct Universal Social Charge (USC)

USC applies to gross income over €13,000/year. Apply cumulative rates:

Reduced rates apply to medical card holders and individuals aged 70+.

For the same €45,000/year employee (monthly):

• 0.5% on €1,001 = €5.01
• 2% on €1,146.67 = €22.93
• 4% on €1,602.33 = €64.09
• Monthly USC = €92.03

Note: A 0.1% PRSI increase is scheduled for October 2025 to part-fund Ireland’s auto-enrolment pension scheme. Check Revenue’s current rates before each run.

Step 6: Calculate PRSI

Most employees fall under PRSI Class A.

No employee PRSI applies on earnings below €352/week.

For the same employee (monthly €3,750 gross):

• Employee PRSI: 4% × €3,750 = €150
• Employer PRSI: 11.05% × €3,750 = €414.38 (above threshold)

Record both in your payroll system - employer PRSI is your cost on top of gross salary.

Step 7: Submit the Payroll Submission Request (PSR) to Revenue

Send the PSR to Revenue through ROS or your payroll software on or before each pay date. The PSR must include for every employee paid:

• Gross pay
• PAYE deducted
• USC deducted
• Employee and employer PRSI
• Net pay
• PRSI class

Late PSR submissions trigger Revenue notices and potential surcharges. Good payroll software (BrightPay, Thesaurus, CollSoft) submits the PSR automatically when you finalise each pay run.

Step 8: Pay Employees and Generate Compliant Payslips

Under the Payment of Wages Act 1991, every employee must receive a payslip showing:

• Gross pay
• PAYE deducted
• USC deducted
• PRSI deducted
• Any other deductions (pension, union dues, health insurance)
• Net pay

Payslips can be paper or electronic - most employers use the employee self-service portal in their payroll software.

Pay employees on or before their contracted pay date. For batch payments, generate a SEPA XML payment file from your payroll software and upload it to your bank. All major Irish payroll platforms (BrightPay, Thesaurus, CollSoft) generate SEPA files compatible with AIB, Bank of Ireland, and Permanent TSB.

Step 9: Report Non-Taxable Benefits (ERR)

Since January 2024, employers must report certain non-taxable payments to Revenue under Enhanced Reporting Requirements (ERR). ERR is separate from the PSR and covers:

• Travel and subsistence - daily rates for domestic and international travel
• Remote working daily allowance - €3.20/day for employees working from home
• Small benefit exemption - vouchers and non-cash gifts up to €1,000/year

Submit ERR reports through ROS or payroll software. Failure to report is a compliance breach even though no tax is due on these payments.

Step 10: Complete Year-End Obligations

After the final pay run of the tax year:

1. Review all PSRs in ROS - correct any errors via amendment PSRs
2. Ensure all employee annual totals reconcile with your accounting records
3. Confirm all ERR submissions are complete
4. Review PRSI class allocations - particularly for directors and part-time workers where classification can be uncertain
5. Prepare for auto-enrolment contribution reporting (from September 2025)

There is no P35 return under PAYE Modernisation. Your real-time PSR submissions throughout the year replace it.

Irish Payroll Software Options

Running payroll manually is error-prone and time-consuming. The three main Irish payroll platforms all handle PSR submissions, SEPA file generation, and auto-enrolment (from September 2025):

All four are fully PAYE Modernisation compliant and approved by Revenue. Compare them in detail on our payroll software Ireland page.

Frequently Asked Questions About Running Payroll in Ireland

What do I need to register as an employer in Ireland? You need a Tax Registration Number and access to Revenue Online Service (ROS). Register for Employer (PAYE/PRSI) through ROS before your first pay run. Revenue will issue your employer registration, typically within 3-5 working days.

What is PAYE Modernisation? PAYE Modernisation is Revenue’s real-time payroll reporting system, introduced in January 2019. Every time you pay employees, you submit a Payroll Submission Request (PSR) to Revenue on or before the payment date. It replaced the old annual P35 return.

What is a Revenue Payroll Notification (RPN)? An RPN is the digital replacement for the old P2C tax certificate. It tells your payroll software each employee’s tax credits, rate band, and PRSI class. Retrieve RPNs from ROS before each pay run. Your payroll software can fetch them automatically.

Do I need payroll software or can I do it manually? You can run payroll manually and submit PSRs through ROS directly. However, for more than 1-2 employees, payroll software saves significant time and reduces errors. BrightPay, Thesaurus, and CollSoft all cost under €300/year for small teams.

What is the employer PRSI rate in Ireland? Employer PRSI is 8.8% on weekly earnings up to €441 and 11.05% on earnings above that threshold. This is your cost on top of gross salary - budget for it when calculating total employee cost.

What are Enhanced Reporting Requirements (ERR)? ERR, introduced in January 2024, requires employers to report non-taxable payments to Revenue - including travel and subsistence, remote working allowances (€3.20/day), and small benefits (up to €1,000/year). No tax is due, but reporting is mandatory.

When is the PSR due? The PSR must be submitted to Revenue on or before each pay date. Submit it as part of finalising your pay run - most payroll software does this automatically.

What records must I keep for Irish payroll? You must keep payroll records for 6 years, including: gross pay, all deductions, payslips issued, RPNs used, PSR submissions, SEPA payment records, and ERR submissions. Store records securely - GDPR applies to employee payroll data.

How does auto-enrolment affect payroll from 2025? From September 2025, employers must automatically enrol eligible employees (aged 23-60, earning €20,000+) into the NAERSA pension scheme and deduct contributions through payroll. Rates start at 1.5% employee and 1.5% employer, rising over 10 years. See our auto-enrolment Ireland guide for full details.

What happens if I submit a PSR late? Late PSR submissions can result in Revenue surcharges and compliance notices. Revenue monitors PSR timing and cross-references it with SEPA payment data. If you discover an error after submission, you can submit an amendment PSR - there’s no penalty for correcting honest mistakes promptly.