Hiring your first employee is a milestone. It also means you move from being self-employed to being an employer. New responsibilities follow.
This post tells you what you need to know about employment law, payroll, and the practical side of hiring in Ireland.
Before You Hire
Before you bring someone on, ask yourself two questions.
Is there enough consistent work? You cannot hire an employee for one month and then let them go. Employment is an ongoing commitment. Do you have six months of work lined up? If not, wait.
Can you afford the real cost? An employee is expensive. If you are paying someone 30,000 euros a year, the real cost is roughly 30,000 plus 10-11% employer’s PRSI, plus training, plus the admin overhead. That is roughly 33,500 euros. Can your business support that?
Many new employers underestimate the cost. When they realize the true expense, they are stuck with it. Do the math before you commit.
Registering as an Employer With Revenue
Once you decide to hire, you need to register with Revenue as an employer.
Go to Revenue’s website or use Revenue Online Services (ROS). Register for PREM (Payroll Employer Management). This registers you to operate PAYE (Pay As You Earn) and to handle employee PRSI.
This is free. It takes about 10-15 minutes online. You get a reference number.
You need to do this before the employee starts. If you hire someone and do not register, you are breaking the law.
The Employment Contract
By Irish law, you must give an employee a written contract within five days of starting. This contract must cover:
- Job title and duties.
- Salary and how often they are paid.
- Hours of work and rest breaks.
- Annual leave entitlement.
- Notice period.
- Any disciplinary procedures.
You can get a simple employment contract template online. Tailor it to your business. Have the employee sign a copy and keep one for your records.
This protects you both. It removes ambiguity about what is expected.
Payroll: PAYE, Employee PRSI, and Employer’s PRSI
This is where most new employers get confused.
PAYE: This is the income tax you withhold from the employee’s wages. You collect it from their salary and send it to Revenue monthly.
Employee PRSI: This is the Social Insurance contribution the employee pays. It comes out of their wages. You withhold it and send it to Revenue.
Employer’s PRSI: This is your contribution. You pay it on top of the employee’s wages. It is roughly 10-11% of their gross salary.
Example: An employee earns 30,000 euros per year gross.
PAYE tax might be 3,000 euros (depends on their circumstances). Employee PRSI might be 2,000 euros. These come out of their wages.
Your employer’s PRSI on 30,000 euros is roughly 3,200 euros. You pay this.
So the employee takes home roughly 25,000 euros. You pay 33,200 euros total (30,000 wage plus 3,200 PRSI).
This is the real cost. Do not budget for 30,000 euros and think you are done. Budget for 33,000 plus.
Payroll Software Options
You cannot do payroll by hand in Ireland. You need proper payroll software or an accountant to handle it.
Popular options: Thesaurus Payroll Manager is widely used by Irish businesses. Brightpay is another. Microsoft Dynamics 365 for payroll exists but is overkill for a small business.
Most software costs roughly 200-500 euros per year for a small business with one or two employees.
Alternatively, hire an accountant to handle payroll. This costs roughly 50-100 euros per month per employee. It is worth it if you are unsure about payroll.
The Working Time Rules
Irish law limits working hours and mandates rest breaks.
Maximum 48 hours per week. This is averaged over a reference period (usually a year). You cannot ask an employee to work more than 48 hours per week as an average.
Rest breaks: Employees are entitled to rest breaks during the day. This is covered under the Organisation of Working Time Act.
Annual leave: Employees are entitled to annual leave. Currently, this is at least 20 days per year (or 4 weeks if you use weeks). You can include public holidays in this, but you must have a written policy.
For a tradesperson with one employee, these rules are practical. You cannot work someone 60 hours a week. You give them breaks. You let them take holiday.
Sick Pay and Sick Leave
Sick leave in Ireland has changed in recent years. As of 2024, employees are entitled to statutory sick pay.
The current entitlement is three days paid sick leave per year. This is paid at the normal wage.
If an employee is sick for more than three days in a week, you can request a medical certificate after the third day.
This is a minimum entitlement. You can offer more generous leave if you want, but this is the legal minimum.
Employer’s Liability Insurance
As soon as you have an employee, you need employer’s liability insurance. This covers legal liability if an employee is injured or claims a work-related illness.
The cost is usually 100-200 euros per year for one employee.
Get this in place before the employee starts. Do not skip it.
The Most Common Mistakes First-Time Employers Make
Treating employees as subcontractors to avoid PRSI. This is illegal. If someone works for you on an ongoing basis under your direction and control, they are an employee, not a subcontractor. Revenue will pursue you if you get this wrong. The penalties are steep.
Not having a written contract. This causes disputes later. Write it down.
Not understanding the true cost. The employee’s salary is not the full cost. Budget for PRSI and other overhead.
Letting payroll slip. Revenue is strict about payroll deadlines. Pay on time, every time.
When to Use a Subcontractor Instead
Sometimes hiring an employee is not the right move. Sometimes a subcontractor makes more sense.
The legal test is: Is the person working under your control and direction, or are they independent?
An employee works your hours, uses your equipment, and takes direction from you. A subcontractor works their own hours, uses their own equipment, and decides how to do the job. You just specify the outcome.
For example, a plumber who comes to your jobs site every day and works to your schedule is an employee. A separate plumber who takes on jobs for you but also works for other customers is a subcontractor.
If you hire someone just for one specific job and they are done when the job finishes, they are likely a subcontractor.
If you are unsure, check with Revenue or your accountant. Getting it wrong is expensive.
The Reality
Hiring an employee is a commitment. It is also growth. If your business is ready for it, it can be worth doing.
Get the legal stuff right upfront. Register with Revenue. Get a contract in place. Set up payroll properly. Get insurance.
These things take a few hours to sort, but they keep you compliant and protected. Do not skip them trying to save money.
Written by Maebh Collins
ACA qualified, Dundalk-based. I build websites and write SEO content for trade businesses across Ireland and the UK. If you have questions, get in touch.