Small business payroll in Ireland: what our service includes and how it works

A day working from home in Louth is an Irish working day, even when the employer is in Belfast. A day working from home in Newry is a UK working day, even when the employer is in Dundalk.

That can change the employee’s tax position and the employer’s payroll responsibilities. It can also change which country collects social insurance on the whole salary.

Check income tax, social insurance and payroll administration separately. Social insurance means PRSI in the Republic of Ireland or National Insurance in the UK. A working pattern can meet the conditions for one relief while creating obligations under another system.

If the employee lives in Ireland and works for a Northern Ireland employer

Regularly performing their normal duties from home in Ireland can cost the employee Transborder Workers’ Relief. The relief requires the employment duties to be performed outside Ireland, apart from merely incidental duties. Revenue’s guidance includes an example of one regular home-working day a week causing the relief to be lost.

That is worth checking before anyone agrees a weekly home-working day. Our Transborder Workers’ Relief guide explains the conditions and claim process

Without that relief, an Irish-resident employee will generally need to account for Irish tax on their employment income, with credit for qualifying, non-refundable UK tax on the same income. Residence, domicile and treaty rules can affect the calculation. Revenue explains double taxation relief here.

What must the employer do?

The Northern Ireland employer normally needs to operate Irish PAYE on earnings for duties performed in Ireland. That can mean registering with Revenue even if the business has no Irish office. Revenue’s guidance on foreign employments exercised in Ireland explains the employer obligations.

The UK payroll treatment also needs to be reviewed. Do not simply subtract Irish home-working days from UK payroll without checking the required HMRC procedure. The aim is to make the deductions and reporting match the employee’s actual position in both countries.

If the employee lives in Northern Ireland and works for an Irish employer

For an employee who is non-resident in Ireland, pay relating to Irish working days is generally taxable in Ireland. UK tax rules apply to the UK-resident employee’s earnings too, with relief potentially available for Irish tax on the same income.

For payroll, Revenue requires prior written authorisation before an Irish employer limits income tax and USC deductions to the Irish duties. Without that authorisation, Revenue says to deduct them from all the employee’s pay. Apply through MyEnquiries and keep the approval with your payroll records. See Revenue’s rules for employees working partly abroad.

Home-working days in Northern Ireland also require a UK review. Whether the Irish employer must operate UK PAYE depends on its UK presence and arrangements; it is not decided solely by the number of days worked at home. National Insurance obligations can still arise separately. MRC’s overseas-employer guidance explains the PAYE distinction.

For the wider setup, read our guide to hiring across the border.

Does the 183-day rule let us ignore occasional home working?

No. The treaty’s short-stay employment exemption has several conditions, including where the employer is resident and whether a local business presence bears the pay. It is not a general allowance for 183 tax-free working days.

It also does not make home-country earnings tax-free for a resident. Read the conditions together in Article 15 of the Ireland–UK tax treaty, rather than using a day count on its own.

PRSI or National Insurance: use a separate test

Social security coordination normally puts a covered employee into one country’s system at a time. For someone who regularly works in both Ireland and the UK, the country of residence and the amount of work done there are important. The employer’s contributions generally follow the employee’s applicable system. HMRC explains the multi-country and employer rules.

Doing a substantial part of the work in the country of residence can put the employee into that country’s system. 25% of activity is a key indicator, assessed under the applicable coordination rules. It is not an income tax threshold. The Department of Social Protection’s guidance explains the substantial-activity test.

Consider this illustrative pattern: an employee lives in Louth, works three equal-length days in Belfast and works two equal-length days at home each week. The home-working share is 40%. Irish PRSI may then apply to the whole employment income, rather than National Insurance being charged on the Belfast days and PRSI on the home days.

By contrast, one equal-length home-working day out of five is 20%. That is below the usual substantial-activity indicator, but the employee could still lose Transborder Workers’ Relief. The two tests do different jobs.

Have the relevant authority confirm the applicable system and obtain the appropriate certificate of coverage. The agreement that applies can depend on the employee’s circumstances, including the history of the cross-border arrangement. Keep the certificate with your records and review it if the pattern changes. HMRC’s coverage guidance sets out when a certificate is needed.

What about pensions and fully remote employees?

Check pension duties separately. UK auto-enrolment uses tests including whether the worker works or ordinarily works in the UK. Irish MyFutureFund has its own eligibility and payroll requirements. Two payroll records do not, by themselves, establish that someone must be enrolled twice. See The Pensions Regulator’s assessment guidance and MyFutureFund.

the employee will work entirely from home across the border, review the arrangement as a job carried out in that jurisdiction. Confirm tax, social insurance, pension duties and employment terms before promising an unchanged take-home salary. A short temporary posting may have a different result from a permanent remote role.

A practical checklist before approving cross-border home working

1. Write down the proposed pattern. Include office days, home days, travel and any seasonal changes.
2. Calculate the employee’s position. Check potential loss of relief, tax credits, social insurance and likely take-home pay.
3. Confirm employer costs and administration. Include registrations, reporting, employer contributions and pension duties.
4. Obtain the necessary decisions. This may include Revenue authorisation and a social insurance coverage certificate.
5. Keep a work-location record. Ask employees to record where they actually work, not just their intended schedule.
6. Agree when to review it. A move, an extra home-working day or a change of role should trigger another check.

You can give staff flexibility while keeping payroll manageable. The useful starting point is an agreed pattern and a clear calculation of what it means for both sides.

To discuss a proposed arrangement, contact Small Business Payroll or call 01 234 3788. Have the employee’s home location and weekly work pattern ready.