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August 13, 2019

How technology supports PAYE Modernisation and the payroll process

Ireland’s update to its Pay As You Earn system (PAYE system) came into effect on Jan. 1, 2019. The initiative, known as PAYE Modernisation, aimed to create better transparency between employers, employees, and the Revenue. Here, we review what employers need to know about PAYE Modernisation, and how payroll software supports a modern pay experience.

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The Office of Revenue Commissioners (the Revenue) recently oversaw PAYE Modernisation, which has resulted in significant modifications and updates to the Irish PAYE system. The new system came into effect Jan. 1, 2019.

The Irish PAYE system was first introduced in 1960, and no major changes have been made to the system until now. According to the Revenue, PAYE Modernisation “involves the most significant reform of the PAYE system since its introduction.”

Modernising the PAYE system is a response to broader shifts in the world of work, including the changing nature of payroll and the pay experience, adoption of technology, employee expectations, and work itself.

A key objective of the PAYE system update is creating better communication and transparency between employers and the Revenue. In particular, the initiative helps address the problem of overpayment and underpayment of taxes (that is, helping to ensure that the correct amount of taxes are deducted from the right employees at the right time, and paid accordingly by employers). As well, the initiative helps to streamline payroll and reduce administrative burden on employers.

What are the key changes with PAYE Modernisation?

The big change under PAYE Modernisation is real-time reporting (RTR). This means that employers will no longer be required to file monthly or quarterly P30s, or annual P35s at the end of the tax year – in fact, the initiative removes the need to create these forms at all.  

Instead, payroll is submitted in real-time to Revenue, with all the appropriate employee pay and tax information. This helps ensure that the correct amount of tax is deducted when employees are paid, while also helping reduce the risk of employers overpaying or underpaying tax.

What are some of the perceived benefits for employers and employees?

Time and cost savings: Reducing paper-based administrative work for employers is a key benefit to streamlining the payroll process. For employers using payroll software that is integrated with the Revenue, files are automatically prepared, and tax credits retrieval is automated, meaning teams can spend less time on payroll.

Assisting with compliance management and transparency: PAYE Modernisation brings increased transparency to the PAYE system between employers, employees, and the Revenue. As the Revenue notes on its website, real-time reporting minimises an employer’s cost to comply, while employees have online access to their payroll information submitted to the Revenue in real-time. The Revenue in turn can address employer errors or corrections in a timely manner. Employees no longer have to worry about retaining paper based forms when they leave employment or at the end of the tax year.

What do employers need to know?

The introduction of PAYE Modernisation is an opportunity for employers to review their payroll process and technology, particularly for those employers who do payroll manually.

While you can still do payroll manually with PAYE Modernisation, using compliant payroll software that is integrated with the Revenue means that employers can realise the benefits of using technology as part of modernising their payroll process.


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