[GUIDE] Employee Benefits in Ireland: From SME to Enterprise

Introduction

Who Qualifies for Employment Benefits?

Employee Benefits in Ireland

• Annual Leave Entitlement. 
• Pension. 
• Paid Sick Leave.
• Maternity Leave.
• Paternal Leave.

Possible Employee Perks

• Hybrid or Remote Work.
• Health Insurance.
• Cycle to Work Scheme.
• Educational Courses and Upskilling.
• Gym Memberships. 
• Crèche and Childcare Facilities.
• Bonuses. 

Conclusion

 

From hiring bright new talent to keeping current employees happy, employers have many options when it comes to what benefits they provide. At the outset it can even seem as though there are too many benefits being offered, that modern employees have become accustomed to asking for too much.  

To help you gain a greater overview of benefits available to employees in Ireland, 
We’ve put together this comprehensive guide. Here, we’re going to cover key employee benefits such as:

• Annual Leave Entitlement
• Pension
• Paid Sick Leave
• Maternity Leave
• Paternal Leave

There are also what we would consider ‘perks’ that many businesses offer. These include:

• Hybrid or Remote Work
• Health Insurance
• Cycle to Work Scheme
• Educational Courses
• Cycle to Work Scheme
• Bonuses
• Gym Memberships

Before we get into employee benefits, it’s important to note what defines an “employee” as well as who can qualify for benefits. 

 

As a rule of thumb, full-time employees in Ireland are generally entitled to statutory benefits, benefits that employers are compelled to provide under certain employment laws. Furthermore, the laws that govern Irish employment are made up of EU laws, the Irish Constitution, and common law. Despite this, employees are protected by equality legislation that prohibits discrimination based on nine grounds:

• Religion
• Gender
• Sexual orientation
• Civil status
• Ethnicity
• Disability
• Age
• Family status
• Being a member of the Traveller community

But what constitutes an employee in Ireland? According to Citizens Information, a person may be hired under two types of contract. These are:

Contract of Service

A person hired under a Contract of Service is an employee in the traditional sense. If someone has this type of contract, they’re protected by employment legislation.

Contract for Services

If a person is hired under a Contract for Services, they’re an independent contractor or self-employed. If someone has this type of contract, they might not have the same rights as an employee under employment legislation.

These are important distinctions as benefits will differ for both types of contracts. 
 

In accordance with the Organisation of Working Time Act, 1997, (OWTA), employees in Ireland are entitled to four weeks of paid annual leave for each leave year.

When it comes to booking time off, employers will often factor in work requirements. For instance, there might be a ‘hands-on' period coming up that forces the employer into rejecting the request. As such, employers are entitled to schedule employee annual leave in a way that suits their business. 

There are three ways of calculating annual leave in Ireland. These are:

1. If an employee has worked at least 1,365 hours in a leave year (see above), they’re entitled to the maximum of four working weeks of paid annual leave. However, they cannot use this method if they switched jobs during the leave year.

2. An employees can calculate one-third of a working week for each calendar month in which they worked at least 117 hours.

3. An employee can calculate 8% of the hours they worked in the leave year, subject to a maximum of four working weeks. 

When an employee is calculating their holiday entitlement, the employer should include all the hours they worked. This must include any time spent on annual leave, maternity leave, parental leave, force majeure leave, adoptive leave or the first 13 weeks of carer’s leave.

If the employee has worked for at least eight months, they’re entitled to an unbroken period of two weeks' annual leave

 

An occupational pension is one offered by employers to their employees. However, there’s no legal obligation for employers to offer them, and while larger businesses do often provide supplemental schemes, SMEs may not. 

Each pension scheme has its own set of rules and are generally regulated by the Pensions Authority. As specified by Citizens Information, an occupational pension scheme may be:

• Contributory or non-contributory
• Funded or unfunded
• Defined benefit, defined contribution, or a hybrid of both

Contributory

In contributory schemes, both the employer and employee pay contributions towards the scheme. In non-contributory schemes, only the employer contributes.

Funded Schemes

A funded scheme is one where contributions are put into a designated fund and the benefits are paid from that fund.

Defined Benefit and Defined Contribution

In a defined contribution scheme, the pension contribution employee’s make is set, and the benefits depend on the amount of the contributions made.

In a defined benefit scheme, the benefit an employee is entitled to is established in advance. For example, it could depend on length of service.

From time to time, occupational pension schemes can consist of both defined benefit and defined contribution schemes. These are known as hybrid schemes. This enables employees to predict a certain amount of their income, with the reminder subject to defined contribution rules.

 

The Sick Leave Act 2022 governs sick leave in Ireland. As of January 1st, 2024, all employees are entitled to 5 days of paid sick leave. It is proposed that the entitlement will increase to 7 days in 2025 and to 10 days in 2026.

Sick days can be taken as consecutive or non-consecutive days and when absent, employees must receive 70% of their normal weekly pay, up to a maximum €110 a day. To qualify for paid sick leave, an employee must have first completed 13 weeks of continuous service with their employer. The employee must also provide their employer with a medical cert from their doctor that needs to specify the reason the employee is unfit for work. All unused sick leave will expire at the end of a calendar year.

 

Maternity leave is a period of protected leave that new mothers receive following the birth of a child. Full-time, part-time, and those in casual employment are entitled to this leave.

At present, employees are entitled to 26 weeks of maternity leave in Ireland. They can also avail of an extra 16 weeks of unpaid maternity leave if they wish. 

There is no minimum length of service required for someone to take maternity leave, either. Nor is there a minimum number of hours worked per week. The Maternity Protection Acts 1994 – 2004 protects employees on maternity leave.

 

This is leave of two weeks to be taken at any time during the first six months of a child's birth or adoption. 

Paternal Leave extends to parents of older children, too. Employees whose children are 12 years or older can take 22 weeks of unpaid leave for each child.

With regards to adoption, employees (male or female) are entitled to 24 weeks of leave. These 24 weeks are paid, but employees can also take an additional 16 weeks of unpaid leave in the event of adoption.

 

Hybrid and remote work are two arrangements that have grown in popularity because of the COVID-19 pandemic. That is because many businesses were forced to adapt to remote work and set their employees up to work from home. While many of these businesses have reopened their offices and called employees back to the office, others have implemented hybrid work policies. These allow employees to split their workweek between home and the office.  

When implementing a remote or hybrid arrangement, it’s important that employers stipulate the details in the employee’s contract. Employers should also have the employee conduct a risk assessment of their home workstation that HR can review. This will ensure that employers are protected in the event of any mishaps at the employee’s home.

Equipment may need to be provided to those who work from home full time, too. This equipment can include a laptop, monitors, a desk, etc. Should an employee work between the office and their home, it’s likely that they will get by with their company-owned laptop. 
 

Medical insurance, such as health or dental, or both combined, is paid by an employer on behalf of an employee. Employers cannot claim the tax relief as a discount (Medical Insurance Relief, given as Tax Relief at Source) is applied by the authorised insurer. The relief available can be calculated as:

• 20% of the cost of the policy
• 20% of €1,000 (equal to a credit of €200)

Instead of the employer claiming tax relief from Revenue, it is the employee who will pay: 

• Pay As You Earn (PAYE)
• Pay Related Social Insurance (PRSI) 
• Universal Social Charge (USC)

A medical insurance benefit must be added to an employee’s pay for these deductions to be made. 

 

In Ireland, the Cycle to Work Scheme, or Bike to Work Scheme, is a tax incentive scheme to encourage employees to cycle to work. An employer can pay for a new bicycle, and bicycle accessories if they wish, and the employee then repays the cost in regular instalments from their gross salary. Those employees who take up the scheme are not liable for tax, PRSI, or the Universal Social Charge on your repayments.

There are three limits depending on the type of bike purchased. These are:

• €3,000 for cargo and eCargo bikes
• €1,500 for pedelecs and e-bikes
• €1,250 for other bicycles

Employees can use the scheme once every four years. 

 

From LinkedIn Learning to approved evening courses, employees in Ireland are sometimes provided the opportunity to upskill. 

Employers can cover the cost of employee courses and exams or reimburse them for fees they’ve already paid. This, however, is not a taxable benefit if the course or exam is relevant to their business in that it: 

• Allows the employee to gain knowledge necessary for their role.
• Helps the employee better perform their current or future duties.

On the other hand, an employer might cover the cost of a course that is not relevant to their business. If they do, it is a taxable benefit. In this scenario, the employee must pay the following on the cost of the course: 

• Pay As You Earn (PAYE)
• Pay Related Social Insurance (PRSI) 
• Universal Social Charge (USC)

Employers may pay expenses incurred by an employee while undertaking a course. These expenses are not taxable if both of the following apply to the course:

• The course is relevant to the employer’s business.
• The course is necessary for the employee to perform their work duties.

Employers can cover awards, too, and the payment is taxable. The employee must pay PAYE, PRSI and USC on the value of the award, the only exception being if the award is a repayment of expenses.

 

Whether it’s on- or off-site, employers sometimes pay an employee’s gym membership. 

Where the facility is on-site and available to all employees, it’s not deemed Benefit-in-Kind (BIK). If the facility is only available to certain employees, it is deemed Benefit-in-Kind. The employees who have the use of these facilities are chargeable on the benefit, under the Pay As You Earn (PAYE) system, to:

• Income Tax
• Pay Related Social Insurance (PRSI)
• Universal Social Charge (USC)

If an employer pays a “corporate subscription”, it is deemed Benefit-in-Kind and the employee must pay Income Tax, PRSI, and USC on the subscription.

 

Employers may provide employees with crèche and childcare facilities. This can be one of two ways, as set out by Revenue.

Employer-provided Facility

If an employer provides free or subsidised childcare facilities at work, it is deemed a Benefit-in-Kind (BIK). An employee is chargeable on the benefit, under the Pay As You Earn (PAYE) system, to:

• Income Tax
• Pay Related Social Insurance (PRSI)
• Universal Social Charge (USC)

For tax purposes, the value of the benefit includes the insurance and maintenance costs of the premises. It should also include the value of any other costs an employer must pay to operate the facility.

Independent Facility

An employer might pay or subsidise the cost of an independent crèche or childcare facility for their employees. If they do, it is deemed Benefit-in-Kind (BIK), so employees must pay Income Tax, PRSI, and USC. Similarly, if an employer makes bulk payments, it is also deemed BIK. Again, the employees that use the facility must pay Income Tax, PRSI, and USC.

The value of the benefit should be divided between the employees that use the facility. This benefit is taxable and should be based on the number of children each employee has.

Where recreational or crèche facilities are provided for employees on-site, it is deemed Benefit-in-Kind (BIK). This means that the employee must pay: 

• Income Tax
• Pay Related Social Insurance (PRSI)
• Universal Social Charge (USC)

 

Bonuses are a common benefit that employers offer staff. They can come in the form of gift cards of end-of-year sums based on business performance. As of January 1st, 2024, employers must be mindful of new regulations guarding payments such as bonuses: the Enhanced Reporting Requirements. 

The Enhanced Reporting Requirements now require employers to report any of the following three non-taxable expenses/benefits to Revenue:

• Small benefit exemption
• Remote working daily allowance
• Travel and subsistence

Under The Finance Act 2022, employers can give employees up to two small benefits, tax free, each year. These cannot be cash benefits and the combined value of the benefits cannot exceed €1,000. If more than two benefits are given in a year, only the first two qualify for tax free status. Also, tax-free vouchers or benefits must only be used to purchase goods or services. They cannot be redeemed for cash.

 

As you can see, there is a lot for employers to balance with regard to employee benefits. From medical insurance to pensions and gym memberships, employers from SMEs to large-scale enterprises must learn to navigate this ever-changing employment landscape.  

 Oftentimes, and especially during the hiring stage, candidates query an employer’s position on benefits such as remote work. Even employees who have worked for the same business for several years are now looking to avail of benefits such as hybrid work. 

Within these queries is the opportunity for employers to may set themselves apart in order to attract and retain top talent. By adapting to new demands, employers can present themselves as a business that understands work-life balance and looks out for its employees. Of course, not every business will be in a position to offer this, so when considering the offering of a benefit, it’s important to forecast the impact it may have on budgets.

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