Understanding Auto Enrolment: What Irish SMEs Need to Know About New Pension Deductions

In Ireland, 2026 dawned with a new age for the humble Irish pension. Auto enrolment came into effect on January 1st 2026, and even for the most prepared business, it has still heralded huge change – for none moreso than hardworking SMEs.  

Auto-enrolment in Ireland is a new pension savings system introduced by the Irish government to help workers build retirement funds beyond the State pension. Auto enrolment, or My Future Fund automatically enrols employees aged 23 to 60 who earn €20,000 or more per year into a pension plan.  

Both employers and employees will contribute to this fund, starting at 1.5% of gross earnings each, gradually increasing to 6% over ten years, while the State adds a top-up of €1 for every €3 saved by the employee.  

The system is administered by the National Automatic Enrolment Retirement Savings Authority (NAERSA), which uses payroll data to identify eligible employees and manage contributions. This initiative aims to reduce reliance on the State pension (currently €289.30 per week for those aged 66–79) and ensure workers have a more secure financial future. 

See also: Auto-Enrolment Ireland: What Employers Need to Know | SD Worx 

For SMEs, the clue is the name. This is an automatic process, so as soon as your employee meets the criteria, they will be automatically enrolled, and your business will need to ensure that it is compliant in keeping up with contributions, as non-compliance will be punishable with fines and actions.  

It is estimated that in Ireland, 800,000 employees will benefit from the scheme, which will help to close the pension gap, but for SMEs, preparation will be required over time to ensure that the best outcomes are being worked towards.  

1. Automate Payroll Processes 

Manual calculations are risky and time-consuming. Auto enrolment requires accurate deductions, timely reporting, and integration with NAERSA systems. Investing in managed payroll services for SME's that handles these automatically will save you from errors and fines. 

2. Stay Updated on Legislation 

The Automatic Enrolment Retirement Savings System Act 2024 sets out strict compliance rules. Employers who fail to make contributions or submit accurate data can face financial penalties and enforcement actions. Bookmark the official Irish Government guide to stay informed on auto enrolment legislation. 

3. Communicate Clearly with Employees 

Employees will want to know how auto enrolment affects their pay and retirement savings. Provide FAQs, hold briefings, and share official links to build trust and reduce confusion. 

4. Plan for Contribution Increases 

Employer contributions start at 1.5% but will rise to 6% over ten years. Build this into your financial planning now to avoid cash flow shocks later. 

5. Partner with Experts 

Compliance isn’t optional and mistakes can be costly. Working with a payroll provider like SD Worx ensures your business is up to date on their obligations; contributions are calculated correctly, and reporting is seamless. 

 

For many SMEs, the biggest hurdle will be managing compliance without adding admin headaches. Manual processes can lead to errors, missed deadlines, and frustrated employees. And with penalties for non-compliance, getting this right isn’t optional. 

According to the Department of Social Protection, employers who fail to meet their auto enrolment obligations could face financial penalties and enforcement actions under the Automatic Enrolment Retirement Savings System Act 2024. While exact penalty amounts vary, the legislation outlines fines for late or missing contributions and potential prosecution for repeated breaches. According to the CSO, SMEs make up 99.8% of all businesses in Ireland, and over 70% of these employ fewer than 10 people - meaning even small changes in payroll costs can have a big effect on cash flow.  

The National Automatic Enrolment Retirement Savings Authority (NAERSA) will monitor compliance using payroll data, meaning errors in reporting or contribution calculations will be quickly flagged. For SMEs relying on manual payroll processes, this creates a significant risk of: 

• Incorrect deductions leading to employee complaints and reputational damage
• Missed deadlines resulting in fines or enforcement notices
• Administrative overload as contribution rates increase from 1.5% to 6% over the next decade 

Administrative overload as contribution rates increase from 1.5% to 6% over the next decade. The government estimates that over 800,000 workers will be enrolled in the scheme by 2036, so the scale of compliance checks will only grow. That’s why now is the time to rethink how you manage payroll and compliance. Manual processes simply won’t cut it. A Workforce Management solution can automate reporting, track contributions accurately, and keep you compliant without adding extra admin. 

At SD Worx, we make auto enrolment simple. Our payroll solutions automatically calculate contributions, keep you compliant, and free up your time to focus on growing your business. We also provide expert guidance and employee communication support, so you can navigate this change with confidence.