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Mastering Payroll Setup for SMEs: Practical Solutions for Success

As an SME, you likely have big hopes for the future. You’re probably focusing on growing your client base and, in turn, taking on new staff. As of 2023, there are over 2.5 million people employed in Ireland, of which approximately 1.17 million people are employed by SMEs. That’s a lot of payrolls to run!

You probably know a thing or two about setting up payroll for a small business and the importance of getting it right from the get-go. This is essential from the start, and it means that your staff are paid on time, you’re compliant with the regulations that govern payroll in Ireland, and you have the necessary documentation required by Revenue. These are important points as failing to pay staff properly or submit the correct report on time can lead to costly consequences, including a Workplace Relations Commission (WRC) complaint and fine, bad PR, resignations, a decrease in employee morale, an impact on productivity, etc. In fact, the WRC’s 2023 Annual Report revealed that 26% of complaints related to pay. This is a 21% increase on 2022.

Of course, you could also be at the start of your business venture. If that’s the case and you’re wondering, how do I set up payroll for my business, read on…


    How Does Payroll Work in Ireland?

    In Ireland, payroll encompasses more than just paying employees. It includes calculating wages, deducting taxes, complying with employment laws and ensuring timely payments to the Revenue Commissioners.

    Payroll in Ireland is generally processed on a weekly or monthly basis. Payments to employees can be made under various forms, such as bank transfers. Regardless of the payment method used, employees should receive the correct amount of pay on time, which heightens the importance of your payroll solution.

    There are many ways in which an SME might operate their payroll. This could mean having an employee blend HR and payroll responsibilities, an in-house payroll department, or an outsourced payroll provider.

    Whatever your payroll process is, the first step when setting up payroll in Ireland is to look at how to register with Revenue.


      Registering with Revenue Ireland

      Group of people smiling at desk

      Understanding payroll accounting is a hurdle most SMEs must overcome at one stage or another. Even before you begin hiring, registering with Revenue Ireland is an essential step prior to setting up employee payroll. 

      To do this, you must set up an account and provide relevant business information and obtain a tax registration number. Once you begin to take on staff, you must register them for PAYE (Pay As You Earn) and deduct necessary taxes from their payslips, such as Universal Social Charge (USC) and Pay Related Social Insurance (PRSI). These deductions must be reported to Revenue on a monthly basis:

      • PAYE: There are two bands for PAYE, a standard rate of 20% and a higher rate of 40%. You calculate PAYE based on gross pay minus tax reliefs such as pension contributions and tax credits.
      • USC: This is a tax payable on total income. As well as their income from your employment, a person might receive income from, for example, renting a premises, which is also taxable.
      • PRSI: PRSI is paid into the ‘Social Insurance Fund’ which the Government uses to pay for social welfare benefits and pensions.

      Aside from helping new employees avoid emergency tax in Ireland, submitting these deductions to Revenue ensures you stay on the right side of the law.

      As your business goes from strength to strength, it’s important that you retain accurate, up-to-date records of your payroll activity. Keep a record of employee details, wage information, tax deductions and payments made. These records should be kept for a specified period as per legal requirements. Luckily, SD Worx, formerly Intelligo has payroll software that does all this for you. 


        Obtaining and Maintaining Employee Records

        When taking on new staff, you need to obtain and maintain a range of information from them. This includes the employee’s:

        • PPS number
        • Name
        • Date of birth 
        • Address

        You will also need to retain the date of commencement of employment of each employee and, where relevant, the date of cessation of employment of each employee.

        How to maintain employee records is another thing, of course. 

        It goes without saying that all employee information must be maintained in a secure way. Nowadays, with cybersecurity a constant concern, it’s crucial that you manage your data safely and efficiently. One way of doing this is to use an outsourced payroll solution, such as MegaPay Outsourced. This outsourced payroll service manages your employee payroll data in one secure place while also allowing you to generate ad-hoc reports whenever you need them. A highly scalable platform that grows with your business, MegaPay Outsourced can integrate with many HR systems so that HR data can flow seamlessly into payroll. 

        For more on payroll compliance, read our related article, Payroll Compliance: How to Meet Payroll Rules and Regulations


          Establishing Payroll Policies and Procedures

          Clear payroll policies and procedures are essential for consistent and compliant payroll management. Consider the following:

          • Pay Periods: Define how frequently employees are paid (weekly, bi-weekly, monthly).
          • Timekeeping: Implement robust timekeeping methods to accurately track employee hours.
          • Overtime policies: Establish clear guidelines for calculating and compensating overtime.
          • Leave management: Outline policies for accruing and using leave, including statutory and additional leave entitlements.
          • Expense reimbursements: Set up procedures for employees to claim work-related expenses.


            How to Set up a Payroll System For Success with SD Worx, formerly Intelligo

            Mastering payroll setup for SMEs in Ireland is a crucial step towards operational efficiency and compliance. By understanding payroll fundamentals, choosing the right system, adhering to tax and legislative requirements, and continuously updating your practices, you can turn payroll from a potential challenge into a streamlined process. 

            At SD Worx, formerly Intelligo, we understand the workload that comes with running an SME. From generating sales to overcoming hurdles, we know your daily schedule leaves time for little else. We also know how to guarantee your employees are paid on time, every time. Our payroll software MegaPay takes the stress out of managing payroll processes by providing a range of solutions. These include:

            • Scalability: Essential for when you take on new staff and your business grows.
            • Instant auditing: Audit any aspect of your payroll history.
            • Real-time updates: Make a change anywhere and you have updated pay status instantly.
            • Customisable reporting: Easily construct your own reports. 
            • Salary scales and shift patterns: Build salary scales, shift patterns, and any other parameters for increased automation across all relevant cases.

            We also utilise enterprise-grade data centres through Microsoft Azure and provide secure access 24/7, meaning your employee data is always protected and you avoid payroll mistakes.

            To set your payroll up for success, talk with us today