Even relatively simple versions of payroll for small businesses can be complex to understand. When it comes to multinationals though, things can become still more complicated, as different countries have their own unique standards and rules for payroll processing.
All businesses that operate across borders should be aware of these varying processes, so their company doesn’t end up being caught unaware and falling foul of the rules. Neighbouring countries such as Ireland and the UK may share many similarities but in terms of payroll the differences can seem surprisingly significant. Here are the major differences to take note of:
Tax Years
Keeping track of the national tax year is vital for ensuring you remain in line with the government’s taxation decisions for the new year and your employees are paying the right amount in tax. Ireland’s tax year is easy to follow, starting on 1st January and ending on 31st December, whereas the UK’s tax year goes from 6th April to 5th April the following year.
Filing Details
Employers need to report earnings details for their employees to ensure tax records are kept up to date. Irish employers do this by submitting a Payroll Submission Request (PSR) on or before payday via Real Time Reporting (RTR). At the end of the tax year, an employment detail summary will be made available to all employees.
In the UK, employers use Real Time Information (RTI) to submit payment information to HMRC, for which the deadline submission is the 19th of each month when employee payrolls are confirmed for the end of the month. It’s required by law that employers submit an RTI return each time employees are paid on or before payday. This is essentially like submitting a weekly, fortnightly or monthly P35.
A Full Payment Submission (FPS) is required in the UK, which details a breakdown of payment including deductions for items such as pension and other employment benefits taken off the employee’s base wage. The Employer Payment Summary (EPS) meanwhile contains adjustments like statutory payments and details of an employer’s PAYE/NIC liability for the relevant period.
Establishment and Employer registration
As an employer seeking to pay staff via payroll services, one of the first steps will be to register your business and declare your place of establishment (i.e. your business address). In Ireland, you must register as an employer with Revenue for PAYE purposes by filling out the appropriate form, found on the Revenue website. Within nine days, you must also notify the Revenue Commissioners of your name and address.
In the UK you can register online. A non-resident company cannot typically set up a payroll scheme with PAYE without a business premises in the country – exceptions may apply. However, an employer is still responsible for calculating and submitting National Insurance details even without a UK place of establishment.
Holidays
All full-time employees have a set paid holiday entitlement. It’s important to keep track of paid holidays for payroll purposes.
In Ireland this is a minimum of four weeks (or 20 working days) per year, with part-time employees entitled to the same on a pro-rata basis. There are different methods by which these can be calculated. Alongside this there are currently ten public holidays in Ireland that are not included in the leave entitlement.
Full-time UK workers are entitled to 28 days leave per year, calculated by multiplying the five-day working week by the base annual entitlement of 5.6 weeks. A part-time worker’s Annual Leave will be calculated the same way, so for example if they work only three days per week, this will be multiplied by 5.6 weeks to calculate a total of 16.8 days Annual Leave.
Some employers may choose to include bank holidays in the total Annual Leave entitlement; this is left to their own discretion and means holiday entitlement tends to vary slightly more between UK employers with 28 days holiday as the bare legal minimum.
Extra holiday can be an enticing benefit offered to new or experienced loyal employees. Many employers also allow workers to carry over unused Annual Leave to the following year.
Benefits in Kind (BIK)
In addition to extra holidays, employers can offer certain benefits to workers as part of employment, which are considered Benefits in Kind. These are also subject to PAYE, PRSI and USC – with certain exemptions.
It is the employer’s responsibility in Ireland to identify the calculated notional value and collect any liabilities due on this benefit through the payroll system. The taxable value of any business car used is based on its Original Market Value and mileage.
UK rules on this may vary and what needs to be reported to HMRC could depend on the type of benefit offered. The taxable value of company cars will depend on their fuel type and CO2 emissions, among other factors. These must be calculated and reported to HMRC by the employer independently. P11D forms also need to be submitted annually declaring full details of benefits provided to each paid employee.
Pensions
Employers in both the UK and Ireland are required to enter their employees into a pension scheme automatically, though the rules vary slightly. Since 2012, UK employers have been required to enter all their qualifying workers into an automatic pension scheme. Employees may opt out if they choose but should be automatically re-enrolled three years later. This has been required of even small employers since at least April 2017.
In Ireland, an employee must be automatically enrolled in a standard pension scheme within six months if they are not eligible immediately. This basic pension is known as a Personal Retirement Saving Account (PRSA). Contributions to this must be paid by the employer by the 21st of each month starting the month after their first pay deduction. Bear in mind auto-enrolment legislation is due to be introduced in Ireland in 2024.
Due to the apparent similarities between the UK and Ireland, even sharing a land border via Northern Ireland, it is vital to keep track of the small differences in payroll processing rules. Otherwise, small mistakes may cause bigger issues later.
If you want to avoid these mistakes, it’s best to rely on qualified payroll experts for help in all challenges facing multinational businesses. Get in touch with us today for a quote or simply for further payroll advice.