Payroll is one of the most significant costs for a farm or small and medium-sized enterprises (SMEs). A payroll budget is essential for business owners because it helps them understand the total cost of their employees and the specific items that make up those costs.
Net vs gross
Gross pay: the total amount of money an employee receives before taxes and deductions.Net pay: the final amount of money a person pays after subtracting all taxes and deductions.Agree on gross
Although not as common as it used to be, employers sometimes negotiate a net rather than a gross wage when taking on a new employee. This can be very expensive, even with one worker on your payroll.
Mary says that when taking on a new employee, pay should always be agreed on a “gross” rather than “net” basis, to avoid unforeseen costs if the employee’s tax status changes.
In a net pay agreement, you agree to pay a set amount “into the hand”. These arrangements are difficult to budget as they involve grossing up an employee’s pay to consider tax, PRSI and USC and sometimes even local property tax liabilities. Failing to obtain an employee’s PPS number is another expensive mistake as the employee will be on emergency tax
Liabilities comparison
Liabilities can vary significantly from employee to employee e.g. where all employees receive €700 net and the employer has a net pay agreement.An employee with married
allowances: €905.67.An employee who is single: €999.23. An employee who is on emergency
tax: €1,263.19.An employee with no allowances: €1,478.16.Taking on new employees in 2023?
Wage negotiations should always be based on gross wages. Where existing employee wages are based on “take home”rather than “gross” pay, this is a good time to start phasing these arrangements out.
Sick Leave Pay
Statutory Sick Pay (SSP) came into effect on 1 January 2023. All employees (both part-time and full-time) are now entitled to up to three days of employer-paid sick leave in a year.
An employee becomes entitled to sick pay only after 13 weeks of continuous service Employees are entitled to up to three days of paid sick leave per year. Employee must provide a medical certificate from a medical practitioner stating that the employee cannot work due to illness. The daily payment rate under the Sick Leave Act 2022 is 70% of regular earnings up to a maximum of €110 per day.As an employer, you must keep proper records for each employee. The SSP records must be kept for four years and must include information about each employee who availed of sick leave. This information includes:
The employee’s period of employment The dates of statutory sick leave in respect of each employee. The rate of statutory sick leave payment to each employee.An employer who fails to maintain accurate records may be convicted and subject to a fine of up to €2,500.
Employee Benefits
Employee benefits are non-cash, but can have a financial cost for employers, such as paid holidays, pensions, health insurance or company cars. The latter two attract BIK (benefit-in-kind).
“A benefit-in-kind (BIK) is any non-cash benefit of monetary value that you provide for your employee. These benefits can also be referred to as notional pay, fringe benefits or perks.” (Revenue Commissioners)
According to Revenue, benefits have monetary value and must be treated as taxable income. In other words, the value assigned to them is used to calculate the employee’s PAYE/PRSI/USC liabilities. From an employer perspective, it means an additional employer PRSI liability.
Minimum wage
The National Minimum Wage applies to most employees with the exemption of a close family relative or someone on a recognised apprenticeship. It is the minimum hourly pay rate that must be paid. It applies to full-time, part-time, temporary, and casual employees. From 1 January 2023, the following rates apply:
Minimum wage rates
Aged 20 or over: Rate €11.30 (100% of wage)Aged 19: Rate €10.17 (90% of wage)Aged 18: Rate €9.04 (80% of wage)Under 18: Rate €7.91 (70% of wage)An employer must keep records to show that employees have received their national minimum wage. Records must be kept for three years.
Get in touch
If you have any questions on employment law or your employment obligations send them to smcintosh@farmersjournal.ie. For further support with any of the above contact hrservices@ifac.ie
Read more
Employment law series: 1. what are my obligations?
Shay Galvin announced as new Agri Aware chair
Payroll is one of the most significant costs for a farm or small and medium-sized enterprises (SMEs). A payroll budget is essential for business owners because it helps them understand the total cost of their employees and the specific items that make up those costs.
Net vs gross
Gross pay: the total amount of money an employee receives before taxes and deductions.Net pay: the final amount of money a person pays after subtracting all taxes and deductions.Agree on gross
Although not as common as it used to be, employers sometimes negotiate a net rather than a gross wage when taking on a new employee. This can be very expensive, even with one worker on your payroll.
Mary says that when taking on a new employee, pay should always be agreed on a “gross” rather than “net” basis, to avoid unforeseen costs if the employee’s tax status changes.
In a net pay agreement, you agree to pay a set amount “into the hand”. These arrangements are difficult to budget as they involve grossing up an employee’s pay to consider tax, PRSI and USC and sometimes even local property tax liabilities. Failing to obtain an employee’s PPS number is another expensive mistake as the employee will be on emergency tax
Liabilities comparison
Liabilities can vary significantly from employee to employee e.g. where all employees receive €700 net and the employer has a net pay agreement.An employee with married
allowances: €905.67.An employee who is single: €999.23. An employee who is on emergency
tax: €1,263.19.An employee with no allowances: €1,478.16.Taking on new employees in 2023?
Wage negotiations should always be based on gross wages. Where existing employee wages are based on “take home”rather than “gross” pay, this is a good time to start phasing these arrangements out.
Sick Leave Pay
Statutory Sick Pay (SSP) came into effect on 1 January 2023. All employees (both part-time and full-time) are now entitled to up to three days of employer-paid sick leave in a year.
An employee becomes entitled to sick pay only after 13 weeks of continuous service Employees are entitled to up to three days of paid sick leave per year. Employee must provide a medical certificate from a medical practitioner stating that the employee cannot work due to illness. The daily payment rate under the Sick Leave Act 2022 is 70% of regular earnings up to a maximum of €110 per day.As an employer, you must keep proper records for each employee. The SSP records must be kept for four years and must include information about each employee who availed of sick leave. This information includes:
The employee’s period of employment The dates of statutory sick leave in respect of each employee. The rate of statutory sick leave payment to each employee.An employer who fails to maintain accurate records may be convicted and subject to a fine of up to €2,500.
Employee Benefits
Employee benefits are non-cash, but can have a financial cost for employers, such as paid holidays, pensions, health insurance or company cars. The latter two attract BIK (benefit-in-kind).
“A benefit-in-kind (BIK) is any non-cash benefit of monetary value that you provide for your employee. These benefits can also be referred to as notional pay, fringe benefits or perks.” (Revenue Commissioners)
According to Revenue, benefits have monetary value and must be treated as taxable income. In other words, the value assigned to them is used to calculate the employee’s PAYE/PRSI/USC liabilities. From an employer perspective, it means an additional employer PRSI liability.
Minimum wage
The National Minimum Wage applies to most employees with the exemption of a close family relative or someone on a recognised apprenticeship. It is the minimum hourly pay rate that must be paid. It applies to full-time, part-time, temporary, and casual employees. From 1 January 2023, the following rates apply:
Minimum wage rates
Aged 20 or over: Rate €11.30 (100% of wage)Aged 19: Rate €10.17 (90% of wage)Aged 18: Rate €9.04 (80% of wage)Under 18: Rate €7.91 (70% of wage)An employer must keep records to show that employees have received their national minimum wage. Records must be kept for three years.
Get in touch
If you have any questions on employment law or your employment obligations send them to smcintosh@farmersjournal.ie. For further support with any of the above contact hrservices@ifac.ie
Read more
Employment law series: 1. what are my obligations?
Shay Galvin announced as new Agri Aware chair
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