On Tuesday, 7th October, Minster for Finance Jack Chambers TD and Minister for Public Expenditure and Reform Paschal Donohue TD delivered Budget 2026 at Dáil Éireann. We delve into the detail with Seán Murray, Director of Product Services, to discover what it means for payroll in Ireland.
Budget 2026 Ireland: An Overview
Budget 2026 set out an overall package of €9.4 billion, consisting of €8.1 billion in public expenditure and €1.3 billion in taxation measures. This year’s war chest is somewhat down on the 2025 package of €10.5 billion, with taxation measures coming in at €100 million less than last year.
The announcement, as a whole, will be viewed by many employees and employers as an exercise in maintaining the status quo. There are no employee giveaways this year and little by way of cost relief consolation for employers in most sectors.
Budget 2026 changes for employees
From an employee’s perspective, personal tax credits and standard rate cut-of points remain unchanged, with most workers not receiving any bump in net pay apart from a slight adjustment due to an increase to the 2% USC earnings threshold. However, both employee and employer PRSI rates rose by 0.1% from 1st October, and this will negatively impact, albeit slightly, net pays this month. This 0.1% increase is the second in a series of annual increments, which will accumulate to a total increase of 0.7% come 2028. The purpose of this initiative is to replenish the Social Insurance Fund in preparation for an expected surge in demand for the state pension, as more people reach the accessibility age and the ratio of PRSI contributors to state pension recipients dwindles to a predicted 2:1 over the next 10 years.
The national minimum wage (NMW) rate receives a modest uplift of 65c to €14.15 per hour, in line with the Low Pay Commission’s recommended 5% increase, benefitting over 160,000 workers who fall into this pay category. It is some way short of last year’s increase of 80c. Coupled with the rise in the 2% USC earnings threshold of €1,318 to €28,700, this measure will ensure that anyone on the NMW and a maximum 39-hour working week will remain on the lower rate of USC.
Budget 2026 changes for employers
From an employer point of view, the negatives will likely outweigh the positives. Food, catering, and hairdressing businesses will see a reduction of VAT from 13.5% to 9% from 1st July next year, at a cost of €232 million to the exchequer in 2026 and over €600 million from 2027 onwards. This move is a significant attempt to turbocharge these sectors. On the flip side, along with the 0.1% employer PRSI rate increase effective from 1st October, employers will have to contend with other pressures on the cost of employment. The national minimum wage increase will impact some businesses while the lack of any real attempt to boost disposable income will undoubtedly fuel wage-increase demands, especially in the public sector.
Meanwhile, 1st January will mark the introduction of My Future Fund, the state’s pension auto-enrolment scheme, into which employers will contribute 1.5% of their employees’ gross pay to match employees’ own contributions to the new state fund. This will result in a not unsubstantial rise in the cost of employment for smaller businesses that may not currently offer their employees the opportunity to join a company pension scheme. Finally, carbon tax increases are coming and this will mean cost increases for employers in terms of fuel and energy.
Seán Murray, Director of Product Services at Zellis, commented,
“Not too much to celebrate in this year’s Budget – unless you happen to be the owner of a business in hospitality or hairdressing. It comes up short when compared to last year’s pre-general election announcements which had something for all.
Employees will be disgruntled at the fact that there’ll be little to no material impact on disposable income following these measures, and while pension auto-enrolment is unquestionably a badly needed initiative, it’ll see a 1.5% drain on net pay for those employees impacted from 1st January.
Employers continue to experience increases to labour costs while rising carbon taxes will also impact the cost of doing business. On the plus side, certain targeted reliefs and business support measures will benefit some employers and enhanced R&D tax credits will support innovation and competitiveness for those availing of same. And a €10 per week increase in social welfare payments will also be welcome by recipients.”
Are you ready for auto-enrolment in January 2026?
Get to grips with the fundamentals of auto-enrolment pensions—who, what, when, and where—with our handy infographic.
