Ireland Budget 2027: What Payroll Teams Need to Know

On Tuesday, 6th October, Tánaiste and Minster for Finance, Simon Harris, and Minister for Public Expenditure and Reform Jack Chambers, TD, delivered Budget 2027 at Dáil Éireann. We delve into the detail with Seán Murray, Director of Product Services – Ireland at Zellis, to discover what it means for payroll in Ireland.

An overview

Budget 2027 set out an overall package of €8.65 billion, consisting of €7 billion in public expenditure and €1.65 billion in taxation measures. This year’s war chest is somewhat down on the 2026 package of €9.4billion and almost 20% down on the 2024 commitment of €10.5 billion. 

While the package as a whole hasn’t been described as a giveaway by many commentators, the Tánaiste’s statement that the goal was to “put money back in people’s pockets” does hold true for the most part with initiatives to take PAYE workers out of the higher tax rate, increases to minimum wage, increases to Social Welfare payments and moves to combat the rising cost of fuel by maintaining reduced fuel excise rates until the end of February 2027 and to postpone a carbon tax increase on fuel until May 2027. 

For PAYE workers, an uplift of the annual the standard rate cut of point by €2,500, seeing a cohort dropping down onto the lower rate of tax, and a small increase to annual tax credits will see extra money landing in pockets come pay day.  A widening of the USC 2% rate band will also see some taxpayers dropping down from the 3% rate to 2%.   

On the negative side both employee and employer PRSI rates rose by 0.15% from 1^st October of this year, which will see a negative small reduction in net pay this month for some.  A further .15% increase will occur in Oct 2027 as part of 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.  

For those employees currently in receipt of the national minimum wage, the hourly rate will be uplifted by €0.79 from €14.15 to €14.94 per hour in respect of hours worked on or after 1 January 2027.  This will impact approximately 137,000 employees.  The new rate still falls short of the Living Wage of €15.40, a rate which many organisations such as Social Justice Ireland, had canvassed for. 

From an employer point of view, the Budget was a mixed bag.  Wider tax bands, start-up relief extending to 2030, and a higher pay threshold before the top rate of employer PRSI applies will all aid the cost of doing business. Meanwhile SMEs will continue to take some pain in the form of the minimum wage increase, by 79 cents an hour, increases in employer PRSI from this month and further increases from October of 2027 while small businesses continue to adjust to the 1.5% overhead on staff salaries as a result of the introduction of MyFutureFund, auto-enrolment pension contributions. The scheme currently sits with approximately 854,000 members enrolled and with over €690 million under investment. 

“A real mixed bag of measures in this year’s Budget with employees and employers slightly better off overall, at least for the short term.  But there are certainly clouds gathering on the horizon with an ongoing cost of living crisis, temporary fuel cost measures due to expire over the next number of months, carbon tax increases to be introduced later in the year, wage demands in the Public Sector and with the government playing a risky game of spending €7 out of every €8 received in corporation tax, with just €1 going into the rainy day fund.” – Seán Murray, Director of Product Services – Ireland at Zellis

Key takeaways

1. Tax Credits and Cut-offs 

Standard Rate Cut-off points and Tax Credits will increase for all employees for the new year and these will be presented on tax certificates when issued by Revenue. 

What does this mean for payroll? 

Revenue Payroll Notifications (RPNs) will be made available by Revenue from week two of December for application to payrolls ahead of the first pay runs in the new tax year. 

2. Universal Social Charge (USC)  

The Minister delivered some relief for employees via amendments to the USC rates and thresholds as follows: 

• The 2% rate band limit for USC will increase to €30,300 (from €28,700). 

• This means that the increase in the national minimum wage will not bring full-time workers into the higher 3% rate band. 

• The USC exemption earnings threshold of €13,000 remains unchanged. 

• The emergency USC rate of 8% also remains unchanged.

What does this mean for payroll?

Employees will feel the benefits of the amendments to the USC from 1^st January, when they receive their 2027 tax certificates. These RPNs are expected to be available from Revenue in week two of December. Employers may download the certificates at this point and apply them to payroll for processing in tax period one of 2027. 

Note that for Zellis clients, the statutory parameter table for USC will be updated as part of the ROI legislation upgrade in November to reflect the above changes. 

3. PRSI (effective 1^st October 2026) 

As part of the government’s PRSI roadmap 2024-2028, a .15% increase in PRSI rates came into effect from Oct 1^st this year.  A further increase .15% increase in rates will come into effect from Oct 1^st, 2027.  As a result of the increase in the national minimum wage, the upper weekly earnings threshold for class A contributors will be raised. 

What does this mean for payroll? 

PRSI rates increased with effect from 1^st October, that is, for pay dates falling on or after this date.   

Note that for Zellis clients, the statutory parameter tables for PRSI were updated automatically in September in anticipation of this change. A further small amendment will be made to the PRSI statutory parameter table to reflect the increase in the upper weekly earnings threshold for class A employees in this year’s Budget and at the same time the next increase, effective Oct 2027, will also be forward loaded and applied during the forthcoming ROI legislation upgrade in November. 

National Minimum Wage

The national minimum wage rate receives a modest uplift of 79 cents to €14.94 per hour from 1 January 2027. 

What does this mean for payroll? 

Employers should ensure that any current reports that may track payments against the national minimum wage are checked for compliance with the new hourly rate. 

5. Social Welfare Payments

Most weekly social welfare payments will increase by €10 from 1^st January 2027.  Illness benefit will be extended from €254 to €264 per week. Maternity, paternity, adoptive, and parental benefits will all rise by €10, from €299 to €309. And the State Pension personal rate will increase from €299.30 to €309.30 per week. 

What does this mean for payroll? 

For employers incorporating the processing of illness benefit into their sickness calculations, they should ensure that any rates included in those calculations are correct.  Similarly, employers should check state pension rates that may be used in some occupational pension scheme calculations as well as rates for statutory leave categories impacted, as above, that may also be included in payroll calculations.

Notes and further sources 

The above is our interpretation of the forthcoming changes as announced in the Minister’s Budget 2027 speech. It is not intended to constitute tax, financial, or legal advice. The measures are subject to change ahead of the passing of the relevant legislation, the Finance Act. 

Full details can be found in the Revenue Budget Summary.