If you employ people you need to pay them properly. Here’s how to avoid disputes and penalties under the Payment of Wages Act 1991.
You need to know:
- How to pay salaries
- What type of payslips you need to issue
- What taxes you should deduct
- What payment processes you need to have in place
- How to avoid disputes
Employees must be paid by one or a number of methods set out in the Act. The main methods are:
- Electronic transfer
- Money order
You should always be aware of the national minimum wage. This applies to all employees, except close relatives and apprentices. You can check minimum wage entitlements online.
All employees are entitled to payslips showing the gross amount of wages payable, and the nature and amount of any deductions, including all taxes and voluntary contributions, for example health insurance contributions. Just because you make an electronic payment doesn’t mean you are exempt from providing a payslip.
You should ensure that reasonable steps are taken to keep the pay statement confidential. If the payment is made by credit transfer, the statement should be given to the employee as soon as possible afterwards.
As an employer, you are responsible for deducting the right amount of income tax, PRSI, PAYE and universal social charge (USC) from wages and submitting these to the Revenue. You must also pay Employer’s PRSI contributions. Detailed information on the taxes you need to deduct from your employees’ wages and how to do it is available on the Revenue website.
Deductions must be required or authorised by law, for example, PRSI or PAYE deductions, be under a valid oral or written term of the contract, or have the employee’s prior written consent.
A deduction from wages will be lawful if:
- The employee commits an act such as breaking equipment, or is suspended without pay
- The employer provides goods or services to the employee which is necessary for employment.
If the wages paid on any occasion are less than the total due (after legal deductions) or no wages are paid, then the amount will be treated as a deduction made by the employer and, consequently, this will be subject to the rules for a valid deduction.
More information about employees’ rights with regard to pay is available on this online resource.
It makes sense to invest in a payroll system to help you pay your employees. It will generate payslips and also keep track of all the payments and deductions you make.
There are plenty of payroll systems on the market designed for start-ups and small businesses, some of which offer free trials for an initial period
If you regularly pay your employees late or fail to pay them at all, they can enforce their legal right to be paid under the terms of their employment letter. If late payment of wages is persistent, employees can take up a trade dispute case with the Rights Commissioner.
Employees are entitled to take up a case with the Rights Commissioner within six months of a complaint being made, and up to a year in exceptional circumstances.
Find out more about the Rights Commissioner online.
Understand your obligations for employee payment. Ensure you don’t regularly pay your employees late, or not at all.
Check if you are compliant. Are you conforming with the law?
Review existing structures. You can save yourself time and effort by investing in a new payroll system, for example.