Ireland’s Budget 2026, announced on 7 October 2025, builds on recent reforms and introduces several updates that employers and payroll professionals need to be aware of. The government’s latest fiscal plan introduces a range of payroll-relevant changes that will affect wage costs, compliance, and workforce strategy.
Ireland at a Glance
With its dynamic economy, business-friendly tax regime, and English-speaking workforce, Ireland continues to be a magnet for foreign investment, particularly for tech, pharma, and financial services. As such, many global payroll functions operate a payroll in the country. Its corporate tax rate remains one of the lowest in Europe at 12.5%, and the country ranks high on ease-of-doing-business indices, making it an attractive launchpad for global expansion.
Payroll in Ireland is generally seen as straightforward but highly regulated. Employers must navigate a dual-rate income tax system (20% and 40%), Pay Related Social Insurance (PRSI) contributions, and the Universal Social Charge (USC), as well as mandatory reporting and payslip obligations. Statutory benefits include sick pay, maternity and paternity leave, and redundancy entitlements, with a new auto-enrolment pension scheme mandatory in 2026.
Budget 2026 Key Changes
Here is a breakdown of the key changes in the Budget 2026.
- Beginning 1 October 2025, as part of Ireland’s long-term social welfare funding plan, PRSI contribution rates increased by 0.10% for both employers and employees, bringing them to 4.20% for employees and 11.25% for employers for anyone earning more than €527 weekly.
- Beginning 1 October 2025, meals provided by employers no longer count as a taxable benefit in kind (BIK) in the following cases: meals provided to all employees on the employer’s premises and eaten on site, and working lunches or dinners provided on site to certain employees for business reasons (not exceeding the current day rate of €19.25).
- Beginning 1 January 2026, the national minimum wage increases by €0.65 to €14.15 per hour.
- Beginning 1 January 2026, the 2% USC band will increase by €1,318, raising the threshold from €27,382 to €28,700. This change ensures that full-time minimum wage workers remain outside the higher USC rates, while providing modest tax relief for those earning above the threshold. The reduced USC rate for individuals with full medical cards and earnings under €60,000 will continue until the end of 2027.
- Beginning 1 January 2026, the temporary €10,000 reduction in the Original Market Value (OMV) used for calculating BIK on company cars is extended through 2026. There is a new A1 category for vehicles with zero emissions, and the reduced BIK rates will range from 6-15% depending on business mileage.
- Beginning 1 January 2026, the Foreign Earnings Deduction (FED) is extended to 2030, with the annual cap increased from €35,000 to €50,000, and new eligibility for employees working in Turkey and the Philippines.
- Beginning 1 January 2026, the Special Assignee Relief Programme (SARP) is extended to 2030, with a higher minimum salary threshold of €125,000 (up from €100,000) for qualifying employees. Further administrative relief will be specified in the Finance Bill.
Lastly, the long-awaited Auto Enrolment (AE) retirement savings scheme, branded “My Future Fund,” begins 1 January 2026. Employers are required to automatically enrol eligible employees who are not already in a pension scheme. Initial contributions start at 1.5% of an employee’s gross salary, matched by the employer, with a gradual increase to 6% over a decade. The government will provide a top-up of €1 for every €3 contributed by the employee. While auto-enrolment is compulsory for all eligible employees, employers can be exempted from this process once they have an existing payroll deduction scheme in place.
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Max van der Klis-Busink, MCIPP, RPP, is the Owner of Passion For Payroll and Vice President of Global Strategy on PayrollOrg’s Board of Directors.
