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Budget 2025: key payroll and finance changes you need to know

The Irish economy presents a mixed picture.

While there is steady economic growth supported by an improvement in global trade and a resilient labour market, the global economic environment has led to challenges. However, Ireland’s Finance Minister, Jack Chambers, delivered his Budget last week, stating he aims to “provide ways and means for continuing to deliver many more bright and hopeful days for us all.”

To keep you up to date, in this blog, we’ve run through the key aspects of the 2025 Budget, detailing the key changes and how they will directly affect payroll and finance.

National Minimum Wage (NMW): a step towards fairer pay

From 1st January 2025, the Minimum Wage will be increased by €0.80 per hour, taking it to €13.50 per hour. This is less than the €1 increase which was recommended by the Low Pay Commission.

The adjustment will impact industries with a high proportion of minimum-wage employees, as businesses will need to adjust their systems and budgets to accommodate this change and ensure compliance.

Standard rate cut-off point and tax credits

The standard rate cut-off point will be increased by €2,000 for single/widowed persons or surviving civil partners without qualifying children, married couples or civil partnerships – one income.

Along with married couple or civil partnership- two incomes.

Additionally, personal tax credits, including the personal, employee and earned income credits, will rise by €125 each.

USC & PRSI: adjusting the rates

The 2% Universal Social Charge (USC) rate will be raised to €27,382, aligning with the new National Minimum Wage.

Furthermore, the 4% rate will be reduced to 3%, aiming at easing the burden on middle-income earners.

In terms of Pay Related Social Insurance (PRSI), the Budget has not introduced significant rate changes but emphasises compliance.

Businesses must continue to ensure accurate deductions in alignment with the latest guidance.

Social Welfare Benefits: Enhanced Support for Workers

The 2025 Budget introduces increases across various social welfare payments, including:

State Pension
Jobseekers Benefit
Maternity Benefit

These adjustments include a €15 increase for Maternity Leave, Adoptive Leave, Paternity Leave and Parental Leave, aiming to help individuals cope with rising living costs.

It’s crucial payroll teams stay on top of these changes to accurately calculate employee entitlements and benefits.

Benefit In Kind (BIK) for employer – provided vehicles

The only change for Car NIK will be a €10,000 extension of the BIK relief, which will now remain in place until the 31st of December 2025. This extension applies to all categories (A through D) and includes all vans, but Category E is excluded from this.

Furthermore, there’s no change to the van BIK and this rate will remain at 8%.

In 2025, OMV will be reduced by €35,000, for electric vehicles only for the tax year.

The €10,000 BIK relief will be added for the nest year (2025).

This means there will be €45,000 relief on the OMV, on electric vehicles only until the 31st of December 2025.

from 2026 onwards, OMV will be reduced by €20,000 in 2026 and then €10,000 in 2027.

Enhanced Reporting Requirements (ERR): compliance and accuracy

The introduction of Enhanced Reporting Requirements underscored the Government’s focus on transparency and accountability.

ERR commenced this year from the 1st of January 2024 and will require employers to report details of certain payments made to their employees and directors.

Phase 1 will deal with the following payment:

Small Benefits
Remote working – total number of days and total amount paid
Travel and subsistence

This submission must be made by you on, or before, the payment date to the employee.

Statutory Sick Pay (SSP): expanding employee rights

The Government has made Statutory Sick Pay (SSP), including increasing the number of paid sick leave days and adjusting the payment rates.

The updates scheme is being rolled out over four years as follows; 2023 – 3 days, 2024 – 5 days, 2025 – 7 days (this could potentially be delayed but not confirmed at present), 2026 – 10 days (fully operational).

A rate of payment for Statutory Sick Pay will be set at 70% of usual daily earnings capped at €110 per day.

Both full-time and part-time employees can benefit from SSP which will be in addition to other leave entitlements including annual leave, Parental/Maternity Leave as well as public holidays.

All workers will a right to take a complaint to the Workplace Relations Commission (WRC) if they are not provided with a company sick pay scheme.

Automatic enrolment (AE): preparing for the future

The 2025 Budget includes measures to advance the automatic enrolment (AE) pension scheme, which aims to increase access to pensions for workers.

Automatic enrolment is an initiative that requires employers to automatically enrol eligible employees into a workplace pension scheme.

The scheme has been created because too few people have sufficient pension coverage to enable a reasonable standard of living in retirement above the level of the state pension.

As it stands, auto enrolment has currently been delayed to September 2025 (at the earliest).

Navigating change with Paycheck Plus

As highlighted above, the 2025 Budget brings numerous changes that will significantly impact payroll and finance operations.

Is your business prepared? At Paycheck Plus, we specialise in navigating these complex changes.

Reach out to us today to learn more about how we can assist with these legislative changes and keep your payroll processes running smoothly.

10 October 2024 - Irish Payroll, Pensions & Auto Enrolment