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Irish employers will face challenges around changing tax rules and new reporting obligations

Mazars says new statutory sick pay rules and complexities associated with employees working remotely from overseas will place added strain on HR and payroll functions

`Depending on the local tax laws, having employees operating in certain jurisdictions may create a tax presence and potentially expose the company to corporate taxes issues.' Photograph: Getty Images

Thu Jun 16 2022 - 05:00

Irish employers will face many challenges in terms of changing tax rules, new reporting obligations, statutory sick pay and the complexities associated with employees working remotely from overseas. These are going to place added strain on HR and payroll functions, according to Mairéad Divilly, lead partner for outsourcing and compliance services with Mazars.

For example, overseas remote working is fraught with unintended consequences. “We’ve had numerous inquiries on this issue,” says Divilly. “Employers have to register in the overseas jurisdiction for payroll and social security. And they need to operate the local payroll taxes on payments to these employees.”

Mairéad Divilly: 'Lots of calculations are required – the split between male and female employees including total ordinary pay, total bonus, total benefits-in-kind, total hours worked, mean and median hourly pay, the percentage of males and females in the workforce, part-time and full-time employees, and more'

There can be some unpleasant cost surprises, as Jennifer O’Neill, Mazars director of payroll outsourcing services, points out.

“Our employer’s PRSI rate in Ireland is just 11.05 per cent. That compares favourably to other European countries where employer costs can exceed 30 per cent or more. Also, depending on the local tax laws, having employees operating in certain jurisdictions may create a tax presence and potentially expose the company to corporate taxes issues. It’s important that contracts of employment for these employees comply with local legislation and regulation. It’s beneficial to have the support of an international professional services firm who can advise as appropriate.”

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In Ireland the benefit-in-kind (BIK) regime for company cars is about to change. The temporary regime which applied during Covid expired on May 31st, 2022, and companies must apply the old rules from that date. And the basis for calculating the tax will change to a combination of mileage and CO2 emissions from 2023 onwards.

O’Neill says there will be five emissions bands from A, the lowest, to E, the highest. She gives the example of a car worth €37,000, doing 25,000 business kilometres per annum and emitting 150g CO2 per kilometre. Under the current rules the BIK on which the employee’s income tax would be calculated would be €8,880. Under the new regime under which the car would come in at band D the amount will rise to €12,488.

“Costs will increase for many employers and their employees,” she says. “Employers will be reviewing the profile and associated costs of their fleet of motor vehicles.”

The BIK regime is also changing for electric vehicles. At present no BIK is payable up to the first €50,000 in value, with normal rates kicking in above that. That threshold will reduce to zero by 2026, with a new rate of 22.5 per cent being applied instead of the 30 per cent used for internal combustion engine vehicles.

The rate for vans will go up from 5 per cent to 8 per cent in 2023.

Statutory sick pay is another significant change. The Government has approved the draft Sick Leave Bill 2022. This scheme is being brought in on a phased basis rising from three days this year to 10 in 2026.

Jennifer O’Neill: 'Several clients have addressed the calculation challenge and are addressing the GPG identified to report the proposed action to be taken'

“Most businesses and representative organisations have welcomed this but to be fully prepared for its introduction the legislation underpinning statutory sick pay and any accompanying regulations need to be published as quickly as possible. The implementation date is important to allow time for businesses to understand how it works” says Divilly. “Clarification is required on qualifying and non-qualifying earnings, the treatment of deductions from these earnings, employees in multiple employments, and additional payments such as shift work and piece work.”

Gender pay gap (GPG) reporting legislation was enacted in 2021. Employers with more than 250 employees must choose a snapshot date in June 2022 and report within a six-month period on their GPG for the 12-month period up to and including that date. This means the reporting deadline is December 2022.

“Lots of calculations are required – the split between male and female employees including total ordinary pay, total bonus, total benefits-in-kind, total hours worked, mean and median hourly pay, the percentage of males and females in the workforce, part-time and full-time employees, and more,” says Divilly. “They have to report within six months of the snapshot date. That’s a very short time-frame. Collecting the data will be a challenge. The GPG report will be publicly available, which could impact talent acquisition and company reputation. Also, employers will have to say what they’re going to do to improve their GPG.”

Mazars has developed a tool which supports the calculation of the GPG. “Several clients have addressed the calculation challenge and are addressing the GPG identified to report the proposed action to be taken,” O’Neill adds. “Businesses need to familiarise themselves with these matters to ensure that payroll and HR systems are in place to capture the data required and comply with legislation.”

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