Welcome to our guide on essential payroll terms. Whether you're a business owner, HR professional or payroll manager, this guide is designed to demystify the terminology surrounding payroll processes. Understanding these key terms is crucial for effectively managing employee compensation, tax obligations, and compliance.

AEO – Attachment of Earnings Order or Notice of Attachment (NOA) – when received by the employer on behalf of an employee places a legal obligation on an employer to make a deduction from an employee’s salary or pension at source and pay it over to the relevant authority.

APSS – Approved Profit-Sharing Scheme – provides a tax efficient mechanism to give shares to the employees. Revenue approval is required to operate an APSS.

ASC – Additional Superannuation Contribution - applies to individuals who are accruing pensionable benefits in respect of their current employment. The Contribution only applies to a person who is a member of a public service pension scheme.

AVC –Additional Voluntary Contribution – a voluntary contribution made by an employee to a pension scheme, in addition to any standard contributions provided for in the contract of employment.

Benefit in Kind (BIK) - A noncash benefit given to an employee by an employer which is subject to tax in the hands of the employee, e.g. Company car, Medical insurance (where employer pays on behalf of an employee)

DETE (Department of Enterprise, Trade and Employment) - charged with promoting fair competition in the marketplace, protecting consumers and safeguarding workers.

DSP (Department of Social Protection) - Government Department in Ireland responsible for social protection and social inclusion policies. It designs, develops, and delivers income supports, activation and employment services.

EAT (Employment Appeals Tribunal) - adjudicate on employment law disputes arising on the termination of the employment relationship. It also has an appellant function regarding disputes that arise during the employment relationship.

Emergency Tax - An employer is obliged to operate the Emergency tax basis (higher tax of rate) where:

• The employer has not received a PPS number from a new employee, or
• The employer holds the employee’s PPS number and requests an RPN, but no RPN is available as the employee has not yet registered for PAYE with Revenue

Flat-rate expense allowances - are those that cover the cost of equipment your employee needs for work. This equipment may include tools, uniforms and stationery. Your employee must incur these costs in performing the duties of their employment, and the costs must be directly related to the nature of their employment. Flat-rate expenses are available to a wide range of professions.

Gross Pay - Gross pay is the amount of wages/salary payable to an employee by an employer before any deductions (tax or otherwise) are withheld.  Gross pay is the multiplication of the hours worked by the agreed hourly rate or the agreed set amount for a set period (weekly/monthly salary)

ITR (Income Tax Return) – form used to file information about your income and tax to the Income Tax Department. The return is mandatory to be filed for proprietary directors, self-employed and individuals that have any source of additional income such as Rental surplus, Dividends, Deposit interest.

It can also be filed by employees who desires to claim tax credits for additional costs such as medical expenses, working from home costs etc.

LPT (Local Property Tax) - self-assessed tax charged on the market value of residential properties in the State.

LRC (Labour Relations Commission) - work with employers and employees to develop and improve good employment relations practices and procedures in their workplaces.

MyAccount - Using a single login and password this allows you access to your “Online Revenue services” for taxpayers.

NERA –National Employment Rights Authority – responsible to monitor the conditions of employment in the Republic of Ireland.

Net Pay - Gross Pay less all deductions, this normally equates to the end payment to an employee.

Notional Pay - The term used to describe the monetary value of a BIK (Benefit In Kind), which is included in an employee’s gross pay for calculation of PAYE, PRSI, and USC.

P45 - Statement of Earnings and deductions issued to an employee on cessation of employment.

As part of the PAYE modernisation, paper based P45s and P60s were replaced with an online system. Employees no longer receive the forms. Instead, they can check their employment details online via their Revenue myAccount.

P60 - End of Year statement of earnings and deductions issued by an employer to all employees who are still in their employment on 31st December of the tax year.

As part of the PAYE modernisation, paper based P45s and P60s were replaced with an online system. Employees no longer receive the forms. Instead, they can check their employment details online via their Revenue myAccount.

PAYE (Pay As You Earn) - Nearly all income is liable to tax. Tax on income that you earn from employment is deducted from your wages by your employer on behalf of the Irish Government. This is known as Pay As You Earn (PAYE). The amount of tax that you must pay depends on the amount of the income that you earn and on your personal circumstances. There are a range of income tax reliefs available that can reduce the amount of tax that you must pay.

PAYE Cumulative basis - Year to date calculation of tax which ensures that an employee's tax liability is spread evenly over the year. Each pay period tax deduction is calculated as the total tax due from 01st January to the date of payment and reduced by the amount of year-to-date tax previously deducted.  This ensures that any tax credits and standard rate cut off point which are not used in a pay period are carried forward to the next pay period within that tax year. The cumulative basis facilitates the payment of tax refunds where due.

PAYE Tax Basis - Indicates the Tax Basis on which PAYE and USC will be calculated based on the three applicable methods: Cumulative, Week One/Month One or Emergency.

PAYE Week One/Month One - Each pay period is treated separately without any consideration of previous pay or deductions. The tax credits and cut off point is applied to each pay week/month and tax is deducted accordingly.  No tax refunds may be made by an employer where this basis applies.

Payslip - Statement of Earnings and Deductions issued by an employer to an employee.

Pension - Saving plan for retirement which will provide a source of income once you retire.  Some pension deductions are tax allowable so that tax is deducted from your Gross Pay after your pension deduction.

PHI (Permanent Health Insurance) – also known as Income Continuance Plan (ICP), provide for periodic payments to an individual in the event of loss, or reductions, of income, if they are unable to work for an extended period due to ill health. Premiums payable into a Revenue approved PHI scheme qualify for tax relief at the individual’s marginal rate of tax.

PPS Number - Personal Public Service Number, unique number issued to individuals wishing to live or work in the Republic of Ireland.

PRSA (Personal Retirement Savings Account) - is a long-term savings account, designed to help people save for retirement. It is available from PRSA providers whose products have been approved by Revenue and the Pensions Authority. As an employer, if you do not make an occupational plan available, you must provide access to a Standard PRSA.

PRSI (Pay Related Social Insurance) - PRSI is a compulsory deduction from your earnings which is payable to the Department of Social Protection and used to fund social insurance payments in the state. Each periodical contribution creates an employee's record of aggregate contributions which will in turn dictate the level of benefits available to that employee when applicable. The amount of PRSI you pay will depend on your earnings and the class you are insured under.

PRSI Class - Social insurance contributions are divided into different categories, known as classes or rates of contribution. The type of class and rate of contribution you pay is determined by the nature of your work. Most employees pay Class A PRSI. This class of contribution can entitle you to the full range of social insurance payments that are available from the Department of Social Protection, if you meet the qualifying criteria.

PRSI Insurable Weeks - Each PRSI contribution made in a pay week equates to a week of insurable employment.

PSR (Payroll Submission to Revenue) – periodic submission of the payroll data to Revenue. Each PSR submitted will provide Revenue with the information for each employee, including their amount of pay, payment date and the amount of Income Tax, Universal Social Charge and Local Property Tax deducted.

RAC (Retirement Annuity Contract) – Self-employed people or employees who do not have access to an occupational pension scheme may opt to take out a Retirement Annuity Contract with a pension provider.

Reckonable Earnings – is your gross pay including any notional pay or benefit in kind.

ROS (Revenue On-Line System) – enables the company to view their own, or their client's, current position with Revenue for various taxes and levies, file tax returns and forms, and make payments for these taxes online.

RPN (Revenue Payroll Notification) – this replaces the tax credit certificate (P2C). Employers will be able to request an RPN from Revenue directly through the payroll software, which will allow instant access to changes to an employee’s tax credits.

SCSB (Standard Capital Superannuation Benefit) - is an additional relief that the employee may be entitled to when they are receiving a lump sum payment on retirement or leaving work. It benefits employees with high earnings and long service. SCSB is calculated at 1/15 of the average annual pay for the last 36 months in employment. This is multiplied by the number of full years of service. Any tax-free lump sums received are subtracted from this benefit.

SRCOP (Standard Rate Cut-Off Point) – the amount of income that is liable to tax at the standard rate of 20%. Any income more than the SRCOP will be liable to tax at the higher rate, currently 40%. 

Statement of Liability - is a final review of the employee’s tax liability for a tax year. It was previously known as the P21–End of Year Statement. The individual must complete an income tax return to request their Statement of Earning and tax for the year from Revenue.

Tax Credit - Each employee is entitled to tax credits depending on their personal circumstances, e.g. married person's or civil partner’s tax credit, employee (PAYE) tax credit, etc. These tax credits are used to reduce the tax calculated on an employee's gross pay. Tax credits are non-refundable. However, any unused tax credits in a pay week or month are carried forward to subsequent pay period(s) within the tax year.  After your tax is calculated, as a percentage of your income, the tax credit is deducted from this to reduce the amount of tax that you have to pay.

 Tax Credit Certificate - Revenue issues a tax credit certificate to every employee who makes a claim for tax credits. The certificate sets out in detail the amount of tax credits and standard rate cut off point and USC cut offs that Revenue has determined to be due to the employee.  Revenue also issues the tax certificate to the employer for each employee registered in his employment.

Taxable Pay - An employee’s gross pay less certain deductions approved by Revenue which are allowable for tax purposes, such as contributions to a Revenue approved Pension Scheme, PHI Scheme or deductions under an approved Salary Sacrifice Arrangement.

TRS (Tax Relief at Source) – When an individual pays their own medical insurance premium to an authorised insurer (such as VHI, Laya etc), they obtain tax relief at the standard rate (currently 20%) directly from the insurer who reduce their premium by the appropriate amount. This is known as tax relief at source. Tax relief is limited to the first €1,000 of an adult premium and the first €500 of a child premium.
A taxable BIK arises for an employee where their employer pays any part, or all, of their medical insurance premium. The employer is required to pay the net amount of the premium (amount after deduction of TRS) to the insurer and the employer must then pay the TRS amount to Revenue when paying their Preliminary Tax to the Collector General. The taxable BIK is the amount of the gross premium (net plus TRS) paid by the employer. However, the employee is entitled to a tax credit equal to the amount of TRS paid by the employer from Revenue. The claim can be made online through myAccount.

USC (Universal Social Charge)- is a tax on your income. It is calculated on the Cumulative, Week 1 or Emergency basis. No USC liability arises where an individual’s gross income for USC purposes does not exceed €13,000 for the current tax year. For this exemption to apply in payroll, it must be stated on the latest RPN issues by Revenue.

WRC (Workplace Relations Commissions) - core services include the inspection of employment rights compliance, the provision of information, the processing of employment agency and protection of young persons (employment) licences and the provision of mediation, conciliation, facilitation, and advisory services.

If you have any further questions or need additional information, don't hesitate to reach out to our team. Our expert payroll team is here to assist you in your payroll journey and provide you with the support you need.