Important Payroll General Terms
Employer An employer is someone who pays emoluments (Ex: wages, salary etc) to an employee. Employers are responsible for deducting income tax, Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) from an emplotyee's gross pay.
Employee For tax purposes, an employee is someone who receives emoluments which are taxable through payroll. Office holders and retired people in receipt of an occupational pension are treated in a similar manner to an employee from a payroll perspective. Employees are often reffered to as PAYE taxpayers.
Gross Pay Gross Pay is the total amount paid to an employee including wages, bonus, commission, overtime, holiday pay etc. and the notional value of non-cash benefits, before any deductions are made by the employer.
Taxable Pay Taxable pay is the amount of the employee's pay which is liable to tax and is calculated as the employee's gross pay less certain allowable deductions, including:
- Employee contribution to a pension scheme, Personal Retirement Saving Account (PRSA), Pan-European Personal Pension (PEPP) or Permanent Health Insurance (PHI) scheme,
- Any amount of salary/wages sacrificed to aquire a travel pass under the travel pass scheme or a bicycle under the cycle to work scheme, and
- Additional Superannuation Contribution payable by public servants.
Pay for USC purposes This is the amount of an employee's pay which is liable to USC, which is calculated as an employee's gross pay less any amount of salary/wages sacrificed to aquire a travel pass under the travel pass scheme or a bicycle under the cycle to work scheme.
Pay for Employee PRSI purposes This is the amount of an employee's pay which is liable to Employee PRSI. It is calculated as an employee's gross pay less any amount of salary sacrificed to aquire a travel pass under the travel pass scheme or a bicycle under the cycle to work scheme.
Pay for Employer PRSI purposes This is the amount of an employee's pay which is liable to Employer PRSI. It is calculated as Pay for Employee PRSI purposes less any amount of share based renumeration or Additional Superannuation Contribution payable by a public servant
Net Pay This is the amount which is physically paid to an employee after all deductions have been made.
Mandatory Deductions These are the deductions which an employer is legally obliged to make from an employee's wages. They include statutory deductions (Ex: income tax, USC, PRSI, Local Property Tax (LPT) and deductions authorised by the employee's contract of employment (Ex: pensions contributions).
Voluntary Deductions These are the deductions which an employee may request to have deducted from his wages, which could include trade union contributions, salary sacrifice for a bicycle or travel pass etc.
Personal Public Service Number (PPSN) A PPSN is an individual's unique reference number that is needed for all dealings with public service agencies including Revenue and the Department of Social Protection. Employers are required to obtain a PPSN from eacj employee.
PAYE System PAYE stands for Pay as You Earn. This is the system used by employers to deduct Income Tax, PRSI and USC from an employee's wages and pays the amount deducted to Revenue.
Tax Credit Certificate This is a certificate issued by Revenue to an employee which outlines the various tax credits, Standard Rate Cut Off Point (SRCOP) and USC rates and thresholds allocated to the individual for a particular tax year. Where the employee has more than one employment, it will contain the amounts allocated to each employer. It is made available online for those who are registered with Revenue Online Services.
Standard Rate Cut Off Point This is the amount of income an individual can earn which is liable to tax at the standard rate of 20%. Any income in excess of this amount is liable to tax at the higher rate of 40%.
Tax Credits Tax Credits reduce the amount of tax an individual is liable to pay. Individuals can claim tax credits from Revenue depending on their personal circumstances, such as a personal tax credit, married tax credit, employee tax credit etc.
Revenue Payroll Notification (RPN) This is an electronic notification issued by Revenue to an employer which contains the amount of an employee's tax credits, SRCOP, USC rates and USC Cut Off Points allocated to that employer. It is required by an employer to calculate an employee's income tax and USC liabilities.