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Employment contracts in the Republic of Ireland
Irish law dictates that an employer must provide employees with a statement of terms. This requirement has 2 elements, the first being a statement of 5 core employment terms and the second a statement of additional terms of employment.
The initial statement of terms must confirm the names of the contracting parties, address of the employer, contract duration (indefinite, fixed term etc.), method of calculating payment, and hours of work. This must be provided within the first 5 days of employment.
All employers must provide new employees with additional written terms of employment within 2 months of starting the job, which include place of work, job title, employment start date, the terms of compensation (which should be paid in euros), terms of pension schemes, paid leave, hours of work (including overtime), notice and termination requirements. An employer can satisfy both requirements with 1 statement or a written employment contract.
Working hours in the Republic of Ireland
Employees cannot work more than an average of 48 hours within a 7-day period, and a rest break of at least 11 hours must be taken after each 24-hour working period.
The typical workday in the Republic of Ireland is from 9 a.m. to 5:30 p.m. with a minimum half-hour lunch. Many offices, including government departments, are closed between 12:30 p.m. and 2 p.m.
Employers are required to provide a “premium” compensation to employees who have to work on Sundays. Overtime pay is not a statutory obligation for employers. However, many companies pay employees higher pay rates for overtime, and any payments for overtime cannot fall below the minimum wage set by the government. The employment contract should state whether the employee is required to work overtime and the associated rates of pay for doing so.
Holidays in the Republic of Ireland
The Republic of Ireland celebrates 10 public holidays for which employees are customarily given the day off:
- New Year’s Day
- Saint Brigid’s Day
- St Patrick’s Day
- Easter Monday
- May Day
- First Monday in June
- First Monday in August
- Last Monday in October
- Christmas Day
- St. Stephen’s Day
If any of the public holidays fall on a weekend, employees do not have any automatic legal entitlement to the next working day off. However, employees are entitled to a paid day off within a month of the public holiday, an additional day of annual leave, or an additional day’s pay if they are unable to take the formal public holiday off.
Vacation days in the Republic of Ireland
Full-time employees are normally entitled to 20 days of annual holiday leave each year in addition to public holidays. Vacation days must be stipulated within the employment contract.
Statutory annual leave is calculated based on the number of hours an employee works in a leave year, which runs from April 1 to March 31. In order to determine the employee’s entitlement, companies should make the following considerations:
- 4 weeks of annual leave entitlement for employees that have completed at least 1,365 work hours within a leave year.
- If an employee has worked less than 1,365 hours in a working year, the minimum statutory entitlement is the greater of (a) ⅓ of a workweek for every month an employee worked at least 117 hours; or (b) 8% of the hours worked in a leave year, subject to a maximum of 4 workweeks.
The Republic of Ireland sick leave
As of 2023, the government has a new sick pay scheme for employees who have worked at least 6 months for their employer. Under the new legislation, sick leave will increase for qualifying employees each year as follows:
- 2023 – 3 days
- 2024 – 5 days
- 2025 – 7 days
- 2026 – 10 days
The employer is obliged to provide sick leave compensation at a rate of 70% of the employee’s regular wage, with a daily limit of EUR 110.
To qualify for statutory sick pay (SSP), the employee must have worked for the employer for at least 13 consecutive weeks prior to the day of sick leave and must provide a medical certificate confirming their illness starting from the first day of their sickness.
Employers can increase sick leave and payment provisions at their discretion. Enhancements should be contained in the employment contract and be available to all employees within the company.
Maternity leave in the Republic of Ireland
Pregnant employees are entitled to 26 weeks of basic maternity leave and 16 weeks of additional maternity leave that begins immediately after the basic maternity leave period ends.
Additional regulations are in place surrounding birthing parents, which are as follows:
- 2 weeks of leave must be taken before the due date and 4 weeks after as a statutory minimum.
- Employers are not required to pay employees who are on basic or additional maternity leave; however, the employee may qualify for a maternity benefit paid by the government during the 26 weeks of basic maternity leave.
- In cases of adoption, 24 weeks of leave is afforded to one of the parents, and up to 16 weeks of additional adoptive leave. Adoptive benefit, payable by the government, may also be applicable.
- An employer can agree to enhanced payments, which must be documented in the employment contract or company policy.
Paternity leave in the Republic of Ireland
Non-birthing parents are entitled to 2 weeks of paternity leave.
- Paternity leave can be taken at any time during the 26 weeks after the birth or adoption.
- Employers are not required to pay employees who are on paternity leave; however, the employee may qualify for a paternity benefit, paid by the government, during the 2 weeks of paternity leave.
- An employer can agree to enhanced payments, which must be documented in the employment contract or company policy.
- The employee must notify their employer at least 4 weeks before the leave starts.
Parent’s leave and parental leave in the Republic of Ireland
Parent’s leave entitles each parent to 7 weeks’ leave during the first 2 years of a child’s life, or in the case of adoption, within 2 years of the placement of the child with the family.
Employers are not required to pay employees who are on parent’s leave, but employees may qualify for a parent’s benefit, paid by the government, for the 7 weeks of parent’s leave.
Parental leave entitles each parent to take up to 26 weeks’ leave for each eligible child before their 12th birthday.
- Employers are not required to pay employees who are on parental leave, and there is no state-provided benefit for this leave.
- Parental leave can be taken as 1 continuous stretch or 2 separate blocks of at least 6 weeks each.
- Where a child has a disability or long-term illness, parental leave can be taken up until the child is 16.
Health insurance in the Republic of Ireland
Employees in the Republic of Ireland are entitled to healthcare through the public healthcare system (Health Service Executive), funded by general taxation.
In addition to the public healthcare system, there is also a large private healthcare system. Wait lists for those without private insurance can be extremely long and can often stretch into years. Therefore, most employees expect private health insurance.
Private health insurance is taxable and should be considered when calculating an employee’s net take-home pay.
The Republic of Ireland supplementary benefits
In the Republic of Ireland, benefits-in-kind, such as free or subsidized accommodation, and preferential loans are taxable if the employee earns more than EUR 1,905 per tax year. If the employee receiving such benefits is a director of the company, the benefits are taxable regardless of the annual earnings.
Generally, we recommend budgeting 20% for benefits on top of the gross salary to determine the total employer’s cost.
Additional common supplementary benefits include the following:
- Life assurance or death in service
- Company car or car allowance
- Wellness schemes such as gym access
Performance-based bonuses, either monetary or in shares, are common incentives in the Republic of Ireland.
Termination and severance in the Republic of Ireland
There are no specific rules or requirements surrounding the use of probationary periods, but many employers put a probationary period in place, and the terms must be included in the employment contract, such as the length of the probationary period.
A typical probationary period ranges from 3 to 6 months. This can be extended but cannot exceed 11 months in aggregate. Probationary periods generally allow the employer to terminate employment with a shorter notice period (generally 1 week), which should be set out in the employment contract.
Termination regulations in Ireland are very rigid and generally require a fair reason and process to be followed. They are very process-driven with courts expecting specific adherence for employers to avoid illegal termination challenges from employees. Employees are protected against unfair dismissals after 1 year of service with an employer.
Employers can justify a dismissal provided there are substantial grounds, such as:
- Capability or lack of qualification
- Other substantial reason
The specific reason for termination will determine the particular process that must be followed. Upon termination of employment in the Republic of Ireland, the employee will be paid, at minimum:
- Payment in lieu of their contractual notice time (unless notice time is worked)
- Payment up to and including their final employment date
- Any vacation time that has been accrued but untaken at their final employment date
The minimum statutory notice period employers must provide depends on the employee’s length of service:
- 13 weeks to 2 years of service: 1 weeks’ notice
- 2 to 5 years of service: 2 weeks’ notice
- 5 to 10 years of service: 4 weeks’ notice
- 10 to 15 years of service: 6 weeks’ notice
- More than 15 years of service: 8 weeks’ notice
It is common for employers to include longer notice periods in employment contracts, generally 1 month for most employees, and 3 months for senior employees.
Severance payments are not required in the Republic of Ireland, except in the case of redundancy. If an employee has completed over 2 years of service and is terminated due to redundancy, then they are entitled to a statutory redundancy payment: 2 weeks’ pay for each year of employment plus 1 additional week’s pay (payment is subject to a maximum ceiling).
Paying taxes in the Republic of Ireland
Employees’ and employers’ social insurance contributions are paid into the Social Insurance Fund, known as PRSI (Pay Related Social Insurance). The social insurance schemes are financed by this fund, which is administered by the Department of Social Protection.
The social insurance rate contributions are:
- 4% from the employee if they earn more than EUR 352 per week.
- 8.8% from the employer on incomes of up to EUR 441 per week or 1.05% on all earnings where weekly income exceeds EUR 441.
- There is no ceiling cap.
Employers are legally obliged to inform employees of any pension arrangements or personal retirement savings account (PRSA) schemes provided by the company. Employees are legally entitled access to a PRSA when there is no pension scheme in place.
The Universal Social Charge (USC) is a tax that must be paid if an employee’s gross income is more than EUR 13,000 per year, subject to certain exemptions. As of 2023, the rates are:
- 0.5% for income of up to EUR 12,012
- 2% for income between EUR 12,012.01 and EUR 22,920.00
- 4.5% for income between EUR 22,920.01 to EUR 70,044
- 8% for income above EUR 70,044.01
- 11% for self-employed income above EUR 100,000
The PSRI and USC charges cover employees for various social welfare benefits, State Old Age Pension, and medical benefits.
Pay-as-you-earn (PAYE) taxes are calculated based on the employee’s income, less certain allowances. Employees pay progressive income tax in the Republic of Ireland. The top rate is approximately 40% and applies to income over EUR 33,800.
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