One of the most common financial shocks for first-time employers in Ireland is the gap between what they agreed to pay someone and what it actually costs to have them on the payroll. The salary you offer is only the starting point.
Here is the full picture.
The Minimum Wage Has Changed
From 1 January 2026, the national minimum wage for adults aged 20 and over is €14.15 per hour. For a full-time employee working 39 hours per week, that is a gross annual salary of approximately €28,688.
Employer PRSI — The Cost Most SMEs Underestimate
On top of every euro of salary you pay, you owe Employer PRSI to Revenue. This is not deducted from the employee's pay — it is an additional cost to your business.
The current Employer PRSI rates for 2026 are:
9% on weekly earnings up to €441
11.25% on weekly earnings above €441
From 1 October 2026 these rates increase to 9.15% and 11.40% respectively.
For a straightforward example — an employee on a €40,000 annual salary costs you approximately €4,460 per year in Employer PRSI alone, on top of their gross pay.
Auto-Enrolment Pension — New in 2026
From 1 January 2026, Ireland's MyFutureFund auto-enrolment pension scheme applies to eligible employees. If an employee aged between 23 and 60, earning over €20,000 per year, is not already contributing to a pension, they are automatically enrolled.
Employer contributions start at 1.5% of gross pay, with a matching employee contribution and a State top-up. This rate will increase in phases over time.
For employers, this is a new recurring cost that was not a factor in previous years. It needs to be factored into any hiring decision made from 2026 onward.
Statutory Sick Pay
Ireland's statutory sick pay scheme requires employers to pay eligible employees during certified periods of illness. In 2026, employees are entitled to sick pay from day one of employment, subject to a minimum service requirement and certification.
This is a real operational cost that does not show up in payroll calculations but needs to be budgeted for.
What a €35,000 Salary Actually Costs You
To put it plainly — if you hire someone on a €35,000 annual salary in 2026, your total employment cost before any other benefits or overheads is approximately:
Gross salary: €35,000
Employer PRSI (approx. 11.25%): €3,938
MyFutureFund employer contribution (1.5%): €525
Total direct cost: approximately €39,463 per year
That is before any equipment, training, recruitment costs or workplace overheads.
Three Things Every First-Time Employer Must Do
Register as an employer with Revenue before you pay your first employee. You must operate PAYE — deducting income tax, employee PRSI and USC from every payslip — and report in real time through the PAYE Modernisation system. Late or inaccurate reporting carries penalties.
Use payroll software or appoint a payroll bureau. The interaction between PAYE, PRSI, USC and the new pension auto-enrolment system is complex. Manual calculation errors are one of the most common triggers for Revenue compliance interventions with small businesses.
Do not misclassify employees as contractors. Revenue applies a strict Code of Practice in determining employment status. If a person works exclusively for you, uses your equipment and operates under your direction, they are likely an employee in Revenue's view — regardless of what the contract says. The liability for unpaid PAYE and PRSI falls on the employer.
The Bottom Line
Hiring your first employee is a significant milestone for any Irish business. The actual cost, when Employer PRSI, pension auto-enrolment and statutory obligations are factored in, is typically 12 to 15 per cent above the agreed gross salary.
Plan for the full cost. Budget for it accurately. And get the payroll right from day one.
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