How to hire and pay independent contractors in Ireland

If you’re looking to hire independent contractors, Ireland should be on your shortlist. The business-friendly country has ‌plenty of well-educated, highly skilled workers who could meet your business needs.

However, the complexities of Irish employment law can make hiring tricky. You’ll have to ensure you’re hiring and paying contractors compliantly and following local labor and tax laws. If you misclassify contractors (even by accident), you may have to face stiff penalties or legal issues. 

You don’t have to stress, because this article will cover labor laws and compliance issues associated with employment in Ireland.

Ready? Let’s get started.

Unique considerations of managing contractors in Ireland

The Republic of Ireland has employment compliance laws that guide the recruitment process for employees and independent contractors. Employers who do not understand the distinction between employees and contractors and misclassify them could face costly litigation.

Irish employment laws and regulations promote equality and ensure the fair treatment of employees and prospective employees. Discrimination against employees and prospective employees who are members of protected categories is prohibited. Protected categories include gender, age, civil status, religion, marital or family status, race, disability, sexual orientation, and Irish Traveler community membership (a nomadic ethnic group). 

Some things a hiring manager should be aware of before recruiting in Ireland:

• Some foreign workers will need relevant work permits from the Department of Jobs, Enterprise, and Innovation (DJEI) to work in Ireland.

• Ireland offers state-sponsored healthcare, so employers are not required to provide health benefits. However, many employees will expect private health insurance from their employer due to long delays with the public service.

• Employees are limited to a seven-day average of 48 work hours. A rest break of at least 11 hours must be taken after every 24 hours of work.

Learn how to hire independent contractors in Ireland by checking out our comprehensive guide below.

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What are key labor laws in Ireland?

In Ireland, employees are entitled to statutory benefits, including paid sick leave, maternity leave, and workers' compensation insurance. They are entitled to at least four weeks of leave and ten holidays annually. Independent contractors are self-employed and are not entitled to benefits.

Under the Employment Equality Acts of 1998-2011, employers may not discriminate against current or prospective employees for promotions, pay, work experience, or access to employment.

Under the Terms of Employment (Information) Act of 1994, employers must provide employees with specific information about their jobs. This includes providing an official contract of employment.

The National Minimum Wage Act of 2000 established that Irish employees are entitled to a statutory minimum wage. As of January 1, 2024, it is €12.70 per hour for workers over 20.

Under the Unfair Dismissals Act of 1977, it is considered unfair to terminate an employee for any reason other than incapability, incompetence, misrepresenting qualifications, or improper conduct.

Legal expertise is necessary for compliance with Ireland's employment laws. For employers based outside of Ireland, this can be a real challenge. However, Remote's Contractor Management platform facilitates hiring and paying independent contractors in Ireland. Learn more about hiring in Ireland in our helpful guide below.

How do I pay an independent contractor in Ireland?

Paying independent contractors in Ireland involves complex employee protections and compensation and benefits laws.

Some contractors receive a lump sum when their project is completed or at agreed-upon milestones. Others receive an hourly rate. There are several ways that payrolls can be set up in Ireland. Common options include:

• Internal payroll: companies with subsidiaries in Ireland can run payroll out of their local branch.

• Outsourcing: companies can outsource their payroll to a local company in Ireland. However, they must assume responsibility for mistakes.

• Employer of Record: companies can contract with an Employer of Record to process their payroll and ensure compliance. As a trusted Employer of Record, Remote offers global organizations the security and expertise they need to hire with confidence.

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What are the risks of misclassifying independent contractors as employees?

There are distinct differences between independent contractors and employees in Ireland. The level of control the employer has over the worker is an important distinction. Employers supervise and manage their employees, while independent contractors work without direct supervision. Other differences include:

• Contractors control their hours while employees have set hours.

• Contractors may use their own equipment, while employees use equipment provided by employers.

• Contractors are paid for one-off projects as a lump sum or at project intervals as decided between the client and the contractor. Employees receive regular payments.

• Contractors are allowed to provide services to multiple companies simultaneously. Employees work full-time for one company.

Misclassifying independent contractors as employees can result in severe consequences for employers. Misclassification occurs when an employer improperly assigns the wrong status to a worker deliberately or by accident. Misclassification can result in fines and penalties by the Revenue Commissioners, the government agency that oversees taxation and related matters in Ireland. Penalties are usually steeper for deliberate misclassification, but there are penalties for innocent errors. In Ireland, the risks of misclassification can include penalties such as:

• Payment of Social Security contributions for the contracted time

• Imprisonment

• Large fines

Misclassifying independent contractors as employees compounds the risk of compromising your company's intellectual property rights (IPRs). This could result in costly and time-consuming legal disputes. Intellectual property (IP) is an asset. However, verifying ownership of IPRs can be challenging when team members work in different countries, especially if they are not company employees.

Remote helps global organizations minimize the risks of misclassification by simplifying international compliance. Our contracts are localized, vetted by legal experts, and help you remain compliant with local tax and employment law.

Check out Remote's expert guide to employee and independent contractor misclassification for thoughtful guidance on this topic.

Tax and compliance practices for hiring independent contractors from Ireland

Employees and contractors in Ireland pay tax through the Pay-As-You-Earn (PAYE) system. Their employers deduct the taxes they owe from their wages and pay them directly to Revenue. In addition to income tax, workers are responsible for Pay Related Social Insurance (PRSI) and, in some cases, the Universal Social Charge (USC) on income. The PRSI and USC charges provide social welfare Benefits, State Pensions, and medical benefits.

US employers who employ contractors in Ireland must collect and file a Form W-8 BEN from contractors who meet the criteria before the contractors receive compensation. Contractors who do not complete the W-8 Ben form will be taxed at a 30% rate. Under certain conditions, employers may also be required to file a Form 1096 for foreign contractors. Any foreign contractor who provides a W-8 BEN form should receive a Form 1042-S from their employer. This form summarizes the income paid to the contractor and documents any taxes that were withheld.

US employers must keep track of payments to contractors and report them to the Internal Revenue Service (IRS). This can be a cumbersome task. However, tax compliance for US companies has become easier with a new tax compliance feature for Remote's Contractor Management platform. It facilitates the management of contractor tax forms.

How do I convert an independent contractor in Ireland to an employee?

There are many reasons why it may become beneficial to change a contractor's status to that of an employee. Reasons include:

• It’s time for the contractor to play a more significant role in the company.

• You want the contractor to receive benefits.

• You want to protect your company's intellectual property.

• You are concerned about losing your contractor to a competitor.

• Your contractor wants to become your employee.

Converting a contractor to an employee can protect the employer from penalties. It can also provide advantages for the employee, like management opportunities and benefits. When you want to convert a contractor in Ireland to an employee, Remote can help you do so effortlessly within our platform.

Are you curious about when you should convert a contractor to an employee? Read our helpful guide.

The fastest, easiest, and safest way to hire contractors in Ireland

Ireland is a business-friendly country rich in well-educated, highly skilled workers. With so much to offer, Ireland is a great place to recruit independent contractors.

However, the complexities of Irish employment law present challenges for hiring and paying independent contractors in Ireland. Global organizations that do not own legal entities in Ireland must work with a provider of global employment solutions. This provider can become the Employer of Record to facilitate the payroll process. Irish employment laws protect employees. Employers must understand all the intricacies of the laws because mistakes can be costly.

Remote's Contractor Management service makes hiring, onboarding, and paying independent contractors in Ireland easier. Specifically, our platform will help you:

• Onboard contractors quickly and compliantly with customizable contracts

• Save time by automating the invoicing and payment processes

• Make payments in 170+ countries in local currency

• Minimize your misclassification risk and protect your IP.

Sign up for Remote and get started today!