How to Manage and Pay Contractors in Ireland

Following the UK’s departure from the EU (commonly known as Brexit), many banks have moved their headquarters from London to Dublin. Many businesses may want to hire contractors in Ireland, because the country has many different leading industries(opens in a new tab).

Small and large businesses, both inside and outside the country, want to hire contractors within Ireland. For SMBs based in countries like the US and within Europe, this also means finding an effective way to make payments across borders without having to deal with transaction fees for wire, digital, and other money transfers when paying contractors. 

When you hire contractors in Ireland, you’ll need to understand how to: 

• Pay 

• Manage 

• Maintain compliance

• Hire and recruit

What is the difference between an independent contractor and full-time employee in Ireland?  

In Ireland there are no particular specifics that govern if you’re considered employed or self-employed. However, the government has an involved role and final say in determining if an employee is employed or self-employed. 

Who decides how to classify workers in Ireland? 

In Ireland, although the employee and the person who hires them as a contractor can set up and determine a working relationship, the final say is not up to those two parties alone. (opens in a new tab)

Written considerations are taken into account when determining employment status by: 

• The Department of Social Protection: Makes the final decision about if you’re employed or self-employed. 

• Revenue: Decides whether you’re employed or self-employed to decide what taxes you’ll pay.

• The Workplace Relations Commision: Handles extreme cases or disputes when someone feels they have been improperly classified. 

How are employment classifications made? 

In Ireland, the three mentioned bureaucracies determine employment status by using standardized legal tests based on the working nature of the relationship. 

There are five legal tests used to establish the difference between an employee (contract of service) and self-employed (contract for services): 

• Mutuality of Obligations: Whether an employer is required to offer you work and whether you are expected to perform those duties 

• Substitution: Whether you can send someone else to do the job for you

• The enterprise test: Whether you are in business on your own account and can profit or suffer loss from your work

• Integration: Whether you are an integral part of the organization

• Control: Whether you can control the work, including how, where, and when the work is done 

What happens if contractors are misclassified? 

False self-employment or classifying contractors in Ireland incorrectly is called bogus self-employment. 

Employers who are found to misclassify their employees as contractors will automatically have to award the employee their statutory rights and benefits. Any tax non-compliance could impact employers being able to ever hire contractors again, and could result in a €250,000 fine or up to 10 years of jail. (opens in a new tab)

How to determine if you need a contractor in Ireland

To decide whether you need to hire a contractor in Ireland will depend on the scope of the project you want completed, and how long you need the contractor for. 

Ask yourself these questions before you decide to hire an independent contractor: 

• Do I want to put this person on my payroll or should they be responsible for their own taxes? 

• Is this person going to be working enough to where they are entitled to benefits and other compensations from my company? 

• What qualifications does this person have that make them specialized to complete a specific project? 

• Do they need to put in bids to compete for these projects or can I assign them everyday tasks like an employee? 

• Can I give this person independence to complete this project without inserting managerial opinion along the way? 

• How long will it take to complete this project? 

Once you go through these questions and determine that you’ll need an independent contractor, instead of hiring a full-time employee, then you can begin your search.

Where to find contractors in Ireland

One of the best ways to find contractors for established Irish businesses is through referrals and networking. Without those connections however, you may have to turn to the online forum. 

You can use many job board sites like: 

• LinkedIn(opens in a new tab)

• Indeed(opens in a new tab)

How to onboard contractors in Ireland

In Ireland, employment contractors are mandatory(opens in a new tab).

Strong written agreements are how the proper departments in Ireland decide whether you’re employed (contract of service) or self-employed (contract for service). 

Putting a clear and detailed independent contractor agreement in place protects both you and the contractor, as well as helps you avoid any future misclassification or liability problems. 

Independent contractor agreements outline important details between the contractor and client, including: 

• Description of the services being provided

• Length of the project or service 

• Payment and other billing details 

• Dispute resolutions

If you don’t enact detailed and clear contractor agreement, the Revenue department could easily determine the working relationship as bogus self-employment and fine the employer. 

How to pay contractors in Ireland

After onboarding your Irish contractor, you’ll need to pay them properly. 

Remember: Don’t put your contractors on your payroll in Ireland, as it will result in compliance and classification problems. 

You have a few options to legally pay independent contractors in Ireland: 

1. Justworks International Contractor Payments. If you are a Justworks customer, you can make international contractor payments to workers in Ireland with the Justworks platform. We take the headache out of paying contractors abroad. 

2. Set up a bank account. You can set up an Irish bank account to pay your contractors. However, you’ll normally need to set up an entity within the country and register with the proper bureaucratic organizations (which can take months). 

3. International money order. A common way to pay an Irish contractor without an entity is to set up an international money order. They can take awhile to process, and the contractor will have to physically deposit them. This is a good option when you’re only paying someone one time. 

4. Digital wallets. You can set up a digital wallet through multinational peer-to-peer lending companies like PayPal(opens in a new tab) that help you deposit and transfer money into your contractors accounts. This is one of the quickest ways to pay contractors without partnering with a global EOR service like Justworks. Most of these services do charge fees for digital wallets, so be aware of that before choosing this option.

How Justworks  can help you convert Irish contractors to full-time employees 

If you have developed a good working relationship with your Irish contractor, you may want to bring them on as full-time employees to reward their hard work and loyalty. 

When you want to convert or hire workers in Ireland, you have two main options for hiring:

• PEO or co-employment service (if you have an Irish entity)

• Global EOR management service like Justworks (if you don’t have an Irish entity)

Employment taxes

Once you determine a contractor's converted salary rate, you’ll need to add in all of the necessary taxes and deductions. 

Common payroll taxes in Ireland: 

• 4%  to the Irish Social Security system (Pay Related Social Insurance) 

• 1-8% to the Universal Social Charge depending on income level

• Income taxes range from 20-40% 

Determine benefits and bonuses

After figuring out a base salary and deducting payroll taxes, employers and contractors will need to come up with an adequate compensation and benefit package. 

Mandatory benefits in Ireland: 

• Healthcare

• Paid time off

• Sick leave 

Our experts in Ireland can help you craft the most competitive (and compliant) compensation and benefit packages when you convert your contractors to full-time employees. 

How Justworks Can Help 

Justworks’ global EOR is the solution for small businesses looking to easily hire talent in countries where they don’t already have a legal presence. 

Justworks has local employer of record (EOR) entities in top talent markets across the globe and we're continuing to expand. For the most up-to-date list of supported countries and key insights about hiring internationally, check out our Global Hiring Guides.

Learn more about our EOR services, and get started today!

FAQ

How to work as an independent contractor in Ireland? 

To work as a contractor in Ireland, you’ll need to first establish yourself and build a clientele. You’ll also need to make sure that you’re registering with the Irish social security system (PRSI), Universal Social Change system, the Revenue department (to pay self-employment taxes), and not working as a full-time employee. 

How are contractors taxed in Ireland? 

Contractors in Ireland are taxed in 3 major different areas. They must pay into the Irish social security system (PRSI), pay 11% to the Universal Social Change system, and pay VAT (value added taxes). 

Is contracting worth it in Ireland? 

Yes, contracting is worth it in Ireland. On average, contractors in Ireland earn 10-15% more than full-time employees. 

Can I have a full-time job and be self-employed in Ireland? 

Yes, you can have a full-time job and be self-employed in Ireland. To do so, register yourself online at the ROS (opens in a new tab)(Revenue department) as both when doing your taxes. By doing both, you’ll be able to take out more deductions for your self-employed business.