The Irish government has made significant changes in the last few years to create a transparent, healthy and investment-friendly business landscape for employers and employees, with an emphasis on immigrant workers, changes in tax law and more.
Recent changes in Irish business law have helped to consolidate Ireland's position as a stable and tax efficient jurisdiction for business. In this article, we talk about the key trends affecting business in Ireland.
Irish Tax Law Changes
Ireland's tax landscape has undergone significant changes, including a tax rate increase for large businesses and the introduction of interest limitation rules, alongside the mechanism for granting incentives for research and development. These adjustments, coupled with flexible employee remuneration schemes and a streamlined tax administration system, highlight Ireland's aim to remain an attractive location for business. Discover how these changes could impact you and explore the benefits of conducting business in Ireland.
Tax Rate Change
The most publicised change is the increase in the Irish tax rate from 12.5% to 15%, which impacts business that have a group turnover of €750m. All other businesses remain at 12.5%.
Interest Limitation Rules
The introduction of these rules only affects part of the market. There is an exclusion if the interest payable by a company doesn't exceed €3m.
The 2016 Reporting Regime
This global country-by-country reporting regime, introduced in Ireland in 2016 impacts large businesses with €750m+ turnover. Since its introduction there has been no change in the volume and enthusiasm for businesses establishing operations in the country.
Research & Development (R&D) in Ireland
The government and tax authorities actively incentivise businesses to undertake R&D in Ireland:
- Grant aid - Available through the IDA.
- Tax credit regime for R&D - Offset against tax liabilities, or refundable in cash (25% of the qualifying expenditure). The most common way to benefit from the tax credit is that 50% of the credit can be taken as a refund for the period in which the expenditure was incurred, 30% in year 2 and the balance in year 3. Businesses can also opt to apportion some of the credit to key employees who were involved in the R&D process.
Flexible Remuneration for Employees
- Special Assignee Relief Programme (SARP) - For employees relocating to Ireland this scheme removes 30% of the individual's income from the tax net (40% saving) from €100,000 to €1m. For example, an executive on €500,000 this would remove 30% x 400k = 120k, saving €48,000.
- Share Remuneration - Remuneration packages can be structured so that a portion of the package is liable to capital gains tax rates which can range from 10% to 33%, rather than 52% on income. There is also a saving of employer Pay Related Social Insurance (PRSI) / social security for the employer of 11.05% of the value of the share remuneration vs. the equivalent value in salary or bonus.
- User-friendly Administration - Taxpayers can interact with the tax authority. The Revenue Online system (ROS) is the primary channel for this interaction. Which makes it easier to register for and is used to file and pay all taxes.
Immigration
With an unemployment rate at 4.9%, indicating full employment, Ireland is emphasising the importance of immigrant labour to bridge its labour market's skills gaps. The Government's expansion of the employment permits system to include 43 new occupations demonstrates a proactive effort to attract skilled international workers. As the country tackles the challenges of a rising number of international protection applicants and other domestic issues, it remains focused on fostering a balanced and welcoming immigration policy for skilled workers.
Unemployment Rate (4.9%)
The unemployment rate in Ireland is currently 4.9%, the country is at what economists consider to be full employment. That has left many organisations struggling to fill roles making immigrant labour more important. The priority of any current or future government in Ireland will be to continue to attract skilled workers to plug identified skills gaps in the Irish labour market.
From that perspective Ireland is very much open for business. For example, in December 2023, the Irish government announced the largest ever expansion to our employment permits system with 43 additional occupations becoming eligible for employment permits. From engineers, mechanics and electricians to meteorologists, butchers and bakers, these changes cross many sectors and will be of huge benefit to Irish business and society.
In 2023, close to 31,000 employment permits were issued. Demand remains high this year with over 13,000 permits already issued to workers from outside the EEA who are coming to Ireland to address the real skills shortages that are impacting businesses across the country.
It is hoped that these changes will benefit Irish business greatly. For example, electricians, electrical engineers, and contractors together with skilled metal workers are now eligible for general employment permits and chemical and project engineers are eligible for Critical Skills Employment Permits. It is hoped this will assist the Irish government in building more homes and meeting its targets in terms of the implementation of additional infrastructure under the National Development Plan.
Salary Thresholds
The recent expansion of the Irish employment permits system also included an increase in certain salary thresholds. The thresholds have not changed in some time and have not kept up with inflation or economic growth.
Migrant workers bring much needed skills and experience to the Irish labour market and a cultural diversity that benefits Irish society. To recognise this contribution and ensure that Ireland is offering good quality employment to these workers, the salary thresholds for the following employment permit categories have been increased:
- Salary for majority of General Employment Permit holders will rise from €30,000 to €34,000 from January 2024. It is estimated that this will increase to €39,000 by 2025.
- Salary requirement for Critical Skills Employment Permit holders without a relevant degree will rise from €32,000 to €38,000 in January 2024. It is estimated that this will increase to €44,000 by 2025.
- Salary requirements for Intra-Company Transfer and Contract for Services Employment Permit applications will increase from €40,000 to €46,000. It is estimated that these will increase further to €53,000 by 2025.
Employment Permits Bill 2022
This bill is moving through the Irish legislative process and promises to bring about important changes once enacted. Including:
- The introduction of a seasonal employment permit.
- The revision of the Labour Market Needs Test for General Employment Permits to make it more relevant and efficient.
- Changes to the 12-month rule which will mean that after completing an initial period of 9 months with their existing employer, an Irish employment permit holder will have the opportunity to change employment.
- The introduction of a more streamlined process for the transfer of employment permits between employers to facilitate the movement of employees.
Anti-immigration Sentiments
Recent global conflicts have led to an unprecedented increase in the number of international protection applicants seeking shelter in Ireland. A pre-existing domestic housing crisis has been exacerbated by the requirement to provide appropriate accommodation for refugees. Subsequently, Ireland’s immigration policies have become a lead issue for the Irish public and is dominating the political agenda.
In the last 6-12 months there have been localised protests against refugee accommodation centres and arson attacks. Serious riots which were loosely related to immigration have also taken place. However, the sentiment towards skilled migrant workers who come to Ireland for work purposes has not been part of the public discourse and such changes are not anticipated in the sphere of corporate or global mobility policies.
Employment
Ireland's employment landscape is evolving with new measures that shift social costs to employers, impacting business operations. These include mandatory sick leave, a raised minimum wage, flexible working rights, and support for domestic violence victims, alongside a future pension auto-enrolment scheme. Amidst a competitive talent market, these changes aim to enhance worker welfare and retention. The country is also navigating discussions around union representation and collective bargaining, indicating a shift towards more inclusive employee engagement. Recent updates consist of:
Pro-active Social Agenda
Over the last two years, there have been new measures which have had an impact on the cost of doing business. Changes have been introduced which pass the burden of some social costs to employers. For example:
- Employers have an obligation to pay statutory sick leave for periods of up to 5 days.
- The statutory minimum wage was increased (now €12.74 per hour since 1 January 2024) as part of an ongoing commitment to raise basic wages.
- Workers are entitled to request the right to work more flexibly or remotely.
- Additional paid leave (paid by the employer) for domestic violence victims.
- It has been announced that there will be a scheme for mandatory auto-enrolment of employees into company pension schemes which is to be introduced by 2025.
- Employer bodies (such as IBEC which represents larger employers) have requested the Government to pause and revisit the cumulative cost of social initiatives.
Talent Battle in Ireland
In an economy which is at almost full employment (per CSO report in February 2024 – Irish employment stands at the highest level since reporting began in 1998) the competition for talent, both attraction and retention remains intense.
A focus on inclusivity and increased initiatives to encourage work life balance is seen as key to winning this battle. The obligation to report on the gender pay gap in organisations (first introduced for companies employing more than 250 people) will extend to businesses that have over 150 employees in 2024, and to companies who employ more than 50 people by 2025.
Union Representation
Ireland's trade union membership stands at around 28%. Collective bargaining remains voluntary and in many multi-national businesses where there may be alternative systems of collective employee engagement (such as employee forums or information and consultation bodies) a more direct model of employee engagement is often in place.
In March 2021 there was a review carried out under the supervision of a high-level group on collective bargaining.
A final report was issued in October 2022, however no further steps have yet been taken by the Government to implement the findings.
The lack of a system by which employers may be required to engage in mandatory collective bargaining has been criticised by the trade union sector and Ireland is out of line with comparable EU jurisdictions. While there are no immediate proposals at Governmental level to change the Irish approach to collective bargaining it is likely to continue to be an area of focus.
The Irish government continues to adapt its laws to further create a competitive, investor-friendly business landscape for talent and their employers. Find out more about the most recent changes made by The Department of Enterprise, Trade and Employment here.
