How to Manage and Pay Contractors in Ireland
Ireland has many different leading industries including financial services, tech, and healthcare, making it an excellent place to find contractors and freelancers. Brexit accelerated this trend, with more companies and banks moving their headquarters from London to Dublin.
Both small and large businesses, both inside and outside the country, want to hire contractors within Ireland. For companies based in countries like the US and 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
Throughout this guide, we’ll give you a complete background on contractors in Ireland, as well as knowledge about how to hire, pay, and manage them compliantly.
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 a worker is employed or self-employed.
Who decides how to classify workers in Ireland?
In Ireland, although you and the person who hires you as a contractor can set up and determine a working relationship, the final say is not up to those two parties alone.
Written considerations are taken into account when determining employment status by:
The Department of Social Protection determines if you’re employed or self-employed.
Revenue decides whether you’re employed or self-employed for tax reasons.
The Workplace Relations Commission 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 legal tests (standard 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 do it
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, leading to a €250,000 fine or 10 years of jail in the most severe cases.
How to determine if you need a contractor in Ireland
Deciding whether you need to hire a contractor in Ireland will depend 1) on the scope of the project you want completed and 2) 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 be 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 if you already have an established name in Ireland 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:
How to onboard contractors in Ireland
In Ireland, employment contractors are mandatory.
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 put a detailed and clear contractor agreement in place, 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.
Don’t put your contractors on your payroll in Ireland, as it will result in compliance and classification problems.
One of the easiest ways to avoid payment and transaction fees when paying contractors is to use a global EOR service like Via. We take the headache out of paying contractors abroad.
You have a few options to legally pay independent contractors in Ireland:
Use a third-party payroll service or EOR. You can however use a third-party payroll processing service or hire a global employer-of-record service like Via that can help you properly manage and pay your independent contractors.
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).
International money order. One of the common ways 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.
Digital wallets. You can set up a digital wallet through multinational peer-to-peer lending companies like PayPal that help you deposit and transfer money into your contractors accounts. This is one of the quickest ways to pay contractors without partnering with an EOR service like Via. Most of these services do charge fees for digital wallets, so be aware of that before choosing this option.
Money transfer services. Another popular option for companies looking to send large amounts of money across borders is using a money transfer service like Payoneer. This option has a high transfer limit, quick transfer time, and different options for sending money. These transfers can occur relatively fast and usually ensure a prompt payment. But, if you transfer money in a different currency than Euros (the currency in Ireland), there usually is a conversion fee. Payoneer, for example, charges $1.50 for domestic transfers and a 2% fee for non-currency transfers.
How Via 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
Global EOR management service like Via
What’s the difference between a PEO and an EOR?
PEO in Ireland
PEO services in Ireland provide HR and global payroll services to companies that already have an established entity in Irlenad.
Partnering with a PEO means:
Setting up an entity, which takes months
Outsourcing HR processes, including benefits administration and payroll
Hiring new employees in a short amount of time
PEO services do not take full responsibility for maintaining compliance with Irish laws. Employers enter into a co-employment with the PEO, which comes with additional risks and liabilities.
Employer-of-record (EOR) services in Ireland
If your business is still growing or you’re just looking to test the Irish labor market, an employer-of-record service provider can help you streamline the HR, hiring, payments, and compliance process without needing to navigate local bureaucracy.
EOR services like Via:
Manage all HR related tasks
Acts as its own entity to free parent companies from legal issues, including compliance with tax and labor laws
Hires, onboards, pays, and cares for new employees without you having to wait to open an entity. This means hiring employees in a matter of days, as opposed to months
Determine new hourly rate/annual salary
In most cases, contractors charge more for their services because they have specialized skills and pay higher self-employment taxes.
An EOR like Via can help you figure out the contractors hourly rate as an employee. Setting a new payment rate might be the most difficult step when deciding how to transition contractors to full-time employees, since you will need to consider what compensation packages to offer in order to stay competitive and maintain compliance.
Employers take on a lot more expenses for their full-time employees. At Via, we can help you figure out exactly how to convert your contractors to employees.
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 include:
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.
Why companies choose Via
Hiring contractors in Ireland can be confusing. Without proper guidance, you will run into challenge with local bureaucracies over compliance and classification.
At Via, we make understanding this transition seamless. You can start by paying workers as a contractor on the Via platform and transition them to full-time employees with benefits if they become a more integrated member of your team. We have on-the-ground legal and tax experts that can guide you through the conversion process and make sure that you’re compliant with all local Irish laws.
With our-easy-to-use platform, Via manages the local HR processes for global employment such as work visas and permits, benefits, payroll, background checks, and more. As your employer-of-record/entity in Ireland, Via assumes full responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
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