Why Irish Employers Should Avoid Agreeing to Net Pay

At first glance, agreeing to pay an employee a net amount, the exact take-home figure after tax may seem simple. But in Ireland, it’s a costly trap for employers.

1. The Tax Liability Falls on You

Under a net pay arrangement, the employer becomes responsible for whatever PAYE, PRSI and USC Revenue calculates. If an employee’s tax credits change or they have undeclared income, you pay the difference.

2. You Lose Control of Labour Costs

Because taxes fluctuate, your payroll costs can vary significantly from month to month. What seems like a €3,000 salary could end up costing €4,900 once deductions are factored in.

3. It’s Not Standard and Can Complicate Reporting

Irish payroll and employment contracts are based on gross pay. Using net pay can raise red flags with auditors, confuse reporting, and undermine confidence in your systems.

4. It Leads to Disputes

When an employee’s tax situation changes, disagreements over who covers the extra tax often follow. Sticking to gross pay keeps responsibility where it belongs, between the employee and Revenue.

5. The Smart Alternative

Always agree on gross salary, document it clearly in contracts, and use compliant payroll software or outsourced payroll services to handle deductions correctly.

Final Word

Net pay agreements might seem convenient, but they expose employers to unpredictable costs and compliance risks. Protect your business by keeping payroll transparent, compliant, and based on gross pay.