Hiring Your First Employee Through an Irish Limited Company

Decide whether the person is an employee or contractor

Start with the real working relationship, not the label on the invoice. An employee usually works under the company's direction and control, performs work personally, follows the company's processes and receives employment rights. A genuine independent contractor normally runs an independent business, carries commercial risk and controls how the service is delivered. The same person can be a contractor in one engagement and an employee in another.

Misclassifying a worker can create backdated PAYE, PRSI, holiday-pay, minimum-pay and employment-law exposure. Write down who controls hours, tools, pricing, substitution, client risk and delivery. If the facts are mixed, get employment and tax advice before choosing payroll or invoicing.

Register the Irish company as an employer

Revenue says an employer must register before paying an employee. The company then deducts Income Tax, PRSI and USC where applicable and reports the pay and deductions to Revenue on or before the payment date. Keep the company tax registration details, payroll records and bank payments consistent. A payroll provider can operate the process, but the company remains responsible for accurate information and timely reporting.

Revenue also states that an Irish company must register as an employer and operate PAYE on director income even if it has no other employees. Do not assume a founder's director fee or salary can be paid informally from the business account. Decide whether the founder receives salary, director remuneration, dividends or reimbursed expenses, and have the treatment reviewed before the first payment.

• Register the company for PAYE before making the first payment.
• Collect the employee's accurate identity and tax information.
• Set a payroll calendar for pay dates, deductions and reporting.
• Keep payroll, bank and bookkeeping records reconciled.
• Review director remuneration separately from dividends.

Give the employee written terms on time

The Workplace Relations Commission says an employer must give new employees core terms in writing within five days of starting. These include the employer and employee names, place of work, role, start date, probation where relevant, pay, expected hours and other core information. A more complete written statement must also be provided within one month.

The contract should be written for the actual role. Cover hours, overtime, annual leave, sick leave, notice, confidentiality, intellectual property, data protection, expenses, probation, remote work, equipment and any applicable collective agreement. If the employee will work in another country, additional information and payroll issues may apply. A short offer email is not a substitute for a proper employment file.

Budget for the full employment cost

The salary is only one part of the budget. Consider employer PRSI, paid annual leave, public holidays, sick leave, payroll processing, pension arrangements, recruitment, training, equipment, software, travel, insurance and the cost of a replacement during leave. Check the applicable national minimum wage and any sector-specific Employment Regulation Order or Registered Employment Agreement before publishing the offer.

Set up a cash forecast that shows the payment date rather than only the annual salary. A new company can be profitable on paper and still fail when payroll, VAT and supplier bills arrive together. Keep a reserve for tax deductions and do not use withheld PAYE or employee PRSI as working capital.

Prepare health, safety and insurance controls

The Health and Safety Authority says all employers, including the self-employed, need a Safety Statement relating to their work activities. It should identify hazards, assess risks and describe the controls and responsible people. New employees should be told about the relevant risks and procedures. The right controls depend on the workplace: a desk-based company, a food business and a construction site do not need the same assessment.

Review employer's liability, public liability, professional indemnity, motor and cyber cover as appropriate to the role. Insurance is not a replacement for risk assessment or training. If the employee uses a home office, vehicle, machinery, customer data or company premises, document the arrangement and check the policy wording.

Set up the company before the first start date

Before advertising or hiring, the Irish LTD should have its CRO records, registered office, bank process, tax registrations and bookkeeping arranged. Form A1 incorporation does not itself create a payroll account or confirm that the company has the licence needed for a regulated activity. If the company was formed through an agent, check which ongoing services are included and which filings remain with the directors.

StartCompany.ie can assist with the Irish company formation and package selection. Payroll, employment contracts, insurance and health-and-safety advice are separate professional workstreams. Compare the current formation package inclusions and total payable amount, then plan the first employee as a compliance project rather than simply adding a person to the bank account.

• Confirm worker status and the real working relationship.
• Register PAYE and choose a payroll process.
• Issue five-day and one-month written employment terms.
• Budget salary, employer costs, leave, equipment and insurance.
• Complete the Safety Statement and role-specific risk assessment.
• Calendar payroll, tax, leave and employment-record deadlines.