PAYE is the system used to deduct Income Tax from employment pay. USC is a separate charge based on its own thresholds, while PRSI depends on the employee’s social insurance class and earnings. The employer uses current Revenue payroll information to calculate deductions.
From gross pay to take-home pay
Start with gross employment pay for the pay period. Payroll then determines taxable pay, calculates Income Tax, applies tax credits, calculates USC and applies the relevant PRSI treatment. Pension contributions, benefits, Local Property Tax deductions and other authorised items can also affect the payslip.
Net or take-home pay is therefore not produced by one flat “tax percentage”.
PAYE and Income Tax
PAYE means Pay As You Earn. Revenue explains that taxable pay is generally earnings after qualifying pension and permanent health insurance contributions. Income within the employee’s standard-rate band is taxed at 20%, and income above that band at 40%. Tax credits then reduce gross Income Tax.
The band and credits available to a particular payroll period come from Revenue information. Personal circumstances can make two employees on the same gross salary receive different net pay.
Universal Social Charge
USC is calculated separately from Income Tax. It uses its own thresholds, rates and exemptions. A tax credit that reduces Income Tax does not simply reduce USC in the same way.
USC calculations may be cumulative or use a Week 1/Month 1 basis, depending on the Revenue Payroll Notification.
Pay Related Social Insurance
PRSI funds social insurance benefits and depends on the applicable PRSI class. The employee contribution shown on a payslip is different from any employer PRSI amount. Class, weekly earnings and current rules can affect the result.
The Revenue Payroll Notification
An employer requests a current Revenue Payroll Notification, or RPN, before payroll. It provides tax credits, Income Tax and USC cut-off points, previous pay and deductions from ceased employments, and relevant exemptions. An incorrect or unavailable RPN can lead to emergency or otherwise unexpected deductions.
A practical payslip walkthrough
Start with gross pay and additions. Identify taxable pay, then read the PAYE, USC and employee PRSI lines separately. Subtract any pension or other authorised deductions and compare the result with net pay. Use the current Revenue calculation rather than applying a remembered percentage to annual salary.
Year-to-date figures help explain a large correction under the cumulative system.
Common reasons net pay changes
- A new or ceased job changes the allocation of credits and rate bands.
- Revenue issues a revised RPN.
- Payroll moves between cumulative and Week 1/Month 1 treatment.
- Overtime, bonus, benefit in kind or unpaid leave changes gross or taxable pay.
- A pension contribution or other deduction changes.
- The PRSI class or earnings threshold treatment changes.
How to investigate an unexpected deduction
Compare the payslip with Revenue myAccount pay and tax details. Check the tax basis, credits, cut-off points, PRSI class and year-to-date figures. Ask payroll which RPN was used. If Revenue records are wrong, update the job or personal details through the appropriate Revenue service.
Check a payroll-related payment
Estimate the gross public holiday benefit before comparing it with the deductions on your payslip.
Estimate public holiday payFrequently asked questions
What is PAYE in Ireland?
PAYE is the payroll system under which employers deduct Income Tax and other required amounts from employment pay and report them to Revenue.
Is USC the same as Income Tax?
No. USC is a separate charge with its own thresholds, rates and exemptions.
What determines PRSI?
PRSI depends on the employee’s social insurance class, earnings and the current rules for that class.
Why is my net pay different from a colleague on the same salary?
Tax credits, rate bands, RPN basis, pension contributions, benefits and other deductions can differ between employees.
What is an RPN?
A Revenue Payroll Notification gives the employer the current credits, cut-off points, prior pay details and exemptions needed for payroll.
How can I check payroll figures?
Read the itemised payslip, compare year-to-date details with Revenue myAccount and ask payroll which RPN and PRSI class were used.
Official sources
Rules and thresholds can change. Check the source that applies to your circumstances before making an important decision.
Important: This guide provides general information for workers in Ireland. It does not replace your contract, payroll records, official guidance or advice on a disputed or unusual case.