Gallagher Keane Newsletter - January Insights

1. National Minimum Wage increase on 1 January 2025

From 1 January 2025, the national minimum wage in Ireland has increased by 80 cents, bringing the hourly rate to €13.50. This increase, introduced under the National Minimum Wage Act 2000, aims to improve wages for many workers across the country. However, certain groups, such as younger employees and those in specific employment arrangements, may receive different rates.

Who is Entitled to the New Minimum Wage?

Most employees are legally entitled to the national minimum wage, but there are exceptions. If you are under 20, your wage will be based on a reduced rate:

• 20 years and over: €13.50 (100%)
• 19 years: €12.15 (90%)
• 18 years: €10.80 (80%)
• Under 18: €9.45 (70%)

These rates ensure a structured increase as younger workers gain experience in the workforce.

What Counts as Pay?

When calculating your hourly rate, the following are included:

• Your basic pay
• Shift premiums
• Fees, bonuses, and commissions
• Service charges processed through payroll
• Zero hours payments

Additionally, if your employer provides food or accommodation, these benefits are factored into the calculation:

• Board (meals): €1.21 per hour
• Lodging: €31.89 per week or €4.55 per day

However, certain payments do not count toward the minimum wage, such as overtime premiums, tips paid directly to you, or pension contributions.

How is Your Hourly Rate Calculated?

Your hourly pay is determined by dividing your gross pay (before tax and deductions) by the total number of hours worked. This includes:

• Overtime and travel time (if part of your job)
• Approved training during normal working hours

Your employer selects a pay reference period (weekly, fortnightly, or monthly) to calculate your pay. This period must be outlined in your statement of employment conditions.

Living Wage in 2026

The government plans to phase in a living wage by 2026, which will replace the minimum wage. The living wage will be set at 60% of the median wage. Until then, the national minimum wage will continue to rise gradually.

For further details, visit https://www.citizensinformation.ie/

2. Check Your 2025 Payslip: What the New Budget Means for You

With the introduction of Budget 2025, your payslip may look a little different this year. Several tax and income-related adjustments have taken effect from January 1st, and it’s important to check your payslip to ensure you’re receiving the correct benefits. Here’s what to look out for:

Income Tax:

• The standard rate band has increased by €2,000, now set at €44,000 for single individuals.
• If you earn up to this amount, you’ll continue to pay 20% income tax, with proportionate increases applied for married couples and civil partners.

Universal Social Charge:

• The 4% USC rate has been reduced to 3% on incomes between €25,000 and €70,000.
• If your income falls within this range, you should see a small reduction in the USC deducted from your salary.

Tax Credits:

• Personal, employee, and earned income tax credits have increased by €125 each, now totalling €2,000 per credit.
• If you’re a PAYE worker, this will reduce your overall tax liability, resulting in slightly more take-home pay.

Small Benefit Exemption:

• The tax-free benefit for non-cash perks, such as vouchers, has increased from €1,000 to €1,500.

Minimum Wage Increase:

• The National Minimum Wage has risen by 80 cents to €13.50 per hour.
• If you are on minimum wage, you should see this increase reflected in your earnings.

What should You Do?

• Check your January payslip to ensure that your tax credit and USC adjustments have been applied correctly.
• Review your deductions and compare them with your previous payslips to confirm the expected changes.
• Claim your entitlements, including the rental tax credit, if applicable.
• Consult your employer or payroll provider if you notice discrepancies.

3. Pensions Auto-Enrolment Scheme in Ireland: Start Date and Key Details

Ireland’s new Auto-Enrolment Retirement Savings Scheme, known as My Future Fund, is set to begin on 30 September 2025. This initiative aims to improve pension coverage among workers who are not currently enrolled in an occupational pension scheme.

What’s Auto-Enrolment?

Auto-enrolment is designed to ensure that employees who are not already contributing to a pension will have a structured savings plan for their retirement. Under the scheme:

• Employees will be automatically enrolled but can opt out after six months.
• Contributions will be made by the employee, employer, and Government.
• The scheme will be managed by the National Automatic Enrolment Retirement Savings Authority, under the supervision of the Pensions Authority.
• The regulations governing the scheme are outlined in the Automatic Enrolment Retirement Savings System Act 2024.

Who Will Be Automatically Enrolled?

Employees will be automatically enrolled if they:

• Are aged between 23 and 60.
• Earn €20,000 or more per year.
• Are not currently part of a pension plan.

If an employee previously contributed to a pension but has since stopped, they will also be enrolled if they meet the above criteria. Employees earning less than €20,000 per year or outside the age range can opt in voluntarily.

Employer Obligations:

Employers are required to comply with auto-enrolment obligations. Failure to do so may result in penalties and possible prosecution. Employers must contribute to employees’ pension funds but are not required to contribute to personal pension plans outside the scheme.

What Happens if You Change Jobs?

If an employee changes jobs, their pension contributions will follow them under the ‘pot-follows-the-member’ system. This eliminates the need to start a new pension scheme with each new employer.

Can You Opt Out?

Employees can opt out of the scheme after six months, with a refund of their contributions. However, opting out after contribution rate increases (in months 7 or 8 after a rate change) will only result in a partial refund.

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