Opening an Overseas Office in Galway: Payroll and Employment Laws to Know

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Galway is quickly emerging as a favorite destination for tech companies in Ireland. It is already ranked second for the number of tech companies calling the city home – behind the much-bigger Dublin. A World Bank report ranked Galway the top city in Ireland for starting a business based on factors such as acquiring permits and enforcing contracts.

While the biggest multinational corporations such as Facebook and Google are located in Dublin, smaller, emerging companies can launch an expansion in Galway and establish themselves locally without competing with the industry giants.

Options for Hiring – EoR or Payroll

In the past, only the biggest companies could afford the time and expense of opening entities in numerous countries to open local branches. Today, any company can hire employees abroad in complete legal compliance, even if they don’t open an entity.

For companies looking to open offices in Galway, there are two primary options. They can work through an Employer of Record (EoR) and begin hiring within a period of days or they can go through the formal process of opening a business. Both have their advantages and their challenges.

Working through an EoR is a great option for companies that want to test the market to see if there is a good fit for their product before making a long-term commitment to the project. It’s easy to start working with an EoR and equally easy to end the relationship. The EoR essentially handles all the administrative aspects of workforce management, including payroll and benefits. As the legal employer, the EoR takes on the legal liability for the employees.

That makes EoR a low-risk option. However, if the expansion proves successful, or if the number of employees grows over a certain threshold, most companies will move to the other option – opening an entity. That way they save on the fees they pay for the EoR service and establish themselves as a legal entity in Ireland – an important status for signing contracts with other businesses.

Companies that are willing to commit long-term may choose to open an entity right from the start. It’s riskier because of the costs involved, both in time and money. It’s also harder to close an entity than an EoR arrangement, which could lead to paying taxes on a business even after it’s shut its doors. With an entity, you assume all of the employment liability right from the start.

However, EoR should always be seen as a short to medium term solution and opening an entity as the ultimate goal. It is the most stable option and appropriate for long-term planning.

Essential Payroll Information

Expanding to Ireland means complying with local tax and labor laws. Penalties can be significant for companies that don’t adhere to the laws, and when taxes are not handled properly though withholding and payment to the proper authorities, employees could be implicated as well.

Therefore, a successful expansion starts with a careful study of the local laws and tax codes. It’s important to know which benefits are mandatory and which are optional. It’s also a good idea to find sources to ensure you stay on top of changes, which often happen quickly and without warning.

This payroll resource for Ireland goes into detail on all the payroll and employment laws you need to know. Below are some basic details to get you started.

Taxes: When it comes to payroll taxes, there are a number of elements to consider. The first is the employer’s tax on the income of the employee. In Ireland, that comes to 11.05% in Pay Related Social Insurance (PRSI). For the employee, there are social taxes and income taxes. As the employer, it’s up to you to withhold up to 15% in PRSI and Universal Social Charge (USC), and income tax that starts at 20% for single people and goes up to 40% for married couples for two incomes.

Paid Time Off: Ireland offers one of the most generous leave laws, requiring that full time employees receive 4 weeks in paid time off. However, the employer has a great deal of say when employees can use the leave.

Working Hours: A standard week in Ireland is 39 hours. There is no statutory overtime rate – an issue that is often addressed in collective bargaining agreements. Employees cannot be asked to work more than 48 hours a week on average over four months.

Terminations: An employee who has been with the company for at least 13 weeks must receive a week notice before termination. If an employee feels the termination is unfair, the employee has the right to ask for a written explanation. The employer is required to provide it within 14 days.

Non-mandatory Benefits: A company opening a branch in Galway may have to compete for top talent. A good benefits package can go a long way in enticing the best candidates to choose to work at their company. Popular non-mandatory benefits include equity, life insurance, health and dental care, and pensions.

Stay on Top of Changes

Tax and labor laws change frequently and it’s up to you to know the current tax rates and labor requirements. With the rise in popularity of remote work, you may choose to hire in Galway even if you don’t open an office in the city.

To ensure a successful expansion to Ireland, you need an online source that collects the tax and labor laws you need to know and monitors Irish legislation for changes.