GLOSSARY OF PAYROLL TERMS
Personal Public Service Number, unique number issued to individuals wishing to live or work in the Republic of Ireland.
TAX CREDIT CERTIFICATE
Tax Credit Certificate
Revenue issues a tax credit certificate to every employee who makes a claim for tax credits. The certificate sets out in detail the amount of tax credits and standard rate cut off point that Revenue has determined to be due to the employee. Revenue also issues the tax certificate to the employer for each employee registered in his employment.
Each employee is entitled to tax credits depending on their personal circumstances, e.g. married person's or civil partner’s tax credit, employee (PAYE) tax credit, etc. These tax credits are used to reduce the tax calculated on an employee's gross pay. Tax credits are non-refundable. However, any unused tax credits in a pay week or month are carried forward to subsequent pay period(s) within the tax year. After your tax is calculated, as a percentage of your income, the tax credit is deducted from this to reduce the amount of tax that you have to pay.
Standard Rate Cut Off Point (SRCOP)
Tax is charged as a percentage of your income. The percentage that you pay depends on the amount of your income. The first part of your income, up to a certain amount, is taxed at 20%. This is known as the standard rate of tax and the amount that it applies to is known as the standard rate tax band. The remainder of your income is taxed at the higher rate of tax, 41%. The amount that you can earn before you start to pay the higher rate of tax is known as your standard rate cut-off point.
Exempt from the deduction of PAYE or USC
If your income exceeds the limits for low income exemption, but is less than twice the amount of the limit then you can claim marginal relief. Under marginal relief, you are taxed only on the amount by which your income exceeds the limit, but a special tax rate of 40% applies to this amount.
TAX DEDUCTION METHODS
Indicates the Tax Basis on which PAYE and USC will be calculated based on the three applicable methods ; Cumulative, Week One/Month One, Emergency
Year to date calculation of tax which ensures that an employee's tax liability is spread evenly over the year. Each pay period tax deduction is calculated as the total tax due from 01st January to the date of payment and reduced by the amount of year to date tax previously deducted. This ensures that any tax credits and standard rate cut off point which are not used in a pay period are carried forward to the next pay period within that tax year. The cumulative basis facilitates the payment of tax refunds where due.
Week One/Month One
Each pay period is treated separately without any consideration of previous pay or deductions. The tax credits and cut off point is applied to each pay week/month and tax is deducted accordingly. No tax refunds may be made by an employer where this basis applies.
An employer applies the Emergency basis of tax to a new employee's earnings where :
· he has not yet received a tax certificate issued to him by Revenue for the employee
· he has not received a form P45 for the employee
· he has received a P45 but it indicates that the Emergency basis applied to the employee in their previous employment
· he has received a P45 without a PPS number stated
An employer may not make a refund of tax under the Emergency basis
In these circumstances the employer applies the Revenue set emergency tax credits and cut off point to an employee's earnings dependent on the presence of a PPS number and the length of time for which the emergency basis continues to apply.
Pay As You Earn (PAYE)
Nearly all income is liable to tax. Tax on income that you earn from employment is deducted from your wages by your employer on behalf of the Irish Government. This is known as Pay As You Earn (PAYE). The amount of tax that you have to pay depends on the amount of the income that you earn and on your personal circumstances. There are a range of income tax reliefs available that can reduce the amount of tax that you have to pay.
Universal Social Charge (USC)
The Universal Social Charge (USC) is a tax on your income. It is charged on your gross income before any pension contributions. You cannot use tax credits or tax relief to reduce the amount you must pay.
Pay Related Social Insurance (PRSI)
PRSI is a compulsory deduction from your earnings which is payable to the Department of Social Protection towards the Social Insurance fund of the state which is used to fund social insurance payments in the state. Each periodical contribution creates an employee's record of aggregate contributions which will in turn dictate the level of benefits available to that employee when applicable. The amount of PRSI you pay will depend on your earnings and the class you are insured under.
Social insurance contributions are divided into different categories, known as classes or rates of contribution. The type of class and rate of contribution you pay is determined by the nature of your work. Most employees pay Class A PRSI. This class of contribution can entitle you to the full range of social insurance payments that are available from the Department of Social Protection, if you meet the qualifying criteria.
Each PRSI contribution made in a pay week equates to a week of insurable employment.
Gross pay is the amount of wages/salary payable to an employee by an employer before any deductions (tax or otherwise) are withheld. Gross pay is the multiplication of the hours worked by the agreed hourly rate or the agreed set amount for a set period (weekly/monthly salary)
Gross Pay less any tax allowable deductions is the taxable pay from which some or all tax deductions will be made.
Gross Pay less all deductions, this normally equates to the end payment to an employee.
Benefit in Kind
A non cash benefit given to an employee by an employer which is subject to tax in the hands of the employee, e.g. Company car, employer pays medical insurance on behalf of an employee
The monetary value attributed to the non cash benefit in order to deduct tax from the employee for the benefit received
Saving plan for retirement which will provide a source of income once you retire. Some pension deductions are tax allowable so that tax is deducted from your Gross Pay after your pension deduction.
Statement of Earnings and Deductions issued by an employer to an employee
Application for a Tax Credit Certificate made by an employee where they are :
· starting their first employment in the state
· they are a national of another country living in Ireland and are starting their first employment in the State
· they are recommencing employment following a period of unemployment.
Statement of Earnings and deductions issued to an employee on cessation of employment
New employee commencement notification submitted to Revenue by an employer on the commencement of a new employee
End of Year statement of earnings and deductions issued by an employer to all employees who are still in their employment at 31st December of the tax year.