How to Pay International Contractors in Ireland [2024]

Step #1: Classify your workers correctly

Since misclassification results in fewer funds for social programs like the Universal Social Charge (USC) and Pay Related Social Insurance (PRSI), which employers and people classified as employees are legally required to pay into, three governing bodies keep a close eye on worker classification. These are the Office of the Revenue Commissioners (usually just called “the Revenue”), the Workplace Relations Commission (WRC), and the Department of Social Protection. 

Misclassifying your employees and independent contractors will result in serious penalties from each (or all) of these three agencies, including:

• Holding you liable for paying back taxes, plus penalties and interest
• Rendering you ineligible to hire any employees who are subject to employment permits (which is a type of work visa non-Irish citizens need to apply for to work in Ireland)

Additionally, if an employee is incorrectly classified as an independent contractor, once the issue has been flagged by the governing bodies, that individual automatically gets all the rights afforded Irish employees, including protection against unfair dismissal and benefits, while you’re required to pay everything you should have, such as back taxes, during their employment.

Fortunately, there’s a way to avoid these kinds of ugly situations: Review the Irish classification requirements carefully, and understand what separates an “employee” from an “independent contractor.”  In Ireland, there's no one "test" for determining a worker's status; instead, courts or tribunals look at the entire employment relationship and assess multiple different factors to decide whether an employer-employee relationship exists.

The main factors are as follows:

• Working hours. Employees have set hours each week or month, while contractors can choose their own schedules.
• Exclusive services. Employees typically work for a single employer, while contractors can (and typically do) work for many at any given time.
• Payment. Employees receive fixed payments on a regular schedule. Contractors invoice for their payments and are typically paid on a per-project basis.
• Ability to sub-contract. Contractors can sub-contract their work if their contract allows for it. Employees typically must complete their work themselves.
• Ownership of equipment. Contractors typically own their own tools and equipment. Employees may use tools and equipment owned or provided by their employer.
• Benefits. Employees are entitled to benefits like annual leave and sick pay. Contractors typically are not.
• Control. Checks how much control the person has over their own schedule, where they work, and how the work is completed. An individual who sets their own schedule and can work from anywhere they want is an independent contractor.

Step #2: Determine the best way to pay your contractors

Once you’ve determined your new hire is indeed an independent contractor in the eyes of Irish labor laws, you must decide exactly how you’re going to pay them. Remote work has skyrocketed in popularity since 2020, and employers and independent contractors have more choices than ever about how exactly they handle payments.

Here are a few options you can explore for paying your international contractors:

• Bank wires. You can open an Irish bank account and do direct deposits into your Irish contractors’ accounts. If you’d rather use a bank account in your own nation, you can send a global wire transfer.
• International money orders. While this may be one of the oldest methods of paying independent contractors who don’t live in the same country as their employer, it’s not the best choice. You’ll be charged a fee for each international money order you send, and the maximum you can send at one time is $1,000, which is incredibly inconvenient and expensive. Money orders are also a favorite choice of scammers, so they’re best avoided.
• Digital wallets or payment platforms. Digital wallets are great for many reasons, but they often pose problems for paying independent contractors internationally simply because different countries have different digital wallets and payment platforms. It’ll be remarkably tough to find a payment platform you can both use.
• Global payroll services. Typically, contractors aren't included in payroll since they aren't subject to the same withholdings as employees—instead, they invoice for their services, which goes through accounts payable for many companies. But with Rippling, you can pay Irish employees and Irish contractors worldwide in one place.

See Rippling

Step #3: Use global payroll software to process payments for Irish contractors 

As you saw in Step #2, there are multiple ways to pay contractors in Ireland. But the fastest and simplest way is paying contractors through global payroll software.

With Rippling, you can pay employees and contractors across the world in a single system. Here’s a preview of how Rippling’s global payroll system works:

Step #4: Keep accurate records for legal purposes

Employers aren’t legally obligated to deduct taxes or offer benefits to independent contractors; the latter are responsible for paying their own taxes and pension plans. 

However, you do need to keep accurate records of each contractor’s information and the contract you signed with them so you can prove they’ve been accurately classified should that ever become an issue.

FAQs about paying contractors in Ireland

Do you need to withhold taxes when paying contractors in Ireland?

No, foreign companies don't have to withhold payroll taxes when paying contractors in Ireland. Contractors are required to pay all of their own taxes.

Does the Irish minimum wage apply to independent contractors in Ireland?

No, Irish minimum wage laws do not cover independent contractors.

Do Irish contractors get benefits?

No. As in many other nations, independent contractors do not qualify for benefits in Ireland. Only workers classified as employees do. 

Can you pay contractors in Ireland in your home currency?

Most Irish contractors should be paid in euros. If they explicitly agree to it in writing, you can pay them in a different currency.

Many international payment providers, like Rippling, support contractor payments in either euros or your currency.

Can you manually pay contractors in Ireland?

Yes, and it's common for small business owners to manually process contractor payments in an attempt to cut costs. But this can be time-consuming, especially as your business grows and if you work with multiple contractors in Ireland or across borders.

It's also important to note that manually processing payments comes with some risks:

• Compliance. Running payroll manually means assuming the risk of human error and omission. Protect yourself and your business with Rippling, which automatically enforces compliance with any applicable local laws—no matter where your contractors live.
• Security. Manual payroll processing also poses security risks, especially if you use spreadsheets or paper records. Sensitive contractor information can be lost, stolen, or misused.
• Contractor experience. Manual payments tend to be slow. They also lack transparency regarding payment timelines and exactly what contractors are being paid for, creating a frustrating experience for contractors.

Make payroll automatic by using Rippling. Rippling syncs all your business's HR data with payroll, eliminating the need for manual data entry entirely. Employees and contractors all over the world get paid quickly (and compliantly) no matter where they are. Plus, Rippling is an authorized payroll provider by the Office of the Revenue Commissioners. 

How do you turn a contractor into an employee in Ireland?

While hiring independent contractors over full-time employees can be flexible and come with financial benefits, sometimes you do need a full-time employee.

The challenge is making sure all the legal requirements are in order: Irish labor laws require statutory paycheck deductions like the PRSI and the USC for persons classified as employees.  

You'll also need to decide between establishing your entity or hiring employees through an employer of record (EOR). With Rippling, you can effortlessly manage contractors—as well as quickly transition contractors to full-time employees—with legally compliant paperwork, benefits administration, payroll, and more. Rippling handles it all, so you stay compliant from onboarding to offboarding.