The new administrative arrangements for PAYE (PAYE Modernisation) started on 1 January this year. These new arrangements do not affect the way income tax and other statutory deductions are calculated under the PAYE system, but do change the way employers report payroll information to Revenue. In most cases the new real-time reporting arrangements have seamlessly integrated into employer’s payroll systems without any impact on employees.
For the Deputy’s general information, the PAYE system does not treat people on temporary contracts any differently to those on full time or permanent contracts. As such, employers are obliged to notify Revenue where an employee has started or has ceased working for them, regardless of the employment status involved. This ensures that employees gain the full benefit of their tax credit and rate band entitlements each time they are paid. For example, where Revenue is notified of the cessation of an employment, the person’s tax credit and rate band entitlements are automatically transferred to any other active employment that s/he may have.
The application of the ‘Week 1’ basis of deduction only occurs in limited circumstances, for example where there is a lack of information about previous employments or where application of the cumulative basis would create significant hardship for the employee. Under PAYE Modernisation, employers are required to report the pay and tax details of their employees every time they run a payroll, which means the individual records should always be up to date. Consequently, it is expected that people in irregular employment should pay the proper amount of tax at each pay date and that the application of the ‘Week 1’ basis of deduction should only occur in limited circumstances.