Ireland: EOR or an Irish entity

What are the routes into employing someone in Ireland?

Two and they differ in who becomes the Irish employer. The employee's statutory entitlements are the same on both. What changes is who carries most of the employer obligations and a few duties stay with the client whichever route it takes.

A company can incorporate. That gives direct control of the employment relationship and brings a set of ongoing company obligations with it.

Or the work can be performed for the client by an employer already established in Ireland. The employer duties are then part of that employer's ordinary operations rather than obligations taken on for a single hire and the client directs the day-to-day work.

Two things do not move with the route and both are worth knowing before the choice is made.

Health and safety duties attach to the place where the work is done. The Safety, Health and Welfare at Work Act 2005 puts duties on an employer towards individuals at its place of work who are not its employees and on anyone who controls a place of work to any extent, so a client keeps those duties for its own premises whichever way the employment is structured. An employer of record carries the employment, payroll and termination duties; it does not make the client's own workplace someone else's responsibility.

The second cuts the other way and it is the reason the route is sometimes not a choice at all. An employment permit can only be sponsored by an employer registered with Revenue and the Companies Registration Office and currently trading in the State and the employee has to be employed and paid directly by that employer. A company with no Irish presence cannot sponsor one. For a hire that needs a permit, the route decides whether the hire can happen.

What does incorporating bring with it?

A company and the ongoing obligations of running one. Those are the real comparison, because the employment obligations are identical whichever route is taken.

An Irish company brings directors' duties, annual returns and corporation tax filings, and each of those is a recurring commitment rather than a setup cost. They are the same whether the company employs one person or thirty, which is what makes them expensive relative to a first hire and unremarkable relative to a settled operation.

What incorporating does buy is control. The employment relationship sits directly with the client and the contract is its own. For a company that has decided Ireland is a permanent part of its structure, that is worth having. For a company that has decided nothing yet, it is a commitment made before the information that would justify it exists.

The employment side does not get easier either way. Annual leave, the six-month probation cap and its mandatory extensions, notice from thirteen weeks, five certified sick days at 70% capped at €110 a day and a redundancy lump sum of two weeks' pay per year plus a bonus week, capped at €600 a week on both elements after 104 weeks' service, all apply identically. The hiring guide sets out each one.

What does the 12.5% rate actually depend on?

Carrying on a trade in Ireland. Not on having incorporated there.

Getting that the wrong way round produces a structural decision made for a reason that does not hold. Irish trading profits are taxed at 12.5% whether they arise in an Irish company or in an Irish branch of a foreign company. The rate attaches to the trading activity, not to the corporate form wrapped around it. Forming an Irish company is not what unlocks it.

Two consequences follow. An Irish company that is not trading does not get 12.5% on the income that is not trading income, so the headline rate is not a company-level attribute. And a group within Pillar Two is tested against a 15% minimum effective rate on a jurisdictional basis, so for those groups the 12.5% headline is not the whole answer.

None of that argues against incorporating. It argues against incorporating for the rate, which is a different thing, and it makes the tax position a separate question from the employment decision.

What does it cost to end an Irish employment?

Statutory notice and after 104 weeks a redundancy lump sum. Both of those are capped. Two other statutory payments are not, and they belong in the same budget.

Notice runs on length of service. The right begins at thirteen weeks' continuous service and climbs to eight weeks beyond fifteen years and a contract may give more than the statutory minimum though not less. The hiring guide sets out the full ladder.

Statutory redundancy arrives at 104 weeks. It is two weeks' gross pay for each year of service plus one bonus week, with both elements capped at €600 a week, payable after 104 weeks' continuous service in fully insurable employment and with service before age 16 excluded. The cap is what makes the number predictable: because it applies to both elements, the calculation stops scaling with salary above that point rather than tracking it. The statutory lump sum is tax-free to the employee.

Compensation for unfair dismissal is the larger of the two uncapped items. After twelve months' continuous service an employee can be awarded up to 104 weeks' remuneration and up to 260 weeks where the dismissal is for a protected disclosure. That is a multiple of the employee's own salary rather than a capped sum, so it scales with pay in a way the redundancy calculation does not. The second is cesser pay: on termination the employee is paid for annual leave not taken and for a public holiday falling in the notice period and neither is subject to the €600 cap.

Ireland also sets no statutory annual bonus or thirteenth month payment, so nothing of that kind accrues to be settled on exit.

Two things follow for the route decision. The statutory notice and redundancy entitlements are the same whichever route is taken, because they attach to the employment rather than to the employer's corporate form. What differs is who runs the process and who answers the claim: termination administration and an unfair dismissal claim both land on whoever is the employer on paper, which on an employer of record route is not the client.

When does an Irish entity earn its overhead?

When the Irish operation is settled enough that the recurring obligations of a company are proportionate to what it does. That is a judgement about the business rather than a threshold in Irish law. No Irish statute sets a headcount or revenue point at which a company must incorporate. What Irish law does set is a registration duty once a branch is established.

What can be stated precisely is the shape of the trade-off. The employee's statutory entitlements are constant, so they are not the variable. The company obligations do not scale with a small headcount, so a single hire carries the same directors' duties and annual returns as a team of thirty. And the tax rate does not depend on incorporating. What actually changes is who carries the employment duties and how quickly a commitment has to be made.

For a company placing its first employee in Ireland, or its first in the European Union, an employer of record removes the formation and the Revenue employer registration from the client entirely and the employer duties sit with the employer of record rather than being run from another country. For a company whose Irish operation is established and generating its own revenue, the ongoing company obligations stop being the dominant cost and direct control starts being worth what it costs.

The two are not mutually exclusive over time. An employer of record is a way of employing in Ireland now without deciding the structure question permanently and the structure question can be answered later with better information than is available before anyone has been hired.