When a business starts to grow, the owner can often find themselves in a position where they need an extra pair of hands but at the same time have concerns about the pressure of adding an additional cost.  Over the last couple of years the government has attempted to make it easier for businesses in this position to recruit and retain staff.

The current scheme in place to help employers recruit is the JobsPlus Scheme.  This scheme pays employers a financial incentive to recruit employees who were long term unemployed.  Currently if you recruit somebody who has been unemployed for more than 12 months you will receive €7,500 towards the cost of their wages.  If the person has been unemployed for more than 2 years this increases to €10,000.  The money is paid monthly in arrears, over a two year period.  The income received from this initiative will not be classed as taxable for income tax or corporation tax purposes.

Another scheme that can be a help to businesses in this situation is the Jobs Bridge Scheme.  This scheme allows a business to offer a 6 – 9 month placement to somebody who has been in receipt of a jobseeker’s payment for at least 3 months.  While the individual benefits from gaining relevant experience and receiving an additional weekly payment, the employer –subject to satisfying the relevant criteria – can also avail of the JobsPlus Scheme should they be in a position to offer the individual employment when the placement ends.

If you are in a position where you are taking on employees for the first time, there are a few things that you need to be aware of.  Firstly you will need to register with Revenue as an employer.  You will also need to register your new employees with Revenue in order to obtain their correct tax credit certificate.  When you have this information you will need to operate a payroll system whereby you calculate and deduct tax from your employees’ wages.  This tax will then need to be declared and paid to Revenue on either a monthly or quarterly basis.

A common mistake that employers often make is to agree to pay net wages to their employees i.e. a set amount after tax.  While this is very good for employees it can often work out quite costly for employers.  Even though the wages are paid net to the employees, the employer has to gross up the amount that he has paid and pay that tax over to Revenue.  What often happens is that unbeknown to the employer, the employee may not have the standard tax credits or full standard rate tax band e.g. they may have chosen to transfer this to their spouse.  As a result when the net pay is grossed up, the tax payable will be considerably higher than the employer may have expected.  It’s always wise to pay gross wages, but if you do decide to go down the net wages route, then you should ensure that your employees have the correct tax credits and that these do not change during the year.

Becoming an employer can be challenging in a number of ways, so it’s a good idea to seek advice if you are unsure about any aspect of your new responsibilities.

If you have a specific question or issue that you’d like covered, please email Emma at emma@munnellyaccountants.ie