Employee Annual Leave Entitlements

Under Irish law employees are entitled to 4 working weeks paid time off work as a minimum. This entitlement is calculated pro-rated based on the number of hours the employee works and so an employee who works part-time hours may not receive the full 20 days. Similarly, employees who commence employment during the Company’s holiday year will only be entitled to holiday leave on a pro-rata basis.  

Annual leave is a statutory entitlement and failure to allow an employee time off could result in compensation being awarded to the employee. While an employer may choose when an employee can take their annual leave, certain conditions apply and an employer must take account of employees family responsibilities as well as their right to rest and recreation. Employees who work 8 months in a year are entitled to an unbroken 2 week holiday, subject to any agreement in place.

Employers should keep a record of all annual leave dates taken and it is recommended that all employers have in place an Annual Leave policy. Examples of what the policy should outline are as follows: –

  1. Steps on how an employee requests annual leave.
  2. Any conditions relating to annual leave e.g. no more than 2 consecutive weeks at any one time, notice for holiday requests
  3. Any designated annual leave dates e.g. if the Company closes over the Christmas period
  4. Conditions relating to the carrying-over of annual leave to the next holiday year

An employee’s annual leave entitlement should be set out in their Contract of Employment. It is advisable for all employers to also set in the employment contract that if, upon termination, the paid holidays already taken exceed the paid holiday entitlement at the date of termination, the Company has the right to deduct the excess holiday pay from the employee’s final payment. In the absence of this clause any deduction may be deemed unlawful and an employee may bring a claim against the Company.

Since August 2015 statutory annual leave continues to accumulate while an employee is absent on certified sick leave. This means that employees on long term sick leave can avail of untaken annual leave. However, this does not last indefinitely and the entitlement is only available for 15 months from the end of the holiday year in which an employee was absent on certified sick leave.  

 

 

Ready for PAYE Modernisation?

Revenue are in the process of reforming the current PAYE system. From 1 January 2019 Revenue will be rolling out the new real-time system. Employers, agents and payroll providers will need to review their business processes and practices so they meet the new requirements.

The aim of PAYE modernisation is to:

  • Improve the streamlining of current business processes
  • Reduce the administrative burden currently experienced by employers to meet their PAYE reporting obligations.
  • Ensure Revenue, employers and employees have the most accurate, up to date information relating to pay and statutory payroll deductions

With the new system employees will be able to log into their Revenue account and view information submitted by their employer. Other changes will include payroll software automatically updating changes to P2c files regarding tax credits and cut-off, and automatically uploading data to Revenue. The new system will also see the abolition of P60s, P45s, P30s and P35 forms. Revenue are also reviewing options to deal with the taxation of Illness Benefit which would remove the obligation for an employer to tax it through payroll. 

It will be important for employers to ensure payroll is updated every week or month as the file will be automatically uploaded to Revenue, and non-compliance or continues errors will likely result in Revenue intervention.

To prepare for PAYE modernisation, employers should ensure they have registered all of their employees, received an up to date Tax Credit Certificate (P2C) for each employee and check they have the correct PPSN for all employees. Employers are required to submit a list of employees to Revenue through the Revenue Online Service (ROS). Revenue have published a manual to provide guidance on how to complete and submit the employee list.

Need a Loan to Survive Brexit?

If you own a small or medium sized enterprise and are worried about the impact Brexit will have on your business, then you may be eligible to avail of a loan from certain financial institutions.

The SBCI (Strategic Banking Corporation of Ireland) Brexit Loan Scheme is available to viable micro, small and medium sized enterprises (SMEs) and Small MidCap enterprises that meet certain eligibility criteria. Loan applications can now be made to participating banks, which includes AIB, Bank of Ireland and Ulster Bank. The Scheme will operate until March 2020, or until it has been fully subscribed.

The purpose of the Scheme is to support Irish SME’s/enterprises, allowing eligible businesses to use loans for future working capital requirements and to fund innovation, change or adaptation of the business to mitigate the impact of Brexit.

The Scheme is offered in partnership with the Department of Business Enterprise and Innovation and the Department of Agriculture Food and the Marine, and is supported by the InnovFin SME Guarantee Facility, with the financial backing of the European Union under Horizon 2020 Financial Instruments.

For more information visit: https://sbci.gov.ie/brexit-loan-scheme

 

The Key Employee Engagement Programme (KEEP)

The Key Employee Engagement Programme (KEEP).
KEEP is a tax efficient share option scheme relevant to employees of qualifying companies, which are unquoted small and medium companies.

To qualify, the company must be:

  •  Tax resident and incorporated in Ireland or another EEA state or
  •      Be an Irish trading branch of an EEA resident company
  •      Have less than 250 employees
  •       Have turnover not exceeding €50million or total balance sheet not exceeding €43 million
  •  Not be in the financial activities, professional services or building and construction sectors

To qualify the individual must be:

  • A full time employee (minimum 30 hours per week)
  • Or a proprietary director owning/controlling not more than 15% of the share capital of the company

The employment must be viable for more than 12 months from the date the option is granted.

Gains arising on share options awarded to employees under KEEP will be subject to capital gains tax on the sale of the shares, in place of the current liability to income tax, USC and employee PRSI which arises on the exercise of the option to purchase the
shares. The incentive will be relevant for share options granted from 1 January 2018 to 31 December 2023.

No tax will be payable on the grant or exercise of the share option.
On a disposal of the shares, the base cost for capital gains tax purposes will be the amount paid by the individual to acquire the shares (which may not be less than the market value of the shares at the date of grant).
CGT is paid by the individual on the difference between the option price paid and the sales proceeds.

The total value of qualifying share options that can be granted to an individual employee or director is €100,000 in any tax year, €250,000 in any 3 consecutive tax years or 50% of the annual emoluments of the individual in the year in which the option is granted.

The share options must be:

  • Held by the individual for at least one year before exercise
  • Exercised within 10 years of grant

The company cannot have unexercised share options under the scheme exceeding a market value of €3m.

Benefits

  •  Tax efficient method to incentivise and retain employees
  • Help to align employees’ individual performance to that of the company
  •  Employees are not subject to tax until the shares are sold, and they will benefit from capital gains tax treatment on the sale.

For more information, contact a member of our tax department.