Budget 2027 has been announced by Simon Harris on the 6th October 2026 with several changes that will affect payroll from January.
For employers, the main changes are to the National Minimum Wage, PAYE tax bands and credits, USC thresholds and employer PRSI.
National Minimum Wage increases to €14.94
From 1 January 2027, the National Minimum Wage will increase from €14.15 to €14.94 per hour.
For an employee working 39 hours per week, that is an increase of just over €30 per week, or around €1,600 per year before tax.
Employers with staff on or close to the minimum wage should review pay rates before processing their first payroll of 2027.
Income tax bands and credits increase
The standard-rate income tax band for a single person will increase from €44,000 to €46,500.
The main Personal, PAYE and Earned Income tax credits will also increase by €125.
Together, these changes should increase take-home pay for many employees without any change to their gross salary.
USC threshold rises
The upper limit of the 2% USC band will increase from €28,700 to €30,300.
This change is intended, in part, to prevent full-time workers on the new minimum wage moving into the higher 3% USC band purely because their hourly rate has increased.
Employer PRSI threshold increases
The weekly earnings threshold for the lower employer PRSI rate will increase from €552 to €600.
This is particularly relevant for employers paying staff around the minimum wage, as it provides some offset against the additional wage cost arising from the minimum wage increase.
It is important, however, not to confuse this with a reduction in PRSI rates.
PRSI rates already increased on 1 October 2026, and a further increase of 0.15% is scheduled for 1 October 2027.
What employers need to do
Most PAYE and USC changes will be handled automatically through the employee’s Revenue Payroll Notification (RPN).
Employers should:
- review hourly rates ahead of 1 January 2027;
- budget for the higher minimum wage;
The headline figures are:
| Payroll item | 2026 | 2027 |
|---|---|---|
| National Minimum Wage | €14.15 | €14.94 |
| Single 20% income tax band | €44,000 | €46,500 |
| Main tax credits | €2,000 | €2,125 |
| USC 2% upper threshold | €28,700 | €30,300 |
| Lower employer PRSI threshold | €552/week | €600/week |
Enhanced Reporting Requirements become more flexible
There is also a welcome administrative change to Enhanced Reporting Requirements (ERR).
Currently, employers are required to report certain tax-free payments and benefits to Revenue on or before the date they are provided to the employee.
From 2027, employers will have a choice. They can continue reporting these benefits on or before payment, or instead report them by the 14th day of the following month.
This applies to reportable benefits such as qualifying travel and subsistence payments, remote working daily allowances and the Small Benefit Exemption.
The reporting obligation itself is not being removed, but the additional time should make ERR significantly easier to manage, particularly where expenses and benefits are processed separately from payroll.
Electric vehicle BIK in 2027
Company cars remain an important payroll issue because Benefit in Kind is treated as notional pay and is subject to PAYE, USC and PRSI through payroll.
As per the 2026 Budget and Finance Act, battery electric vehicles benefit from the A1 zero-emission BIK category, with lower BIK percentages than conventional cars depending on annual business mileage.
The existing legislation provides for reductions in the Original Market Value used to calculate BIK. On the current timetable, those reductions are due to reduce again in 2027 as per below.
| BIK OMV reduction | 2026 | 2027 |
|---|---|---|
| EV-specific reduction | €20,000 | €10,000 |
| General OMV reduction | €10,000 | €5,000 |
| Combined reduction | €30,000 | €15,000 |
That means an employee with the same electric company car could have a higher taxable BIK value in 2027 than in 2026, even though electric vehicles continue to receive favourable BIK rates.
Employers providing company EVs must review their BIK calculations before the first payroll of 2027 rather than assuming the 2026 taxable benefit will simply carry forward.
Since its introduction, we have seen last-minute changes to the BIK OMV reduction when the practical cost to employers and the motor industry became clear. However, a further revision may be less likely this time, as the original policy objective was to encourage greater uptake of electric vehicles — and with EV adoption now significantly higher, the Government may consider that incentive has largely achieved its purpose.
What this means for payroll
For many employees, the income tax and USC changes should mean a modest increase in take-home pay.
For employers, the bigger cost pressure will be the increase in the National Minimum Wage, although the higher employer PRSI threshold will provide some relief for employees earning around that level.
It is also worth noting that the €20,000 annual earnings threshold for mandatory enrolment in MyFutureFund (MFF) has not changed. As a result, the increase in the National Minimum Wage is likely to bring more employees above the threshold and into mandatory enrolment.
There are also two important administrative points to prepare for: the more flexible ERR reporting deadline should reduce the burden of reporting employee benefits, while employers providing electric company cars should expect changes to BIK as the available OMV relief reduces in 2027.
Parolla will incorporate the confirmed 2027 PAYE, USC, PRSI and BIK rules ahead of the new tax year, with employee-specific tax credits and bands continuing to come directly from Revenue through the RPN.