PAYE modernisation

PAYE | Key Insights and Trends from 2023 Tax Payers

PAYE Modernisation

In 2023, the PAYE (Pay As You Earn) system continued to serve as a cornerstone of income tax collection within the economy. This blog post delves into the mechanics of PAYE, its impact on both employees and employers, and the notable trends and statistics from the recent comprehensive report on income tax by the Revenue Commissioners.


What is PAYE (pay as you earn) Tax?

PAYE, or Pay As You Earn, is a method where income tax is deducted directly from employees’ wages or salaries by their employer and remitted to the government. This system ensures that employees’ tax liabilities are met in real-time, providing a streamlined approach to tax collection and reducing the burden of annual tax returns.

Insightful Findings from Revenue Commissioners 2023

The latest report reveals several key insights:

1. Overall Tax Contribution

  • Net Tax Receipts: In 2023, the total net tax receipts from PAYE amounted to €32.9 billion, after accounting for repayments of €2.3 billion, indicating the significance of accurate pay and tax calculations. This represents a 7% increase from the previous year, indicating strong economic activity and effective tax collection, a success partly due to the efficient management of payroll systems and ensuring employees are not overpaying tax.


3. Pension Contributions

  • Participation Rate: About one-third of employees made pension contributions, showing an increased awareness and uptake of pension schemes. This rate was a 5% increase from the previous year.
  • Contribution Insights: Employees earning less than €40,000 typically did not contribute to pensions, which may highlight financial constraints or differing priorities among lower-income earners.


5. Sector-Specific Data

  • Sector Contributions: The largest concentrations of employees were found in the Wholesale and Retail sectors, followed by the Financial and Insurance Activities sectors. This distribution points to the significant role these sectors play in the national economy.
  • Pay Increases by Sector: Notable increases in average yearly gross pay were observed in the Information and Communication (14%) and Accommodation and Food Service (13%) sectors, indicating sector-specific growth and possibly evolving job markets.

2. Employment and Employee Demographics

  • Total Employees: There were 3.33 million employees in 2023, spread across 4.39 million employments, highlighting a dynamic job market with some individuals holding multiple jobs and possibly facing challenges with overpay in their pay and tax statements.
  • Nationality Breakdown: Irish nationals constituted 76% of the workforce. Other significant representations included Polish (3%), British (2%), and Indian (2%). This diversity underscores Ireland’s appeal as a workplace destination in the global labor market.
  • Average Gross Pay: The average annual gross pay per employee was €39,700, reflecting general wage increases and economic growth. This figure is essential for calculating the amount of tax due on pay and tax statements. The figure per employment was lower at €30,100, indicating part-time or multiple job holdings.


4. Employment Continuity and PAYE modernization

  • Continuing Employment: Approximately 74% of employments in 2023 continued from 2022. This stability is crucial for both economic forecasting and understanding income tax variations, particularly in calculating the correct amount of tax owed.
  • New Employment Creation: Compared to 2022, there was a slight decrease in the creation of new employments in 2023, which could suggest market saturation or cautious economic optimism.


6. Economic Implications

  • Economic Growth and Taxation: The increase in PAYE receipts and average pay suggests overall economic health and effective tax strategies. These insights are essential for policymakers aiming to enhance employment quality and tax fairness.

Why is PAYE Tax so high?

The question of why PAYE rates are perceived as high can be attributed to several factors, including a lack of understanding about tax credit and deduction mechanisms:

  • Robust Employment: High employment levels enhance the tax base, leading to increased PAYE collections.
  • Wage Increases: As general wage levels rise, so does the amount collected through PAYE.
  • Economic Growth: Sectors such as Information and Communication, which saw a notable increase in average pay by 14% in 2023, contribute significantly to the overall PAYE.


Understanding PAYE Rates

PAYE rates vary based on income brackets, ensuring a progressive taxation system where higher earners pay a proportionately greater amount of their income. This progressive structure is fundamental to achieving equity in tax contributions.


Challenges in PAYE Implementation

Despite its effectiveness, PAYE presents several challenges:

  • Complexity in Compliance: The onus is on employers to accurately calculate and remit the correct tax amounts, which can be complex.
  • Administrative Burden: Small businesses, in particular, may find the administrative requirements of PAYE burdensome, but utilizing the revenue’s myaccount can enable more efficient handling of payroll and tax deductions.
  • Error Rectification: Mistakes in deductions can lead to discrepancies that require adjustments, adding to administrative tasks.


Sectoral Insights and Employment Trends

The report provides a detailed analysis of employment and sectoral trends:

  • Sectoral Contributions: The Wholesale and Retail sectors employ the most individuals, followed closely by the Health and Social Work sectors.
  • Employment Churn: The dynamics of new and ceased employments significantly affect tax receipts, with a net gain of 79,000 employments in 2023.


Pension Contributions

Pension contribution trends also offer insights into financial planning:

  • Pension Contributions: One in three employees contributed to a pension in 2023, with the average contribution increasing with the employee’s pay scale.



The 2023 insights into the PAYE system highlight its critical role in the national economy, driven by robust employment and wage increases. Understanding these dynamics is crucial for employers and employees alike as they navigate the complexities of taxation and financial planning, including the benefits of tax credit and payroll management. Future adjustments and reforms in PAYE will need to address the evolving economic landscape to continue ensuring fairness and efficiency in tax collection.

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