Budget 2027: What Employers and SMEs Need to Know
Budget 2027 has been announced, with a number of measures that will have a direct impact on employers and small and medium sized businesses.
While there are some positive measures aimed at supporting businesses and easing employment costs, employers will also need to plan for a further increase in the National Minimum Wage, changes to employer PRSI and updates to Income Tax and USC.
Here are some of the key changes employers should be aware of.
1. Increase in the National Minimum Wage
From 1 January 2027, the National Minimum Wage will increase by €0.79 per hour, from €14.15 to €14.94 per hour.
For businesses employing staff on the National Minimum Wage, or with employees paid close to this rate, this will result in increased payroll costs and may also have a knock on effect on wider pay scales.
Employers should review their current pay rates and consider whether any adjustments are required across their pay structures.
2. Increase in the Employer PRSI Threshold
To help offset some of the additional employment costs arising from the increase in the National Minimum Wage, the employer PRSI threshold will increase from €552 to €600 per week from 1 January 2027.
The Government estimates that this could result in an employer PRSI saving of approximately €650 to €700 per eligible employee over the course of the year.
This will be particularly relevant to SMEs employing staff on lower or minimum wage rates.
3. Further PRSI Rate Increase in October 2027
Employers should also be aware that a further 0.15% increase in employer PRSI is already scheduled to take effect from 1 October 2027.
The employer rate will increase from 11.40% to 11.55%, with the reduced rate increasing from 9.15% to 9.30% for employees earning €600 or less per week.
While the increase in the PRSI threshold provides some relief, employers should factor the October increase into their employment cost planning for 2027.
4. Income Tax and USC Changes
Budget 2027 also includes changes to Income Tax and USC which will affect employees’ take home pay.
The Standard Rate Cut Off Point will increase by €2,500, from €44,000 to €46,500, meaning that more income can be taxed at the standard rate of 20% before the higher rate applies.
There will also be an increase of €125 in the personal tax credit for workers.
In addition, the entry threshold for the 3% USC band will increase by €1,600, from €28,700 to €30,300.
While these changes do not directly increase employer costs, employers should ensure their payroll systems are updated to reflect the new thresholds and credits. The changes may also result in an increase in take home pay for some employees.
5. Changes to Enhanced Reporting Requirements
From 1 January 2027, employers will have more flexibility in how certain benefits and tax free payments are reported to Revenue.
Employers will be able to choose between continuing to report certain payments in real time or submitting a monthly return.
This change should provide some additional flexibility and may help reduce the administrative burden associated with Enhanced Reporting Requirements.
6. Continued Support for Small and Medium Sized Businesses
Budget 2027 also includes a number of measures aimed at supporting Irish businesses, particularly SMEs, with investment, growth, skills and access to finance.
One of the more significant announcements is a €1 billion investment programme through the Ireland Strategic Investment Fund (ISIF), which will provide additional investment to support the growth of Irish companies.
The Government has also announced:
€150 million from the National Training Fund to support upskilling and prepare workers for the increasing use of AI and new technologies.
Additional support for R&D and innovation, including changes to the R&D Tax Credit which are intended to particularly benefit smaller businesses.
Extension of key business investment incentives, including the Employment Investment Incentive, Start Up Capital Incentive, Start Up Relief for Entrepreneurs and Angel Investor Relief.
Continued access to the Growth and Sustainability Loan Scheme, providing finance for eligible Irish businesses looking to invest and grow.
Increased support through Enterprise Ireland and the Local Enterprise Offices, including funding for business growth, digitalisation, sustainability and innovation.
For SMEs, these supports may provide opportunities to reduce the cost of investment, access finance, develop employees’ skills and support business growth. Employers should review the supports available to their business and consider whether they may be eligible to benefit from any of the new or expanded schemes.
What should employers be doing now?
✔ Review your current pay rates ahead of the National Minimum Wage increase.
✔ Consider the impact of the increase on wider pay scales and potential pay compression.
✔ Review your 2027 payroll budget and factor in changes to employer PRSI.
✔ Check that your payroll and HR systems are ready for the new rates, thresholds and tax credits.
✔ Consider the impact of the Income Tax and USC changes on employee take home pay.
✔ Review your Enhanced Reporting Requirements process and consider whether monthly reporting would be more practical for your business.
✔ Keep up to date with new Government supports available to SMEs throughout 2027.
Overall, what does Budget 2027 mean for employers?
For many SMEs, the increase in the National Minimum Wage will be the most significant employment related change to plan for.
The increase in the employer PRSI threshold provides some welcome relief for businesses employing lower paid staff, although employers will still need to consider the overall impact of rising employment costs, including the further PRSI rate increase scheduled for October 2027.
At the same time, changes to Income Tax, USC and personal tax credits may provide some benefit to employees through increased take home pay.
Budget 2027 also includes a range of supports for businesses, particularly in the areas of investment, skills, innovation, digitalisation and growth. SMEs should review the supports available and consider whether any may be relevant to their business.
As always, careful planning and early preparation will help employers manage these changes and ensure they are ready for 2027.
If you have any questions about how the Budget 2027 changes may affect your business or employees, the MSS HR team is here to help, contact us on 01 8870 690 or via email at info@mssthehrpeople.ie
