Auto-enrolment pensions arrived in Ireland on 30 September 2025. After years of consultations, false starts, and legislation delays, the Government Pensions Auto Enrolment Act 2024 is now live — and it changes the payroll obligations of virtually every employer in the country.
If you employ people in Ireland and you haven’t yet reviewed your payroll arrangements in light of this legislation, this is the article to read. It is one of a series of payroll and employment guides I’ve put together for Dundalk employers, and I’ve broken it down into the questions I’m getting most often from clients across Dundalk and County Louth.
What Is Auto-Enrolment?
Auto-enrolment (AE) is a system under which employees who meet certain criteria are automatically enrolled into a workplace pension scheme. The idea, borrowed from the UK where it has been in place since 2012, is that most people never get around to setting up a pension — and defaulting them into one, while giving them the option to opt out, dramatically increases the proportion of workers who end up with a pension when they retire.
In Ireland, the scheme operates through a central system managed by the National Automatic Enrolment Retirement Savings Authority (NAERSA). Employers do not need to set up their own pension scheme — the contributions go into the central system and are invested in a default fund chosen by the employee (or a default option if no choice is made).
Who Has to Be Enrolled?
Automatic enrolment applies to employees who meet all three of the following criteria:
They are aged between 23 and 60 (inclusive). They earn more than €20,000 per year in gross salary. They are not already a member of a qualifying occupational pension scheme.
If an employee meets all three conditions, the employer is obliged to enrol them into the auto-enrolment system. You cannot opt them out on their behalf and you cannot delay enrolment.
Employees outside these criteria — under 23, over 60, earning below €20,000, or already in a qualifying scheme — are not automatically enrolled, though they may request to opt in voluntarily.
How Much Do Contributions Cost?
The contribution structure is phased in over 10 years. In the initial years, the rates are relatively modest, rising gradually to allow employers and employees time to adjust.
For the first three years (2025–2027), the contribution rates are as follows. The employee contributes 1.5% of their gross earnings. The employer contributes a matching 1.5%. The State adds a top-up of 0.5%. That gives a total contribution of 3.5% of gross earnings going into the employee’s pension.
These rates will increase incrementally — reaching 6% employee, 6% employer, and 2% State (a total of 14%) by year ten.
Contributions are calculated on gross earnings up to a maximum of €80,000 per year — on top of which the employer is also paying employer PRSI at the standard rates. Earnings above €80,000 are not subject to auto-enrolment contributions, though the employee and employer may agree to contribute more voluntarily.
An important point that many employers miss: unlike contributions to a traditional occupational pension or a PRSA, employee contributions to the auto-enrolment scheme do not attract income tax relief. The State top-up (at a ratio of 1:3 on employee contributions) effectively substitutes for the tax relief that traditional pension contributions receive. Employees who are used to contributing to an existing pension and claiming tax relief should be aware that the auto-enrolment scheme works differently.
The Opt-Out Window
Employees who do not wish to remain enrolled have a window to opt out. They can choose to opt out during the seventh and eighth months after enrolment. If they opt out within this window, any contributions already made by both the employee and employer are refunded to them, and they are treated as if they had never been enrolled.
However — and this is critical — if an employee opts out and they continue to meet the eligibility criteria, they will be automatically re-enrolled after a period of two years. They can opt out again, but the cycle repeats. The legislation is designed so that opting out is possible but requires active, repeated effort.
Employers cannot encourage or incentivise employees to opt out. Doing so is a compliance breach and could expose the employer to penalties.
What Do Employers Need to Do Operationally?
The operational requirements for employers are managed through the NAERSA system. In practical terms, you need to:
Identify which of your employees meet the eligibility criteria. Register with the NAERSA employer portal. Enrol eligible employees and begin deducting contributions from payroll on the relevant date. Remit contributions (both employee and employer) to the NAERSA system on a regular basis. Maintain records of enrolments, contributions, and any opt-outs.
If you use a payroll bureau or outsourced payroll service, confirm with them that their system has been updated to handle auto-enrolment contributions and remittances correctly. Most reputable payroll systems will have this in place, but it is worth verifying.
Interaction With Existing Pension Arrangements
If your business already operates an occupational pension scheme for employees, the position is more nuanced. Employees who are members of a qualifying occupational pension scheme are exempt from auto-enrolment. “Qualifying” has a specific meaning here — the scheme must meet minimum contribution and benefit standards set out in the legislation.
If your existing scheme meets the qualifying criteria, your enrolled employees are exempt and your existing arrangements continue unchanged. If your scheme does not meet the qualifying criteria, you may need to either enhance it or enrol the relevant employees into the auto-enrolment system.
I would strongly recommend having your existing pension arrangements reviewed against the qualifying criteria if you haven’t done so already. This is an area where assumptions can be expensive.
Cross-Border Implications
If you employ people who live in Northern Ireland but work in the Republic — or who work partially in both jurisdictions — auto-enrolment adds another layer of complexity to what is already a complicated cross-border payroll situation. The Irish auto-enrolment scheme applies based on where the employee works, not where they live. If they work in the Republic of Ireland and meet the eligibility criteria, you are obliged to enrol them.
Northern Ireland has its own auto-enrolment scheme (the UK system which has been operating since 2012), and employees who are enrolled in the UK system through another employment may have different entitlements. The interaction between the two systems is a specialist area — if you have cross-border employees, take specific advice.
What Happens If You Don’t Comply?
NAERSA has enforcement powers and can impose penalties on employers who fail to enrol eligible employees, fail to make required contributions, or deduct employee contributions without remitting them. The penalties are scaled based on the nature and duration of the breach, but they are real and the Authority has signalled that it will enforce compliance actively.
Beyond the penalties, failing to comply with auto-enrolment creates a liability to make good on the contributions that should have been made, with interest. This is a debt that can follow a business and its directors for years.
Budgeting for Auto-Enrolment
At the 2025–2027 rates (1.5% employer contribution on earnings up to €80,000), the cost is relatively modest. An employee earning €35,000 per year generates an employer cost of €525 per year in auto-enrolment contributions — though as I set out in our guide to the true cost of employing someone in Ireland, auto-enrolment is just one of several costs that sit on top of gross salary. Across a workforce of ten employees on average earnings of €35,000, that’s approximately €5,250 per year in additional payroll cost.
By 2035, when the rate reaches 6%, that same employer cost triples. Planning for the progressive increase is sensible — particularly for businesses that rely on thin margins.
For a comprehensive review of auto-enrolment as it applies to your specific workforce, talk to your accountant or payroll provider now rather than when the first penalty notice arrives.
Paddy Malone FCA AITI
Paddy is the principal of Malone & Co. Chartered Accountants in Dundalk. A Fellow of Chartered Accountants Ireland and a Chartered Tax Consultant with the Irish Tax Institute, he has been advising businesses across County Louth and the North-East for over 35 years.