Employment tax

KPMG insights – our view

Although the ERR change welcome, Budget 2027 was a missed opportunity to introduce targeted measures addressing the rising cost of employment and strengthening Ireland’s competitiveness for global talent.

Those issues matter for both multinational and indigenous businesses, particularly where employers compete internationally for specialist skills.

It is well-publicised that the Exchequer is heavily reliant on corporation tax receipts from foreign-owned multinationals, but it is also worth bearing in mind that those companies account for c. 56% of employment tax receipts.

This concentration underlines the importance of maintaining Ireland’s attractiveness for internationally mobile employees. A targeted tax incentive which supports the recruitment of leading technology professionals could help reinforce Ireland’s position as an innovation location.

Supporting Irish employers

Support for indigenous businesses and small and medium-sized enterprises is equally important. Irish employers face rising labour costs, including the increase in the national minimum wage from €14.15 to €14.94 per hour from the start of 2027, while often competing with larger multinational groups for talent.

Extending the Special Assignee Relief Programme to indigenous Irish businesses, including new hires, would improve access to the relief when recruiting highly skilled people from overseas. A targeted incentive for Irish businesses hiring technology specialists could also support domestic innovation and competitiveness.

The Key Employee Engagement Programme is intended to help small and medium-sized enterprises attract and retain talent through share options. In its current form, however, the programme does not fully reflect common commercial structures or modern working arrangements.

Reform should focus on making the relief easier to use while preserving its policy purpose. Priority changes would include:

• Allowing disposals of KEEP shares to qualify for Revised Entrepreneur Relief;
• Removing annual KEEP limits and increasing the current €300,000 lifetime limit;
• Removing the non-trading requirement for holding companies; and
• Introducing safe-harbour valuation provisions similar to those available in the US and UK.

Under the PRSI Roadmap agreed by the Government, rate increases will continue into 2028. The higher weekly employer threshold will partly alleviate the effect for some employers, but further rate increases will add to employment costs, alongside the costs associated with auto-enrolment introduced from 1 January 2026.

To align more closely with international practice and support employers facing rising costs, the Government should consider introducing earnings caps for both employee and employer PRSI.

Overall, the ERR easement is a useful administrative improvement, but the broader package does not materially address the competitiveness challenges facing employers in Ireland. Future policy should place greater emphasis on employment costs, scalable share incentives and the recruitment of specialist talent across the economy.