How will PAYE Modernisation change the way you run your payroll?

If you read our previous blog introducing PAYE Modernisation, you’ll know that it will require employers to submit information to Revenue in real time. When the payroll is run, employers will need to notify revenue of the payments and deductions for each employee.


This represents a fundamental shift in how payroll is managed. Currently, employers submit PAYE information to Revenue once a year, and provide ad-hoc submissions to notify Revenue of new or departing employees. In the future, this reporting will all be part of the normal payroll process.


PAYE Modernisation won’t change your cash flow: you’ll still forward deductions to Revenue once a year. But the more regular information flow will enable Revenue to ensure that employees are getting all the allowances they’re entitled to, and paying the right amount of tax, at the right time.


At a high level, the process will work like this:


  1. The employer looks up the latest Revenue information for the employee. This will enable them to calculate the tax and deductions required from the employee’s pay. Revenue will carry out reconciliations throughout the year to update this information, as well as ad-hoc reconciliations when there is a change of employee circumstances. At a time when many people have several jobs, Revenue will have a complete view of the employee’s income, and will be uniquely positioned to update all employers on the appropriate deductions to make.
  2. The employer calculates the correct pay, based on the employee information provided by Revenue.
  3. The pay is finalised. There is a simultaneous creation of payslips, filing to Revenue, and payment to the employee’s bank.
  4. Revenue provides the employee with an online account where they can see all their tax information and payments in one place, and provide any updates to Revenue.


The core process remains the same: the changes are the inclusion of the latest Revenue information at the start, and the submission of information to Revenue at the end. Payroll software companies are working with Revenue to seamlessly integrate the new process, which will make it invisible to most employers once it is running.


However, Revenue will use the information and any corrections submitted for its risk analysis, and the accuracy of your payroll will come under closer scrutiny. In our next blog in this series, we’ll tell you how you can start preparing your data now.