Budget 2027 has been described as a “budget for workers.” It includes potential savings for employees, but also brings new cost pressures and practical considerations for employers.
In this guide, we break down the main announcements affecting payroll, HR, childcare, social welfare and AI upskilling. Whether you’re trying to understand how take-home pay could change or planning next year’s payroll budget, here are the key points discussed in the HR Buddy Podcast Budget Special.
Budget 2027: The Biggest Changes for Workers
Several measures are designed to increase take-home pay, particularly for employees who earn above the higher-rate tax threshold and for people on lower incomes.
The higher income tax threshold rises to €46,500
The point at which the 40% income tax rate applies will increase to €46,500, up by €2,500. Someone earning above the threshold could save up to €500 per year. For a working couple, the potential saving could be up to €1,000 per year.
The increase is welcome, but it does not mean everyone is kept out of the higher tax band. Employees earning above €46,500 will still pay the higher rate on income over the threshold.
Tax credits increase
Personal and other income tax credits discussed in the budget are increasing by €125 each. Many employees and self-employed people can claim two of these credits, which could mean an additional €250 per year in take-home pay.
The USC 2% band extends to €30,300
The 2% USC band will apply to earnings up to €30,300, so the 3% rate will begin at a higher income level. This is another potential saving for workers, with the benefit depending on individual circumstances.
The national minimum wage increases
From 1 January 2027, the national minimum wage is set to rise to €14.94 per hour. For a person working a standard 39-hour week, that represents approximately €30.81 more per week before tax.
The increase will directly affect minimum-wage employees. It may also prompt pay review requests from employees earning slightly more, as the gap between their pay and the new minimum wage narrows.
What Budget 2027 Means for Employers
Employers will need to consider the combined effect of higher wage costs, payroll changes and potential pay reviews. Some measures offer relief, but they may not fully offset the costs businesses face.
Employer PRSI threshold changes
From 2027, the employer PRSI threshold will increase to €600. The rates discussed are 9.15% for weekly earnings up to €552 and 11.4% above that.
The government estimates that the change could save employers around €600 to €750 per worker per year, on average. This is intended to help offset the minimum wage increase.
However, the figures discussed in the podcast suggest that the PRSI saving may not cover the full additional wage cost. For a minimum-wage employee working 39 hours per week, the annual pay increase could be about €1,600. After the estimated PRSI saving, an employer could still face an additional cost of roughly €800 per employee per year.
Employers should also consider the potential knock-on effects:
- Employees earning just above minimum wage may ask for a pay review.
- Pay structures may need to be reassessed to maintain appropriate differences between roles.
- Payroll budgets may need to account for wider increases in operating costs.
- Employers in sectors such as hospitality and retail may need to review Sunday pay arrangements and related contract terms.
Capital gains tax and R&D support
The capital gains tax rate is set to decrease from 33% to 31%.
Budget 2027 also includes changes to the R&D tax credit. The limits for subcontracting to third-level institutions and third parties will increase: the proportion rises from 15% to 20%, and the relevant limit increases from €100,000 to €200,000. The first-year payment threshold will rise from €87,500 to €105,000, offering potential cash-flow support for smaller R&D projects.
Childcare Measures and Working Families
Childcare remains a significant cost for families and a factor affecting people’s ability to work and stay in employment. Budget 2027 includes several changes aimed at reducing some of that pressure:
- The childcare services relief scheme threshold increases by €5,000 to €20,000.
- The income threshold for free childcare increases to €34,000.
- The childcare cost cap decreases from €735 to €550 per month for eligible children up to senior infants.
- The weekly child support payment increases by €6 to €84.
- Working Family Payment weekly income thresholds increase by €30.
The lower childcare cap could mean savings of up to €2,220 per child per year for eligible families. For parents with more than one child in childcare, the potential difference could be substantial.
These changes matter in the workplace, too. Childcare costs can affect parents’ working hours, return-to-work decisions and ability to remain in employment. At the same time, childcare providers and staff face their own financial pressures. The podcast discussion notes that additional support for families is welcome, while questions remain about the sustainability of the childcare sector and pay for its workers.
Social Welfare and Other Household Measures
Core social welfare rates are increasing by €10 per week. The measures discussed include increases to the state pension, disability allowance, carers allowance, jobseeker’s allowance and one-parent family payment.
Other changes include:
- The weekly fuel allowance increases by €5.
- The living alone allowance rises to €25 per week, an increase of €3.
- The home care tax credit increases by €100.
- The first-time buyer relief threshold increases by €5,000 to €35,000.
- The rent tax credit threshold increases from €14,000 to €16,000.
- The student contribution fee is permanently reduced by €150.
These measures may offer useful support to eligible households, though their effect will vary depending on each person’s circumstances and the broader cost of living.
AI Upskilling: A New Focus for Employers
Budget 2027 includes €150 million for AI upskilling, phased in over three years. The funding is aimed at students, workers, job seekers and businesses.
This announcement is relevant to employers because AI is increasingly part of everyday work. The podcast also highlights the EU AI Act’s Article 4 obligation for employers to ensure an appropriate level of AI literacy among staff. The new funding may provide support for workplace training, although employers should follow further guidance on how the funding will be made available.
AI training is not just about using new tools. Employers should also consider staff understanding, workplace policies and how AI use fits into their compliance responsibilities.
Employer Checklist: What to Review After the Budget 2027 Announcement
Employers can start preparing by reviewing the practical implications of the announced changes.
- Update next year’s payroll budget.
- Account for the minimum wage increase, employer PRSI changes and possible pay adjustments for employees earning just above minimum wage.
- Review pay structures.
- Consider whether pay differences between roles remain appropriate after the new minimum wage takes effect, and plan for employee questions or requests
- Check contracts and staff handbooks; update as necessary.
- Review references to statutory sick pay, particularly in documents that may still describe a planned increase to 10 days in 2026.
- Review Sunday pay and minimum wage arrangements.
- Check relevant contracts, policies and payroll calculations, particularly in sectors where Sunday working is common.
- Prepare to communicate changes clearly.
- Monitor revenue reporting guidance.
- Move to monthly returns.
Employees may hear about budget measures before they understand when those changes apply. An immediate and straightforward workplace update can help set expectations and reduce confusion. Our simple template can help you do that.
The Bottom Line
Budget 2027 includes potential gains for workers and families, including changes to tax thresholds, tax credits, childcare costs and social welfare rates. For employers, the minimum wage increase, possible pay compression and payroll planning remain important considerations, even with the employer PRSI changes.
The practical next step is to review budgets, pay structures, contracts and staff communications before the changes take effect. We encourage you to review our BUDGET 2027 Hub for all of this information and much more.
For tailored HR or payroll support, contact the HR Buddy team at https://www.hrbuddy.ie/contact-us/.