Holy mother of God, they’ve finally done it. After 25 years of talking about it (longer than most marriages last in this country), auto enrolment is actually happening. And if you’re running an SME in Ireland, you’re probably wondering if that €500 million figure in my title is what it’s going to cost YOU.
Relax. It’s not. Well, not you personally. That’s the estimated annual cost across all Irish businesses when this thing kicks in on January 1st, 2026. But here’s what nobody’s telling you straight: depending on your business, this could either be a minor hiccup or a full blown financial migraine.
I’ve spent the last three months (since the legislation passed in July 2024) running the numbers for my SME clients. One construction company in Swords is looking at €180,000 in additional costs per year. Meanwhile, a tech startup in Grand Canal Dock? They’re actually SAVING money by scrapping their current pension scheme.
Mad, isn’t it?
The Brutal Truth About Auto Enrolment Ireland
Let me paint you a picture. It’s December 31st, 2025. You’re enjoying a well earned pint after surviving another year in business. Then you remember: Tomorrow, you’re legally required to start deducting pension contributions from every eligible employee’s wages. Plus match them. Euro for euro.
Miss a payment? That’s a criminal offense. Yes, CRIMINAL. Not a slap on the wrist. We’re talking potential prosecution.
As someone who’s been doing this since 2008 (ACCA qualified, CTA since 2011), I’ve seen plenty of government schemes come and go. But this one? This is different. Because unlike our previous adventures with Revenue audits, you can’t talk your way out of this one.
Who’s Getting Dragged Into This Mess?
Here’s where it gets interesting. The government reckons 800,000 employees will be auto enrolled. But they’re being cute with the numbers. Let me break down who’s REALLY affected:
The Employees (Your Problem, Technically)
- Aged 23 to 60
- Earning over €20,000 per year (gross, across ALL employments)
- Not already in a pension scheme
Sounds simple? It’s not. Take Mary, who works part time in two shops. Shop A pays her €12,000, Shop B pays her €11,000. Neither employer thinks she qualifies. WRONG. NAERSA (the new pension overlords) will catch this through Revenue data. Both employers now have obligations.
The Employers (That’s You, Sunshine)
EVERY employer. No exceptions. Even if you only have one employee. Even if that employee is your spouse. Even if you’re barely keeping the lights on.
The only escape? If ALL your employees either:
- Already have pensions
- Earn under €20,000
- Are under 23 or over 60
Good luck with that in the current labor market.
The Real Numbers That’ll Make Your Eyes Water
Forget the government’s spin. Here’s what this actually costs, based on real calculations from my client files:
Year 1 (The “Gentle” Introduction)
Employee earning €30,000:
- Employee pays: €450 (1.5%)
- You pay: €450 (1.5%)
- Government chips in: €150 (0.5%)
- Your annual cost: €450 per employee
Employee earning €50,000:
- Employee pays: €750
- You pay: €750
- Government chips in: €250
- Your annual cost: €750 per employee
Doesn’t sound too bad? Wait for it…
Year 10 (The Full Monty)
Employee earning €30,000:
- Employee pays: €1,800 (6%)
- You pay: €1,800 (6%)
- Government chips in: €600 (2%)
- Your annual cost: €1,800 per employee
Employee earning €50,000:
- Employee pays: €3,000
- You pay: €3,000
- Government chips in: €1,000
- Your annual cost: €3,000 per employee
The €80,000 Cap (The Only Good News)
If someone earns €100,000, you still only match contributions up to €80,000. Small mercies.
Real Business Impact: Three True Stories
The Hospitality Horror Show
Jimmy runs a restaurant group in Dublin. 120 employees, mostly on €25,000 to €35,000. Current pension members? Three. His Year 1 additional cost? €47,250. Year 10? €189,000.
“That’s my expansion plans fecked,” he told me over coffee last Tuesday. He’s not wrong. That’s two new restaurants that won’t be opening.
The Tech Company’s Triumph
Contrast with Sarah’s software company. They already offer a generous pension scheme costing them 8% contributions. Auto enrolment? They’ll likely save money by switching, especially in the early years.
“It’s actually simplified everything,” she said. “No more shopping around for pension providers.”
The Construction Conundrum
Pat’s building firm is the interesting one. Mix of Irish lads on good money and foreign workers on minimum wage. Half have pensions, half don’t. The admin nightmare of managing two systems might cost more than just putting everyone in auto enrolment.
The Compliance Nightmare Nobody’s Discussing
Here’s what the glossy government pamphlets won’t tell you:
The NAERSA Dance
This new quango (National Automatic Enrolment Retirement Savings Authority) will:
- Monitor your payroll via Revenue data
- Send you enrollment notices
- Expect payments on time, every time
- Hit you with 0.0274% DAILY interest on late payments
That’s 10% per year, folks. Higher than most business loans.
The Payroll Problem
Your current payroll software? Probably needs an upgrade. I’ve checked with the major providers:
- Sage: Update coming “early 2025” (translation: maybe June)
- Thesaurus: “Working on it” (translation: panic mode)
- BrightPay: Actually ready (fair play to them)
Budget €2,000 to €5,000 for software updates. That’s before training.
The Opt Out Headache
Employees can opt out after 6 months. Sounds simple? Here’s the process:
- Employee serves notice
- You stop deductions
- Process refunds for employee contributions only
- Keep employer and government contributions in the pot
- Deal with the employee who doesn’t understand why they only get 43% back
- Re enroll them automatically after 2 years
- Repeat
One HR manager in Dundrum described it as “like herding cats, except the cats have lawyers.”
The Hidden Costs That’ll Really Hurt
Beyond the obvious contribution costs, here’s what’s keeping me up at night for my clients:
Administrative Burden
- Tracking eligibility across multiple employments
- Managing opt outs and re enrollments
- Dealing with contribution rate changes every 3 years
- Reconciling with NAERSA monthly
Conservative estimate? 2 hours per week for a 20 person company. That’s €5,000 in lost productivity annually.
The Recruitment Reality
“We offer a pension” used to be a selling point. Now it’s mandatory. How do you attract talent when everyone offers the same thing?
One client’s already adding health insurance to compensate. There goes another €1,000 per employee.
The Cash Flow Crunch
Unlike corporation tax where you can plan quarterly, pension contributions are monthly. Miss one? Criminal record.
For seasonal businesses (looking at you, tourism sector), this is brutal. December’s quiet? Tough. Still need to find that pension money.
Your Survival Strategy: The Four Pillars
After running scenarios for dozens of SMEs, here’s your playbook:
Pillar 1: The Financial Reality Check
By September 2025, you need:
- Cost Projections: Not just Year 1, but all 10 years
- Cash Flow Modeling: Monthly, accounting for seasonality
- Pricing Review: Can you absorb this or do prices need to rise?
- Investment Planning: That expansion might need to wait
Pillar 2: The Systems Overhaul
Start NOW:
- Audit your payroll system capabilities
- Get quotes for upgrades
- Train your team (especially on opt out procedures)
- Create employee communication templates
Pillar 3: The Strategic Decision
Three options:
- Embrace auto enrolment: Simplest, might be cheapest
- Keep existing pension: If it’s better than auto enrolment
- Hybrid approach: Some in existing, new hires in auto enrolment
Each has tax implications. This isn’t a DIY decision.
Pillar 4: The Employee Engagement
Your team will have questions. Lots of them. Like:
- “Why is my take home pay dropping?”
- “Can I get my money back?”
- “What if I leave?”
- “Is this better than my current pension?”
Pro tip: Have answers ready. “I don’t know” doesn’t inspire confidence.
The Opportunities Hidden in the Chaos
Not all doom and gloom. Smart operators will find advantages:
The Competitor Exodus
Some businesses won’t survive this. Harsh but true. If you’re prepared and they’re not, you’ll pick up their customers and best staff.
The Tax Play
Employer pension contributions are tax deductible. With Budget 2025 changes and Revenue’s corporation tax guidance, there might be planning opportunities. Especially if you’re close to tax band thresholds.
The Retention Tool
Vesting schedules on employer contributions? Not allowed in auto enrolment. But you could offer additional pension benefits that ARE subject to vesting. Clever, right?
The Acquisition Angle
Buying a business? Their auto enrolment liabilities come too. Due diligence just got more complicated. But it’s also a negotiation point.
The Timeline That Actually Matters
Forget the government’s “September 30, 2025” deadline. Here’s your real timeline:
Now to December 2024
- Understand the rules
- Calculate YOUR costs
- Review existing pension arrangements
- Start budgeting for 2025
January to March 2025
- Payroll system updates
- Policy decisions on existing schemes
- Employee consultation (if keeping existing schemes)
- Legal review of contracts
April to June 2025
- Systems testing
- Staff training
- Employee communications
- Dry runs with dummy data
July to September 2025
- Final preparations
- Employee enrollment decisions
- Cash reserves building
- Prayer (optional but recommended)
October 1, 2025
- Go live
- Panic
- Call your accountant
- More prayer
The Questions Every SME Owner’s Asking
Based on three months of client meetings, here are the biggies:
“Can I just give everyone a pay cut to offset this?”
Technically? Maybe. Practically? Good luck keeping staff. Legally? Minefield. Don’t.
“What if I just… don’t?”
Criminal prosecution. Directors can be personally liable. Your name in the papers. Career over. Next question.
“Can I encourage everyone to opt out?”
That’s inducement. Illegal. Up to €5,000 fine per employee. Plus, they’re auto re enrolled after 2 years anyway.
“Will this actually benefit my employees?”
Honestly? Yes. Most Irish workers retire on state pension alone. This changes that. You might hate the cost, but it’s genuinely good for them.
“Can I use this to replace my existing scheme?”
Maybe. Depends on your current scheme. If you’re paying less than 6%, auto enrolment might cost more long term. Need professional advice here.
The International Perspective
“But the UK has had this for years!” I hear you cry. True. But there are key differences:
UK vs Ireland
- UK: Can use salary sacrifice (tax efficient)
- Ireland: No salary sacrifice allowed
- UK: 8% total minimum contribution
- Ireland: 14% by Year 10 (employee + employer + state)
- UK: Employer pays minimum 3%
- Ireland: Employer matches employee up to 6%
We’re actually more generous. Whether that’s good or bad depends on which side of the payslip you’re on.
Your Action Plan: Do This NOW
Stop reading and start doing:
This Week
- List all employees with age and salary
- Identify who’s affected (probably more than you think)
- Calculate Year 1 costs (1.5% of eligible payroll)
- Check your cash flow for January 2026
This Month
- Talk to your accountant (if that’s not me, I’m hurt)
- Review existing pensions if you have them
- Get payroll software quotes
- Start budgeting for 2025
Before Christmas
- Make strategic decisions on existing schemes
- Inform your team about what’s coming
- Update employment contracts if needed
- Build that cash reserve
The Bottom Line
Auto enrolment Ireland isn’t optional. It’s happening. The businesses that survive and thrive will be those that prepare now, not those scrambling in September 2025.
Will it cost you? Absolutely. Will it hurt? Probably. Will you survive? With proper planning, yes.
But here’s the thing: This is also an opportunity. To review your total compensation strategy. To stand out as an employer who goes beyond the minimum. To build a more secure workforce who’ll stick around because they’re invested (literally) in their future with you.
The €500 million question isn’t whether you can afford auto enrolment. It’s whether you can afford not to be ready.
Start preparing now. Because come January 1st, 2026, “I didn’t know” won’t be an excuse.
And Revenue? They’ll be watching. They always are.
Based on the Automatic Enrolment Retirement Savings System Act 2024 and current government guidance. Rules may change because, well, this is Ireland. Always get professional advice specific to your situation.
Remember: Unlike capital allowances where you might miss opportunities, missing auto enrolment obligations could land you in actual trouble. Don’t risk it.