What Is PAYE? | HR Glossary | BambooHR
The system for deducting income tax and social contributions from wages at source.
Pay As You Earn (PAYE) is the mechanism by which employers deduct income tax, and in Ireland Universal Social Charge and PRSI, from employees' pay and remit them to the tax authority. It shifts the collection of tax from an annual reckoning to real time.
In Ireland, PAYE Modernisation requires employers to report pay and deductions to Revenue on or before each pay run, using each employee's Revenue Payroll Notification to apply the correct credits and bands. The UK operates PAYE with Real Time Information submissions to HMRC.
Accurate PAYE depends on correct employee records, up-to-date tax details and reliable payroll software. Errors create under- or over-deductions that must be corrected and can attract penalties, so payroll configuration should be reviewed at the start of each tax year.
