PAYE Obligations When Hiring a Tutor for an Irish Learning Pod
PAYE Obligations When Hiring a Tutor for an Irish Learning Pod
Most Irish learning pod founders hire a tutor and call them a self-employed contractor. It feels clean: the tutor invoices the pod each month, there is no payroll, no Revenue registration, no Forms P30. Problem solved.
Except it often is not. Since the Supreme Court's 2023 judgment in The Revenue Commissioners v Karshan (Midlands) Ltd, Revenue has a sharper legal test for employment status — and the way most micro-school pods operate pushes their tutor firmly toward the employee column. Getting this wrong means backdated PAYE, PRSI and USC, interest, and penalties, all paid by the pod families collectively.
This post explains what Karshan changed, how to apply the test to your specific arrangement, and what to do if your tutor is an employee.
What Karshan actually decided
The Karshan case involved Domino's Pizza delivery drivers who had been treated as independent contractors. The Supreme Court found they were employees for tax purposes and, in doing so, laid down a structured five-question test for determining employment status:
- Does the person agree to provide their own work and skill personally?
- Is there mutuality of obligation — i.e., does the pod commit to offering work and does the tutor commit to doing it?
- Does the pod exercise sufficient control over how the work is done?
- Are the other terms of the contract consistent with an employment relationship?
- Does the economic reality of the arrangement point toward employment?
The significance for learning pods is in questions 2, 3, and 5.
If your tutor shows up Monday to Friday at 9am because you require it, teaches the curriculum you have set, cannot easily send a replacement if sick, and has no other clients because the pod occupies their full working week — Revenue's answer to all five questions is almost certainly: employee.
The judgment did not create new law; it clarified and sharpened existing principles. But Revenue has been applying it more aggressively in audit scenarios since 2023.
What the domestic employer exemption does not cover
Some pod founders hear about the domestic employer exemption and assume it solves the problem. It does not, for any functional micro-school.
The exemption allows a private individual to employ a domestic worker — a cleaner, a childminder, an au pair — without registering as an employer, provided:
- There is only one employee, and
- That employee earns less than €40 per week gross.
A tutor running a learning pod for four or five families earns multiples of €40 per week. The exemption is irrelevant.
Registering as an employer with Revenue
If your tutor is an employee, the pod's founding parents must register as an employer via the Revenue Online Service (ROS) at ros.ie. The registration is straightforward:
- Log in to ROS using the pod's or the lead family's PREM (employer) registration number.
- Register under PAYE Modernisation — Ireland moved to real-time PAYE reporting in January 2019, meaning each payroll run must be reported to Revenue on or before the payment date via a Payroll Submission Request (PSR).
- Deduct Income Tax (under the PAYE system), PRSI, and USC from each payment and remit monthly (or quarterly for small employers) via Revenue's P30-equivalent returns.
The categories you need to understand:
Income Tax (PAYE): Deducted at 20% on earnings up to the standard rate cut-off point (€44,000 in 2025/2026), and 40% on earnings above that. The tutor receives a Tax Credit Certificate (TCC) from Revenue which tells you how much to deduct.
PRSI — Employees: Employees pay Class A PRSI at 4.1% on all earnings (from October 2024, rising from 4%).
PRSI — Employers: You pay Employers' PRSI at 11.05% on gross earnings above the weekly threshold. This is a cost to the pod, not deducted from the tutor's pay.
USC (Universal Social Charge): Deducted from the tutor's gross pay. Rates: 0.5% on income up to €12,012; 2% from €12,013 to €27,382; 3% from €27,383 to €70,044; 8% above €70,044.
Free Download
Get the Ireland Homeschool Quick-Start Checklist
Everything in this article as a printable checklist — plus action plans and reference guides you can start using today.
What this means for your pod budget
A worked example. Your tutor earns €32,000 gross per year (approximately €30/hour for 1,067 hours annually — roughly a four-day-week arrangement).
- Employee takes home: approximately €25,200 after Income Tax, PRSI, and USC (rough estimate — actual figures depend on their personal credits and cut-off)
- Pod pays: €32,000 gross + €3,536 Employers' PRSI = €35,536 total cost
- Split across five families = €7,107 per family per year, before venue, materials, or insurance
If you had been budgeting on €32,000 gross and ignoring Employers' PRSI, you were underestimating by €707 per family. Over three or four families that is a meaningful hole in the budget. The time to find it is before you start, not at year-end.
What if the tutor is genuinely self-employed?
If the Karshan test genuinely points toward self-employment — the tutor runs their own tutoring business, works for multiple families or organisations, sets their own hours and methods, and can substitute another tutor — then they file their own income tax return annually via Form 11 and pay PRSI at Class S (4%). You do not register as an employer.
To protect yourself in a Revenue audit, keep documentation that supports self-employment: a contract that reflects the genuine arrangement (not just labelled "contractor" while operating as an employee), evidence of the tutor's other clients, and a clear record that you did not direct the method or timing of instruction.
The practical steps
If your arrangement is employment:
- Register as an employer on ROS before the first pay date.
- Engage a payroll provider or accountant if you are not comfortable running payroll — costs typically €50–€120 per month for a single-employee payroll.
- Budget including Employers' PRSI from the start.
- Issue the tutor with a written contract under the Terms of Employment (Information) Acts 1994–2014 within five days of commencement.
- Ensure the tutor has registered with Revenue and has a current Tax Credit Certificate.
If the arrangement is genuinely self-employed:
- Get a written contract that accurately reflects the relationship.
- Do not direct the tutor's methods or fix their hours to a rigid schedule.
- Ensure they are PRSI Class S registered and filing their own returns.
Getting the full compliance picture in one place
Employment status is one of several compliance questions Irish pod founders need to answer before opening day. The Ireland Micro-School & Pod Kit includes a step-by-step legal and operational framework covering Tusla AEARS registration, Garda vetting, Children First Act obligations, insurance, and the full employment status question — with budget templates in euros designed for the Irish context.
The Karshan judgment made this area less ambiguous, not more. That is actually good news: it means the rules are now clear enough to plan around, rather than hoping a grey area stays grey.
Get Your Free Ireland Homeschool Quick-Start Checklist
Download the Ireland Homeschool Quick-Start Checklist — a printable guide with checklists, scripts, and action plans you can start using today.