Published: January 2026
Author: Amergin Consulting Ltd.
Target Audience: Business Owners, Finance Managers, and Small Business Seeking Financial Stability
Book a meeting: https://calendly.com/amergin-group_free/30min-finance-consultation
For many people in Ireland, employment income no longer fits neatly into a single payslip. Overtime has become more common as businesses manage staffing pressures. Bonuses are used to reward performance and retain talent. Second jobs, side roles and additional employments are increasingly part of everyday working life. What once felt exceptional is now routine.
Yet when it comes to tax, overtime, bonuses and second jobs are still widely misunderstood. Many employees assume these payments are taxed “differently,” that higher deductions mean something has gone wrong, or that having a second job automatically pushes them into a higher tax bracket. Employers, meanwhile, often underestimate the complexity of managing multiple employments, payroll alignment and real-time reporting obligations.
Revenue’s position is clear: all employment income is taxable, regardless of whether it arises from basic pay, overtime, bonuses or a second job. The difference lies not in whether it is taxed, but in how tax credits, rate bands and payroll reporting apply.
In 2025–2026, with real-time PAYE reporting firmly embedded and Revenue’s systems fully integrated, misunderstandings around additional employment income can quickly lead to confusion, cashflow stress and Revenue queries. Understanding how these payments are taxed is no longer optional it is essential.
What Revenue Means by Overtime, Bonuses and Second Jobs
Revenue treats overtime, bonuses and income from second jobs as employment income, subject to the same PAYE system as basic wages. There is no separate or special tax category for these payments. What changes is the interaction between the payment and the employee’s tax credits, standard rate band and PRSI class.
Overtime refers to additional pay earned for hours worked beyond normal contractual hours. Bonuses include performance bonuses, Christmas bonuses, sign-on payments, retention bonuses and other once-off or periodic rewards. A second job refers to any additional employment held alongside a main job, whether part-time, casual or short-term.
From Revenue’s perspective, these are simply different forms of employment income. The tax system does not distinguish between “core” pay and “extra” pay it looks only at total earnings and how they are allocated across employments.
Why Overtime and Bonuses Often Feel “Over-Taxed”
One of the most common complaints employees raise is that overtime or bonuses appear to be taxed at a much higher rate than their normal wages. This often leads to the belief that Revenue has applied an incorrect tax rate or that the employer has made a mistake.
In reality, the issue usually lies in how tax credits and standard rate bands are applied through payroll.
Each employee has a set amount of tax credits and a standard rate band that determines how much income is taxed at the lower rate. These are typically allocated to a single employment. When overtime or a bonus is paid, it may push total earnings above the remaining standard rate band, meaning that some or all of the additional income is taxed at the higher rate.
The tax has not increased because the income is overtime or a bonus. It has increased because the employee’s lower-rate band has already been used by their regular pay.
This distinction is subtle but important. Understanding it helps employees recognise that the tax outcome reflects cumulative income rather than a penalty for extra work.
How Bonuses Are Taxed in Practice
Bonuses are taxed through PAYE in the same way as salary. When a bonus is paid, the payroll system looks at the employee’s cumulative earnings to date, the tax already deducted, and the remaining tax credits and rate bands available.
In many cases, bonuses are paid later in the year, when much of the standard rate band has already been used. This means the bonus may be taxed largely at the higher rate, resulting in a higher deduction than expected.
For employees, this can be frustrating. For employers, it often leads to questions and payroll queries. But from Revenue’s perspective, the system is working as intended.
Bonuses are not taxed differently. They are simply added to total income.
Second Jobs and Multiple Employments
Holding more than one job is increasingly common in Ireland, particularly in sectors such as hospitality, healthcare, education, logistics and professional services. However, multiple employments introduce complexity into the PAYE system.
Each employee has only one set of tax credits and one standard rate band. These must be allocated across employments. If all credits and the full rate band are allocated to the main job, the second job will usually be taxed at the higher rate from the first euro earned.
This often leads employees to believe that second jobs are “automatically taxed at a higher rate.” In reality, the higher tax arises because the lower-rate band is already used elsewhere.
Employees can request that Revenue split their tax credits and rate band between jobs. This can reduce the tax deducted from the second job, but it may increase deductions from the main job. The overall tax paid across both jobs remains broadly the same the difference lies in timing and cashflow.
Overtime, Bonuses and PRSI
In addition to income tax and USC, overtime and bonuses are subject to PRSI. Both employee and employer PRSI apply in the same way as for normal wages.
For employers, this means that bonuses and overtime increase not only gross payroll costs, but also employer PRSI liabilities. For employees, PRSI deductions may also increase, particularly where earnings cross thresholds.
This is an important consideration for businesses budgeting for bonuses or increased overtime in 2026, as the true cost extends beyond the headline payment.
Common Misunderstandings Around Additional Employment Income
Many of the issues we see arise from well-intentioned but incorrect assumptions.
Employees often assume that overtime and bonuses should be taxed at the same rate as their normal pay, without considering cumulative income. Others believe that having a second job automatically triggers a higher tax rate, rather than recognising the role of tax credit allocation.
Employers sometimes assume that once payroll is processed correctly, there is no further issue. In reality, employees may need to engage with Revenue to adjust their tax credits, particularly where multiple employments exist.
These misunderstandings are common, but they are avoidable with clear explanation and proactive planning.
Overtime, Bonuses and Self-Assessment
For most employees, overtime and bonuses are fully dealt with through PAYE and do not require inclusion in a self-assessment return. However, where an individual has additional non-PAYE income such as rental income, dividends or foreign income the total employment income, including overtime and bonuses, must be included in the Form 11.
This is particularly relevant for company directors, senior employees and professionals who combine employment income with other income streams. Overtime and bonuses may be fully taxed at source, but they still form part of the overall income picture.
Employer Responsibilities and Payroll Accuracy
For employers, managing overtime, bonuses and second jobs correctly is not just about calculating deductions. It is about ensuring payroll reporting aligns with Revenue’s real-time systems.
Every payment of employment income must be reported to Revenue on or before the payment date. This includes overtime and bonuses, regardless of whether they are regular or once-off. Errors or delays can create discrepancies that trigger Revenue queries.
Employers also have a role to play in explaining tax outcomes to employees. While employers cannot give personal tax advice, clear communication about why deductions may be higher on certain payslips can reduce confusion and build trust.
Overtime, Bonuses and Cashflow Planning for Employees
From an employee’s perspective, understanding how overtime and bonuses are taxed is essential for personal cashflow planning. A bonus that looks generous on paper may result in a much smaller net payment than expected if it falls into the higher tax band.
This does not mean the bonus is not worthwhile, but it does mean expectations must be realistic. For employees relying on overtime or bonuses to meet short-term financial commitments, understanding net pay is critical.
Overtime, Bonuses and Workforce Planning for Businesses
For businesses, overtime and bonuses are often used as flexible tools to manage workload and reward performance. However, they come with cost implications beyond the headline figure.
Employer PRSI, payroll administration, and employee expectations all play a role. In 2026, with rising employment costs and increased scrutiny of payroll reporting, businesses must weigh whether overtime, bonuses or additional hires represent the most sustainable approach.
Strategic workforce planning increasingly requires a full understanding of payroll costs, not just base salaries.
How Amergin Consulting Helps Employers and Individuals
At Amergin Consulting Ltd., we regularly support both employers and individuals in navigating the tax realities of overtime, bonuses and second jobs.
For employers, we help ensure payroll systems are configured correctly, reporting obligations are met, and the true cost of overtime and bonuses is understood in advance. We support businesses in modelling payroll costs, reviewing PRSI exposure and planning reward structures that align with financial goals.
For individuals, particularly directors and senior employees, we help review overall income profiles, explain tax outcomes, adjust tax credit allocations where appropriate and ensure compliance where multiple income streams exist.
Our role is not to change the tax rules, but to make them understandable and manageable.
Looking Ahead to 2026
As Ireland moves into 2026, employment patterns are likely to become even more flexible. Multiple employments, variable pay and performance-based rewards will continue to grow. At the same time, Revenue’s systems will remain unforgiving of misunderstanding or misreporting.
The businesses and individuals who fare best will be those who understand how additional employment income fits into the wider tax picture, rather than treating each payslip in isolation.
Conclusion: Extra Work Is Normal, Confusion Doesn’t Have to Be
Overtime, bonuses and second jobs are now a normal part of working life in Ireland. The tax treatment of these payments is not punitive, but it is cumulative. When income increases, tax follows.
Understanding how and why deductions change allows employees to plan realistically and employers to manage payroll confidently. With the right explanation and support, what feels confusing becomes predictable.
At Amergin Consulting Ltd., we help clients bring clarity to employment income, so additional work strengthens financial stability rather than creating uncertainty.
About Amergin Consulting Ltd.
Amergin Consulting Ltd. is a Dublin-based chartered accountancy and business advisory firm serving Ireland’s SMEs and growth companies across construction, technology, professional services, and renewable energy.
We specialise in Accounting, Payroll, Taxation, and CFO Services that help businesses build stronger foundations for profit and compliance.
Need help running a year-end tax review or planning your 2026 payroll changes?
Amergin Consulting’s finance and tax team can help you identify deductions, forecast cash flow, and ensure full compliance before the year closes.
Book your 30-minute consultation: https://calendly.com/amergin-group_free/30min-finance-consultation
Disclaimer
This article is for general informational purposes only and does not constitute financial or tax advice. While every effort has been made to ensure accuracy, Budget 2026 legislation may change upon enactment of the Finance Act 2025.
Public should seek professional advice tailored to their specific circumstances before acting on any points discussed.
Sources
Revenue Commissioners — Overtime, bonuses and second jobs
https://www.revenue.ie/en/additional-incomes/overtime-bonuses-and-second-jobs/index.aspx
Revenue Commissioners — PAYE and employment income guidance
https://www.revenue.ie
