Briefing | HR implications of Budget 2026

The modified domestic demand (MDD), a proxy for the domestic economy, is projected to grow by 3.3% this year and 2.3% next year. Real incomes are also expected to continue to grow, helped by lower inflation, which is forecast to remain at around 2% next year. 

Minister O’Donohoe highlighted that more than 440,000 jobs have been added to the economy since the pandemic, an historic achievement. This has been driven by record levels of women at work, as well as people coming to work in Ireland. He acknowledged the strength in that diversity and the expectation of a further 63,500 jobs by the end of 2026, with the economy remaining at full employment.  

Budget 2026 

Budget 2026 outlined an additional €9.4 billion in expenditure. This represents an increase investment in vital infrastructure, to help boost productivity, protect jobs and support long-term growth. It also aims to make targeted improvements to public services, and strengthen Ireland’s economic foundations, so the country is better prepared to weather future uncertainties. 

According to Finance Minister Jack Chambers, the budget aims to strengthen communities, build prosperity and enhance living standards, while securing Ireland’s future economic growth. 

Budget 2026 does not target tax benefits for employees; however, it put a renewed focus on a variety of supports for business to secure jobs. It also did not introduce any across-the-board cost of living measures. 

Business supports 

Additional investment was announced for the state agencies who support job creation on a national and international level. However significant investment in future-focused skills was not evident. The CIPD welcomes the establishment of a National Artificial Intelligence Office to provide a focal point for the promotion and adoption of transparent and safe AI in Ireland. 

• SARP (Special Assignee Relief Program) has been extended. This was due to expire at the end of 2025. The threshold of salary has now also been increased from €100k to €125k.  

• The specific business supports include the retention of the Key Employee Engagement Programme until 2028.   

• Research and Development (R&D) supports have contributed to economic growth and creating high value employment. An increase in the rate of the R&D credit to 35% was announced along with a rise in the first-year payment threshold to support smaller R&D projects. 

• There will be a reduction in VAT rate for the hospitality sector and hairdressers to 9% from 1 July 2026. 

• A wide range of sectoral measures were announced, targeting, for example, the visual effects and the digital games sectors, foreign direct investment, entrepreneurs, the financial services sectors, farming and agri-food. 

• The previously announced annual increases in carbon tax will continue out to 2030. The €5,000 VRT relief for electric vehicles has been extended for a further one year until the 31 December 2026. 

• Under the benefit-in-kind (BIK) regime for company cars, the universal relief on the original market value of a vehicle will be tapered out to 2029. This relief will remain at €10,000 in 2026. It will reduce to €5,000 in 2027 and €2,500 in 2028, being abolished from 2029. A new vehicle category for zero emission cars only will be introduced, where the lowest BIK rates will apply. 

Employment and social protection 

The national minimum wage will be increased in 2026, but not to the level of the Living wage, an original government target.

• The national minimum wage will rise by €0.65 on January 1, 2026, reaching €14.15 per hour. Simultaneously, the Universal Social Charge (USC) entry threshold for the 2% rate will be increased to €28,700. We recognise that this pay increase can be challenging for SMEs. 

• The rise in the USC threshold will be a small benefit to all employees, who will have an additional €1,318 exempt from USC. The maximum rate of all weekly social welfare payments will increase by €10 from January 2026 with proportionate increases for qualified adults and people on reduced rates of payment. 

• The €10 increase in social insurance payments will also impact employees on benefits such as Maternity Benefit, Paternity Benefit, Adoptive Benefit and Parent's Benefit as well as Illness Benefit, Health and Safety Benefit, Injury Benefit and Carer's Benefit from January 2026. Where employers make a top-up payment (on top of social welfare payments), the increase in these state payments will result in a cost saving for employers of €10 per week per person receiving the benefit.  

• The Working Family Payment income thresholds will increase by €60 per week for all families alongside an increase in the weekly rates of the Child Support Payment. 

• The Carer’s Allowance income disregard has been significantly increased to €1000 for a single person and to €2000 for a couple. 

• The CIPD looks forward to hearing further detail about how much funding has been put aside for the Government’s 1% contribution to the pension auto enrolment scheme which begins on 1 January 2026. The scheme is expected to cover 750,000 people. Funding has also been designated for the new Jobseekers Pay-Related Benefit introduced this year.  

• The CIPD welcomes increased funding in the childcare sector and education sectors. Building capacity in childcare is central to supporting working parents. The introduction of Employment Regulation Orders will help regularise pay and benefits in the sector. The CIPD welcomes improvement in investment in services for those with a disability.