Taxation of Illness Benefit – Employers are now responsible
Employers are now responsible to tax any illness Benefit received by employees. When an employee is absent from work due to illness and receives Illness Benefit from the Department of Social Protection (DSP) it is now the employer’s obligation to deduct tax through the PAYE system.
The DSP notifies the employer of the amount of the taxable Illness Benefit, which your employee is entitled to receive while out sick and also the date the payment commenced. Employers must contact the DSP (contact 1890 66 22 44 or +353 (0)71 91 93313) on the employees return, to confirm the total amount of Illness Benefit due to be taxed. Employers will operate one of the following procedures:
• If employees are paid while absent from work due to illness, employers will add the taxable portion of Illness Benefit to the pay and tax the combined amount, or
• If employers do not pay employees while out sick and the employee retains the Illness Benefit payment, employers will still be notified of the amount of taxable Illness Benefit the employee is entitled to receive while out sick. On return to work employers will add the taxable portion of Illness Benefit to the employees pay and tax the combined amount.
The amount of taxable Illness Benefit will be shown on P45 if employees cease employment during the year or on the P60 if still in employment on 31 December.
Clients – Please ensure that you advise Paycheck Plus of the amount of Illness Benefit received by any employees while absent on sick leave to ensure we can tax accordingly through the payroll.