Taxation of Maternity Benefit from 1st July 2013

Taxation of Maternity Benefit: Maternity Benefit paid to women by the Department of Social Protection will become liable to PAYE from 1st July 2013, however it will be exempt from PRSI and USC.

Taxation of Maternity Leave

The taxation of Maternity Benefit is expected to become effective from 1st July 2013, regardless of when the Maternity Benefit commenced is claimed.  It is hoped that Revenue will be responsible for the taxation of this payment via a reduction being applied to the employees’ SRCOP (Standard Rate Cut off Point) and tax credits based on information received from DSP (Department of Social Protection) to remove some of the responsibility from the employer.

The proposed taxation of  Maternity Benefit from 1st July 2013 is to be operated in a similar manner to the current taxation of Illness Benefit i.e. employers will be responsible to tax it through the payroll.  However, despite the media attention,  we do not believe this will be possible by 1st July due to many practical issues in the collection of the PAYE on the Maternity Benefit.   If the employee is not being paid while on Maternity leave and does not have sufficient tax credits to cover the payment and this results in a negative pay situation, the employer will have to revert to applying Week 1 basis for the employee.  It has been suggested that the relevant documentation (i.e. P45, P60 and P35L) will be amended to record taxable Maternity Benefit.   The topic of taxation on Maternity Benefit is certainly one for futher discussion so watch this space…….

The Team at Paycheck Plus advise all clients to notify them of any upcoming Maternity Leave.  Paycheck Plus will process the taxation of Maternity Leave in line with legislation requirements ensuring that our clients can be confident that their payroll is operating in accordance with the most up to date regulations.  For further details of this and other services provided in our Managed Payroll Services, contact or call our Team on 01 9059400 today.