Taxation of social welfare payments - Illness Benefit

How to pay an employee who is receiving Illness Benefit?


The information on this page refers to your current obligations. For your obligations before 1 January 2019, please see the Employer’s Guide to PAYE.

Where there is a sick pay scheme in operation, the employer should only tax the pay-related portion of the employee’s salary. Revenue collects the tax due on any Illness Benefit (IB) payments by reducing the employee’s tax credits and rate bands. Employers must use the tax credits and rate bands from the amended Revenue Payroll Notification (RPN) issued by Revenue. 

Below are three examples explaining how the IB process operates where:

  • IB is paid directly to the employer (Example 1)
  • IB is paid directly to the employee (Example 2)
  • the employer does not operate a sick pay scheme (Example 3).