Home   Employing people  

Taxation of social welfare payments - Illness Benefit

  1. Overview
  2. Taxing IB, Occupational Injury Benefit and Partial Capacity Benefit
  3. Illness Benefit included in employee's Revenue Payroll Notification (RPN)
  4. How to pay an employee who is receiving Illness Benefit?

How to pay an employee who is receiving Illness Benefit?

Note

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).
  • Example 1

    Pat is weekly-paid (Friday pay day) and has instructed the Department of Social Protection (DSP) to pay any IB directly to his employer. He is out sick from Monday, 11 March 2024.

    Pay day: Friday 15 March 2024

    The employer pays Pat as normal, as DSP do not pay IB for the first three days of a claim.

    Pay day: Friday, 22 March 2024

    The employer has received a payment of €200 from the DSP. Pat is normally paid €500 per week. For taxation purposes the €200 should not be included in the calculation of PAYE, USC or PRSI. The employer reduces the weekly taxable pay to €300 (€500 – €200).

    Pay day: Friday, 29 March 2024

    The employee returns to work on Tuesday, 26 March. An amended RPN is received from Revenue with reduced tax credits and rate band. The employer only taxes the pay-related portion of the salary as the IB has been included on the amended RPN.

    The employer must not return the IB received on the payroll submission to Revenue.

  • Example 2

    Niamh is paid fortnightly and her employer operates a sick pay scheme. She is out on sick leave from 4 March 2024 and all IB payments are being paid directly to her.

    Pay day: Friday, 8 March 2024

    The employer pays Niamh as usual.

    Niamh returns to work on 18 March 2024. She was paid IB of €230 by the DSP which she hands over to her employer. An amended RPN is received from Revenue with reduced tax credits and rate band on 19 March 2024.

    The employer will need to contact Niamh directly for the details of the IB claim.

    Pay day: Friday, 22 March 2024

    The employer should reduce the taxable pay by the amount of IB received to date (€230). They then must apply the amended RPN received on 18 March 2024.

  • Example 3

    Áine is paid weekly and is on sick leave from 31 January 2024.

    She is paid on Friday, 1 February for the three days she worked that week. The employer does not pay her on 8 or 15 February because she is still on sick leave.

    Áine returns to work on 18 February 2024 and Revenue issues an amended RPN to the employer the next day. This notification takes into account the amount of taxable IB that Áine received. 

    On the next pay day (Friday, 22 February) Áine is taxed as usual on her pay. This is for the period from 18 to 22 February using the amended RPN.

Published: 12 February 2024 Print this page

Back to homepage Back to top