Employer pays employee while out sick but employee retains the illness benefit

Illness Benefit is subject to PAYE only, it is not subject to USC or PRSI.

With effect from 1st January 2018, employers are no longer required to tax Illness Benefit through the payroll.

From this date, Revenue will adjust the employee's tax credits and cut off points via the Tax Credit Certificate/P2C file. Revenue will receive real-time interfaces of taxable Illness Benefit from the Department of Employment Affairs and Social Protection (DEASP).

As a result of this change there will be more frequent P2Cs for employees. While employers are no longer responsible for taxing Illness Benefit through the payroll, it is extremely important to implement amended P2Cs immediately.

In addition, from 1st January 2018 Illness Benefit letters will no longer be delivered to the ROS Inbox.

Prior to 1st January 2018, employers were responsible for collecting PAYE due on Illness Benefit issued to employees.

EMPLOYER PAYS THE EMPLOYEE WHILE THEY ARE OUT SICK

Employer pays the employee while they are out sick, employee retains the Illness Benefit payment from DEASP (does not give it to his employer.

• Employer reduces the employee's salary by the value of the Illness Benefit they are receiving so he is merely topping up the employee salary to their normal periodical salary or the alternative as dictated by company sick pay policy
• Employee claims and retains the DEASP Illness Benefit
• Employer must import the amended P2C file immediately