• Illness Benefit is subject to PAYE only, it is not subject to USC or PRSI.
   
• Since 1st January 2018, employers are no longer required to tax Illness Benefit through the payroll. 
   
• Instead, Revenue adjust the employee's tax credits and cut off points via the employee's Revenue Payroll Notification (RPN).
   
• Therefore, you should ensure that you check for updated RPNs before each pay run.
   
• In addition, since 1st January 2018, Illness Benefit letters are no longer delivered to the ROS Inbox.

Employers should be aware of the following three scenarios that can arise and the correct action:
 

1. Employer does not pay the employee while they are on sick leave
    
2. Employer pays the employee while they are on sick leave, but the employee claims and retains any Illness Benefit payment due to them directly from the DEASP
    
3. Employer pays the the employee while they are on sick leave and also receives the Illness Benefit payment (either directly or indirectly)

Please note: each of the 3 scenarios are legally correct - it is the employer’s own decision as to which scenario they wish to implement. Best practice is to put a sickness policy and sickness pay policy in place to clarify the issue for both managers and employees.

 

Employer does not pay the employee while on sick leave

 
Action required:
 

• Amend the employee's hours/basic pay to reflect the period the employee is out sick
   
• Check for and import any amended RPN file immediately

Employer pays the employee while they are on sick leave, but the employee claims and retains the DEASP Illness Benefit payment themselves

 Action required:

• Reduce the employee's salary by the value of the Illness Benefit they are receiving so you are merely topping up the employee's salary to their normal periodical salary (or the alternative as dictated by your company sick pay policy).
   
• Check for and import any amended RPN file immediately 

(Employee will claim and retain the DEASP Illness Benefit payment themselves)

Employer pays the employee while they are on sick leave and also receives the Illness Benefit payment (either directly or indirectly)

 Action required:

• Reduce the employee's salary by the value of the Illness Benefit they are receiving so you are merely topping up the employee's salary to their normal periodical salary (or the alternative as dictated by your company sick pay policy).
   
• Enter the employee's Illness Benefit payment as a non-taxable addition (taxed by Revenue)
   
• Check for and import any amended RPN file immediately