Wages - Illness Benefit (Disability Benefit) (Maternity Benefit)

What is Illness Benefit?

Illness Benefit is a payment for insured people who cannot work due to illness.
It replaced the payment previously known as Disability Benefit from 2 October 2006.
Illness Benefit is made up of a personal rate for the employee with extra amounts for any dependent adults/children.

What about Illness Benefit and Tax?

The Department of Social Welfare issues all Illness Benefit payments without deducting any tax.
In Budget 2012 it was announced that Illness Benefit will be taxed from the first day of payment; previously the first 6 weeks (36 days) were exempt from tax. This change is effective from 1 January 2012.

Example
Paul an employee of your company has been ill and receives Illness Benefit made up as follows;

Paul’s Personal Portion € 148.80
Dependent Spouse € 98.70
Dependent Children € 95.00
Total Illness Benefit € 342.50

Note: Illness Benefit (excluding any increases for child dependents) is considered as income for tax purposes and it is taxed from the first day of payment.

How Should the Employer process Illness Benefit?

From the point of view of an employer there are a number of ways in which Illness Benefit can be treated;

1. Employer does not pay any wages to the employee during the period of illness.
2. Employer pays the employee a payment (a top-up), and the employee retains the Illness Benefit payment.
3. Employer pays the employee their full wages as normal and recovers the Illness Benefit cheque from the employee.

The following sections explain how to use CollSoft Payroll in each of these scenarios.

1. Employer does not pay any wages to the employee during the period of illness.


In this case, the employer does not enter any wages into CollSoft Payroll while the employee is out of work.

2. Employer pays the employee a payment (a top-up) and the employee retains the Illness Benefit payment.

In this case the employer is paying the employee a portion of their normal wage while the employee receives their Illness Benefit. This top up is treated as a normal wage payment and is entered in CollSoft Payroll in the usual manner. If the employer knows how much benefit that the employee is receiving, then the benefit payments can be recorded along with the wage each week.


Where the employer does not know how much benefit the employee is receiving the employer simply enter the wage top up as a normal wage and leave the Illness Benefit amounts as zero.

The illness benefit payments can be entered as part of another payroll run at a later stage.

3. Employer pays the employee their full wages as normal and recovers the Illness Benefit cheque from the employee.

In this scenario, the employer is paying the employee their full wage and the employee is handing over the benefit payment directly to the employer.

To process this in CollSoft Payroll the user needs to reduce the employee’s salary by the amount of the illness benefit and enter the illness benefit as a new non-taxable addition in payroll.

Example
Patrick usually earns a Gross salary of €500 each week. He then becomes ill and goes on illness benefit of €188.00 per week. His employer agrees to pay him his full wages, but Patrick must surrender his illness benefit payments to his employer.

The employer would records the wage as follows:

Firstly, you should enter a salary of €312(€500 - €188) on the wage entry screen


Secondly, you enter the €188 under additions tab.

Payroll will now factor the benefit into its tax calculation.