Skip navigation

ucd_wide_banner_img.gif
SEARCH UCD

Advanced Search
 
 
UCD Payroll Office
Oifig Párolla UCD

Taxation on Illness Benefit

Background

The Revenue Commissioners have issued revised instructions to employers regarding the tax treatment and reporting of Illness Benefit paid by the Department of Social Protection.

Illness Benefit paid to qualifying employees who are absent due to illness is a fully taxable source of income.

Revenue is now instructing employers that all taxable Illness Benefit paid to their registered employees is to be included with earnings in the calculation of payroll. Therefore the Illness Benefit forwarded to University College Dublin must now be processed through payroll.

Such data must also now be displayed and returned at year end via the P35 process.


Is Illness Benefit subject to Statutory Deductions other than Income Tax?

Illness Benefit is subject to statutory deductions with the exception of;

  •  PRSI and
  • Universal Social Charge (USC)

As such, when operated through payroll, employees will benefit automatically from a reduced USC and PRSI charge.

Employers will also benefit from a reduction in employers’ PRSI

Payslips

Full Pay Entitlement

In cases where Illness Benefit arises and the employee is entitled to full pay for the period of illness in question, employee’s payslips will display reference to two Illness Benefit related lines as follows

Illness Benefit Taxable: 
This entry ensures statutory deductions are calculated with reference to the appropriate income totals.As such USC and PRSI will not be charged on the value of Illness Benefit payable to the employee.

This appears as a minus figure on payslips.








Illness Benefit Adjustment: 
The purpose of this entry is to ensure the employee’s total gross income is not impacted by the minus Illness Benefit Taxable line described above. This will appear as a plus figure on payslips.





Reduced Pay Entitlement

In cases where Illness Benefit arises and the employee has a reduced pay entitlement for the period of illness in question, employee’s payslips will display reference to three Illness Benefit related lines as follows:


Illness Benefit Payment: 

As a reduced pay entitlement exists, the employee is entitled to the benefit of any Illness Benefit payable for the period of illness in question. Therefore, the Illness Benefit payments being forwarded to UCD are processed as payments to the employee through Payroll, thus ensuring the employee receives the total gross income due to them for that period.This system allows for the continued operation of the cumulative (normal) tax basis for the employee during periods of reduced pay.This appears as a positive figure on payslips.












Illness Benefit Taxable:
 

This entry ensures statutory deductions are calculated with reference to the appropriate income totals.As such USC and PRSI will not be charged on the value of Illness Benefit payable to the employee.






Illness Benefit Adjustment: The purpose of this entry is to ensure the employee’s total gross income is not impacted by the minus Illness Benefit Taxable line described above.

This will appear as a plus figure on payslips.








Other Tax Documents

As a result of Illness Benefit being transacted through Payroll, the following documents will also include reference to Illness Benefit where applicable.

  •  P45 Cessation Certificate
  • P60

UCD Campus
Taxation on Illness Benefit