Employer does not pay employee while out sick

All employers must deduct PAYE from any Illness Benefit received by the employee, from the Department of Social Protection, regardless of whether or not the employer pays the employee while they are out of work on sick leave.

If you do not know how much Illness Benefit the employee is receiving then you must make a best estimate and deduct PAYE from it in the week it is due to the employee. Please note:

No payment is made for the first six days of Illness or for any Sunday during the sick period.
The current normal weekly rate of Illness benefit is €188.00, or €31.33 per day.
Employees will receive the 6 day payment even if they normally work 5 days.

Illness Benefit is subject to PAYE only, not USC or PRSI. It is taxable from the first day of payment by the employer.

There are three scenarios that an employer must deal with in considering the treatment of Illness Benefit:

1. Employer does not pay the employee while they are out sick

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

3. Employer pays the employee while they are out sick, employer receives the Illness Benefit payment from DSP

Employer does not pay the employee while they are out sick

The employer reduces the employee's working hours to zero for the sick period.
The employee claims and retains the DSP Illness Benefit of €188.00 per week.
Even though the employer is not paying the employee he must collect the tax on the Illness Benefit that the employee is receiving from DSP and record that he has taxed the Illness Benefit.

Example:

Employee Weekly Tax Credit € 30.00

Employee Weekly SRCOP € 600.00

Employee Gross Salary € 500.00

Employee Gross Salary € 0.00

Illness Benefit €188.00

Pay subject to PAYE €188.00

PAYE 188.00 @ 20% €37.60
Less Tax Credit - €30.00
PAYE payable € 7.60

Pay subject to USC € 0.00

Pay subject to PRSI € 0.00

The employer does not make any payment to the employee, but must collect €7.60 in PAYE due on the Illness Benefit received by the employee directly from DSP.

To tax the Illness Benefit in BrightPay

Click ‘Payroll’ on the menu bar and select the relevant employee’s name in the summary view.
Zeroise any pay items that are displayed on screen so that zero pay is reflected for the period.
Within the ‘Parenting/ Illness Benefit’ section on the employee’s payslip, select Enter to Calendar.

4. Click on the employee's first day of sickness and drag your mouse over the days the employee is out sick. When all sick leave days are highlighted, click the dedicated Sick Leave button at the top right of the screen. The program will automatically calculate the non-qualifying days and the illness benefit days the employee is entitled to.

5. Close the calendar to return to the employee's payslip. Any illness benefit that the employee is entitled to claim will be displayed on screen. As the first 6 days do not attract Illness Benefit, dependent in the pay frequency and the normal working week there may not be an entitlement to Illness Benefit in the first working week.

PAYE will be calculated for the period based on the Illness Benefit entered. Most often, the employees tax credit and cut-off point for the period will cover the PAYE due on the Illness Benefit. If the employee is on a Cumulative Basis, accumulated tax credits and cut-off points may also result in a PAYE refund due.

Editing the Illness Benefit calculated

In the event that the employee is not entitled to illness benefit or the employer receives notification from the DSP of the amount of illness benefit that the employee is claiming and this differs to the amount being calculated by BrightPay, an edit facility is available.

Within the ‘Parenting/ Illness Benefit’ section on the employee’s payslip, click the Edit button to the left of the illness benefit amount being calculated.
If the employee is not entitled to illness benefit, simply untick the box Entitled to Illness Benefit?
If an adjustment is needed to the illness benefit currently being calculated by BrightPay, amend the illness benefit in the field provided Illness Benefit Amount.
If the illness benefit is being paid directly to the employer, tick the dedicated field provided Benefit paid directly to employer?
All amendments are autosaved.