Taxation of Welfare Benefits

PAYE Employee

What happens if I am in receipt of short-term Illness Benefit and not in employment?

Illness Benefit and short-term Occupational Injury Benefit are taxable sources of income. However, the child dependent element of the benefit is exempt from tax. If you make a claim for a tax refund while out of work, the taxable portion of the Illness Benefit will be added to your pay and the appropriate refund, if any, will be made. Leaflet IT 22 outlines the Taxation of Illness and Short-term Occupational Injury Benefits

Back to Top

What happens if I am in receipt of short-term Illness Benefit while still in employment?

If you are absent from work due to illness and receive Illness Benefit, your employer will take the necessary steps to ensure that the taxable portion of the benefit is taxed.

Back to Top

If I am in receipt of Jobseekers Benefit while unemployed how will this affect my claim for a tax refund?

Jobseekers Benefit is a taxable source of income. However, any child dependent element and the first €13 per week of benefit are exempt from tax. When you make a claim for a tax refund the taxable portion of the Jobseekers Benefit will be added to your pay and the appropriate refund, if any, will be made. You should note that if the weekly amount of your Jobseekers Benefit exceeds your weekly tax credit you will not be entitled to a refund. Leaflet IT 24 outlines the taxation of Jobseekers Benefit.

Back to Top

Treatment of Maternity Benefit, Adoptive Benefit and Health & Safety Benefit

Introduction

In his Budget speech in December 2012 the Minister for Finance announced that Maternity Benefit, payable by the Department of Social Protection (DSP) from 1 July 2013 would be liable to tax, but, similar to other DSP type payments, would not be liable to Universal Social Charge (USC) or Pay Related Social Insurance (PRSI). The legislation giving effect to the Minister’s announcement is included in Section 8 of the Finance Act 2013. The legislation refers to the taxation of Maternity Benefit, Adoptive Benefit and Health & Safety Benefit (including any increases for adults and child dependants) payable by the DSP.

For the remainder of this document references to 'Maternity Benefit' may be taken to include the other two benefits, Adoptive and Health & Safety Benefits, as the tax treatment for each is similar.

Maternity Benefit, payable for periods prior to 1 July 2013, remain exempt from tax, USC and PRSI. The position in relation to Maternity Benefit Payable for periods prior to 1 July 2013 is set out in the Taxation of Maternity Benefit, Adoptive Benefit, and Health & Safety Benefit payable up to 30 June 2013 section.

This document outlines how Revenue will tax Maternity Benefit for PAYE taxpayers in receipt of Maternity Benefit payable by the DSP from 1 July 2013. It also contains a section dealing with 'Frequently Asked Questions' in relation to the taxation treatment for PAYE taxpayers.

Taxation of Maternity Benefit, Adoptive Benefit, and Health & Safety Benefit payable from 1 July 2013

As part of the on-going exchange of information arrangements between DSP and Revenue, Revenue will receive details of the benefit payments which will be updated onto Revenue's records.

Individuals who pay their tax through the PAYE system will, where possible, automatically have their annual tax credits and rate bands reduced by the amount of these payments.

Employers will be advised of the adjusted tax credits and rate bands on employer tax credit certificates.

The treatment in specific situations from 1 July 2013 is outlined below:

1. Employees who receive full wages, salary, etc., as normal while out on maternity leave and hand-over or mandate the Maternity Benefit directly to their employer.

Revenue will adjust the employee’s tax credits and rate band by the amount of Maternity Benefit payable by the DSP and in this way collect the tax on the Benefit payable. In such circumstances, only the difference between the wages, salary, etc. paid and the Maternity Benefit recovered is subject to tax, USC and PRSI by the employer in the pay period.

Example

An employee is out on maternity leave from 1 July 2013 and continues to receive their normal gross salary of €700 per week. Maternity Benefit of (say) €262 per week is paid directly by the DSP to the employer (or handed over in full by the employee to the employer).

As Maternity Benefit payments are taxable from 1 July 2013, Revenue will receive the Maternity Benefit details directly from the DSP, reduce the employee’s annual tax credits and rate band by the Maternity Benefit amount, and send a revised tax credit certificate to the employer.

The employee's weekly salary of €700, paid over by the employer to the employee, is effectively made up of:

Maternity Benefit       €262
Company Salary          €438
               	        €700
 

The company salary portion (€438) is chargeable to tax, USC and PRSI by the employer.

The tax payable on the Maternity Benefit portion (€262) has been collected by the reduction in tax credits and rate band. Maternity Benefit is not chargeable to USC or PRSI.

2. Employees who receive full or ‘top-up’ wages, salary etc., while out on maternity leave and the employee retain the Maternity Benefit

Where an employee receives full or partial (‘top-up’) wages or salary while out on maternity leave and the employee retains the Maternity Benefit, tax, USC and PRSI is charged by the employer only on the amount of wages or salary actually paid by the employer.

Example

An employee whose normal gross pay is €700 per week is out on maternity leave from 1 July 2013. They receive Maternity Benefit of (say) €262 per week from DSP and keep the payments. Their employer pays them a ‘top-up’ salary of €438 per week.

As Maternity Benefit payments are taxable from 1 July 2013, Revenue will receive the Maternity Benefit details directly from the DSP, reduce the employee’s annual tax credits and rate band by the Maternity Benefit amount, and send a revised tax credit certificate to the employer.

The 'top-up' salary of €438 is chargeable to tax, USC and PRSI by the employer.

The tax payable on the Maternity Benefit portion (€262) has been collected by reduction in tax credits and rate band. Maternity Benefit is not chargeable to USC or PRSI.

3. Employees who do not receive wages, salary etc., from their employer while out on maternity leave and the employee retains the Maternity Benefit

Revenue will receive the Maternity Benefit notification from the DSP and will reduce the tax credits and rate band of the employee by the Maternity Benefit amount, and issue a revised tax credit certificate to the employer.

If the employee is not entitled to any pay on the usual pay day, the employee may contact her employer to request repayment of any tax that might be due, having regard to her cumulative pay at that pay day and the corresponding cumulative tax.

Alternatively, on the employee's return to work after a period of maternity leave, any refund of tax, which may be due to the employee, can be calculated by the employer having regard to the employee’s cumulative pay at the date of the pay day in question and the corresponding cumulative tax.

Frequently Asked Questions

1. Why are Maternity Benefit, Adoptive Benefit and Health & Safety Benefit being taxed?

These benefits are being taxed as a result of a measure announced by the Minister for Finance in Budget 2013 (Section 8 Finance Act 2013).

2. From what date will Maternity Benefit become taxable?

Maternity Benefit payable by the DSP from 1 July 2013 is liable to tax.

3. Is Maternity Benefit subject to USC or PRSI?

No. Maternity Benefit payments are not subject to USC and/or PRSI.

4. How will Maternity Benefit be taxed?

As part of the on-going exchange of information arrangements between DSP and Revenue, Revenue will receive Maternity Benefit details which will be updated onto Revenue’s records.

  • A DSP Maternity Benefit recipient who pays their tax through the PAYE system will have their annual tax credits and rate bands reduced by the Maternity Benefit amount which may result in additional tax being stopped from any PAYE employment(s) they have.

Employers will be advised of the adjusted tax credits and rate band on employer tax credit certificates.

  • A DSP Maternity Benefit recipient who is self-assessed and pays their tax through the self-assessment system should include details of the Maternity Benefit received in their annual tax return (Form 11).

5. What rate of tax will I pay on my Maternity Benefit?

The rate of tax you will pay will depend on your personal circumstances and the tax reliefs and tax credits you are claiming. See the Employee’s Guide to PAYE

6. If I go on maternity leave after 1 July 2013, what do I need to do to ensure my Maternity Benefit is taxed correctly?

You do not need to do anything*. Revenue will receive Maternity Benefit details directly from the DSP. If you pay tax through the PAYE system your annual tax credits and rate band will be reduced by the Maternity Benefit amount. Your employer will be advised of the adjusted tax credits and rate bands on the employer tax credit certificate.

* A DSP Maternity Benefit recipient who is self-assessed and pays their tax through the self-assessment system should include details of the Maternity Benefit received in their annual tax return (Form 11).

7. I am on maternity leave from April 2013 to September 2013 and in receipt of Maternity Benefit. Will I be taxed on all my Maternity Benefit?

No. The amounts payable up to 30 June 2013 will not be taxed. Amounts payable from 1 July 2013 will be taxed.

8. I am employed by ABC Ltd and earn €700 per week. I will be out on maternity leave from 1 July 2013. As I qualify for Maternity Benefit payments from DSP I will receive €262 per week which is mandated to my employer. ABC Ltd continue to pay me my normal gross pay of €700 per week while I am on maternity leave. How will my Maternity Benefit payments be taxed?

Revenue will receive Maternity Benefit details directly from the DSP, reduce your annual tax credits and rate band by the Maternity Benefit amount, and send a revised tax credit certificate to your employer. In this example:

Your weekly salary of €700 paid to you by your employer is effectively made up of:


Maternity Benefit      €262   Tax collected by reducing tax credits and rate band.  
                              Not chargeable to USC or PRSI.

ABC Ltd Salary	       €438   Chargeable to tax, USC and PRSI
Total		       €700	
 

The difference between the salary paid and the Maternity Benefit mandated is subject to tax, USC and PRSI.

Revenue receive the Maternity Benefit payment data from DSP, reduce the employee’s tax credits and rate band and issue a revised tax credit certificate showing:

Weekly rate band: €368.77	Weekly Tax Credits: €11.06 (example figures only)

Calculation				
Gross Tax	   €368.77 @ 20%		   €73.75		
		   € 69.23 @ 41%      		   €28.38	
		   €438.00		           €102.13

Less Tax Credits				   €11.06	
Net Tax payable					   €91.07	
				            
USC	            €438 @ standard USC Cut-Off Points shown on the P2C:    €17.56
PRSI calculation    €438 @ 4%  					            €17.52
Total Deductions:							    €126.15

9. I am employed by XYZ Ltd and earn €700 per week. I will be out on maternity leave from 1 July 2013. As I qualify for Maternity Benefit payments from DSP I will receive €262 per week which I will keep. My employer will pay me a salary ‘top-up’ payment of €438 per week while I am on maternity leave. How will my Maternity Benefit payments be taxed?

You will receive a total gross payment of €700 each week while you are out on maternity leave, made up of a Maternity Benefit payment and a salary 'top-up' payment.

Maternity Benefit - €262 - Paid directly to you from the DSP.

The tax due on your Maternity Benefit payments will be collected by reducing your annual tax credits and rate band by the Maternity Benefit amount. Revenue will send a revised tax credit certificate to your employer. These payments are not chargeable to USC and/or PRSI.

XYZ Ltd salary 'top-up' - €438 - The salary 'top-up' payment paid by your employer

The amount of this salary 'top-up' payment paid by your employer will be subject to tax, USC and PRSI.

10. I am in employment and will be receiving Maternity Benefit from 15 July 2013. I will not be paid by my employer while I am out on maternity leave. How will my Maternity Benefit payments be taxed?

Revenue will receive the Maternity Benefit notification from the DSP and collect the tax due by reducing your tax credits and rate band by the Maternity Benefit amount.

11. I may not return to work after my maternity leave. I will be receiving Maternity Benefit from 15 July 2013. How will my Maternity Benefit payments be taxed?

Revenue will receive the Maternity Benefit information from the DSP and take the payments into account when dealing with any tax repayment claim you make.

12. I received Maternity Benefit for 26 weeks (and kept the payments) and my employer paid me a 'top-up' in wages for the first 14 weeks only. How is my Maternity Benefit taxed?

Revenue will receive the Maternity Benefit notification from the DSP, reduce the tax credits and rate band by the Maternity Benefit amount, and issue a revised tax credit certificate to your employer.

  • Maternity Benefit period: Weeks 1 to 14 (employer pays 'top-up')

You keep the Maternity Benefit payments. The tax payable on the Maternity Benefit payments is collected by reduction of your tax credits and rate band

Tax, USC and PRSI will be charged by your employer on the amount of the top-up paid by your employer. (See Question 9).

  • Maternity Benefit period: Weeks 15 to 26 (no payment received from employer)

You keep the Maternity Benefit payments. The tax payable on the Maternity Benefit payments is collected by reduction of your tax credits and rate band.

13. The first 14 weeks of Maternity Benefit was paid to my employer while I received my salary as normal. The remaining 12 weeks of Maternity Benefit was paid directly to me and I received no salary from my employer. How is my Maternity Benefit taxed?

Revenue will receive the Maternity Benefit notification from the DSP, reduce the tax credits and rate band by the Maternity Benefit amount, and issue a revised tax credit certificate to the employer.

  • Maternity Benefit period: Weeks 1 to 14 (Maternity Benefit paid directly to employer and employee receives salary as normal)

In each pay period, only the difference between the wages, salary, etc. paid and the Maternity Benefit recovered is subject to tax, USC and PRSI in the pay period.

Example

An employee is out on maternity leave from 1 July 2013 and receives their normal gross salary of €700 per week. Maternity Benefit of (say) €262 per week is paid directly to the employer (or handed over in full by the employee to the employer).

As Maternity Benefit payments are taxable from 1 July 2013, Revenue will receive the Maternity Benefit details directly from the DSP, reduce the employee’s annual tax credits and rate band by the Maternity Benefit amount, and send a revised tax credit certificate to the employer.

The employee's weekly salary of €700 paid over by the employer to the employee is effectively made up of:

Maternity Benefit  €262
Company salary     €438
                   €700 
  

The company salary portion (€438) is chargeable to tax, USC and PRSI.

The tax payable on the Maternity Benefit portion (€262) has been collected by the reduction in tax credits and rate band. Maternity Benefit is not chargeable to USC or PRSI.

  • Maternity Benefit period: Weeks 15 to 26 (Maternity Benefit paid directly to employee and no salary paid by employer)

You keep the Maternity Benefit payments. The tax payable on the Maternity Benefit payments is collected by reduction of your tax credits and rate band.

14. With effect from 1 July 2013, I understand my Maternity Benefit is being taxed by reducing my tax credits and rate band. How will this work in practice?

Revenue will adjust your annual tax credits and rate band to collect the full amount of tax due on a weekly basis. This is done by first 'annualising' the weekly amount of Maternity Benefit payable and dividing this by 52 to recognise the weekly figure. While a notional 'annualised' figure is used for this purpose, please note that only the actual amount of weekly Maternity Benefit payment received will be taxed in this way. The weekly adjusted tax credit / rate band will apply for the duration of the Maternity Benefit payments only and will be readjusted after the last payment is received, when the Maternity Benefit weekly element will be removed from the weekly tax credits and rate band. Where Maternity Benefit payments span two tax years see Question 15, in relation to the treatment for the second year.

See the following examples.

Example 1 - Employer continues to pay salary while the employee is on maternity leave

Anne is employed by ABC Ltd and earns €700 per week. The tax credit certificate which issued to her employer at the start of 2013 shows the following total tax credits and 20% rate band are to be applied from 1 January 2013:

Annual and Weekly Tax Credits and Rate Band
  Annual Weekly
Tax Credits €3,300* €63.47
Rate Band €32,800* @ 20% Balance @ 41% €630.77 @ 20% Balance @ 41%

*Estimated for the purpose of this example.

Anne is on maternity leave from 13 April 2013. As she qualifies for Maternity Benefit payments from DSP she receives (say) €262 per week which she has agreed to mandate directly to her employer. Anne’s employer continues to pay her normal gross pay of €700 per week while she is out on maternity leave (i.e. Maternity Benefit plus 'top-up' salary).

  • Maternity leave period 13 April 2013 to 30 June 2013 (11 weeks) - Maternity Benefit payments payable up to 30 June 2013 are not liable to tax.
  • Maternity leave period 1 July 2013 to 14 October 2013 (15 weeks) - Maternity Benefit payments payable from 1 July 2013 are liable to tax.

From 1 July 2013, Revenue receive Anne’s Maternity Benefit details directly from the DSP and reduce her annual tax credits and rate band by the Maternity Benefit amount, as follows:

Weekly Maternity Benefit:	    €262
This weekly figure is 'annualised': €262 x 52 weeks = €13,624

Reduce the 20% Rate Band

Current rate band		    €32,800
Less Maternity Benefit		    €13,624   (annualised – notional)
Revised rate band		    €19,176

Reduce the tax credits

Current tax credits		   €3,300.00
Less Maternity Benefit x 20%	   €2,724.80 (€13,624 x 20%)(annualised – notional)
Revised tax credits		   €  575.20

Revenue send a revised tax credit certificate (on a 'Week 1 basis') to Anne’s employer, showing the following tax credits and rate band to be applied from 1 July 2013:

Annual and Weekly Tax Credits and Rate Band
  Annual Weekly
Tax Credits €575.20 €11.07
Rate Band €19,176.00 @ 20% Balance @ 41% €368.77 @ 20% Balance @ 41%

This tax credit certificate is issued on a 'week 1 basis', which means that the employer is to apply this in payroll on a week by week basis and is not to back date it to 1 January 2013. In this way the notional annualised figure is restricted to a weekly adjustment for the duration of the Maternity Benefit payment only.

Anne’s first pay day in July 2013 is Friday 5 July. She receives her 'normal' gross pay of €700 amount from her employer (with the Maternity Benefit having been mandated directly to the employer). This €700 is effectively made up of:

Maternity Benefit   €262	Tax collected by reducing tax credits and rate band  
ABC Ltd Salary	    €438	Chargeable to tax
Total	            €700

The difference between the €700 salary paid and the €262 Maternity Benefit paid to the employee (i.e. €438) is subject to tax, USC and PRSI in the usual way. The Maternity Benefit portion (i.e. €262) is subject to tax but not to USC or PRSI. Anne’s employer applies the revised tax credit certificate and calculates her tax as follows:

Gross Tax	   €368.77 @ 20%		   €73.75		
		   € 69.23 @ 41%      		   €28.38	
		   €438.00		           €102.13

Less Tax Credits				   €11.07	
Net Tax payable					   €91.06	

Note for couples who are taxed under joint assessment

The above example used sample annual tax credits of €3,300 and a rate band of €32,800. Where the individual in receipt of Maternity Benefit payments does not have sufficient tax credits and rate band to collect the full amount of tax due on the Maternity Benefit, and where joint assessment applies, the balance will be collected from their spouse or civil partner by reducing their spouse’s or civil partner’s tax credits and rate band.

At end of Maternity Benefit period

In October 2013, DSP notifies Revenue that Anne’s Maternity Benefit payments have now ceased. Revenue adjust Anne’s weekly tax credit / rate band record by removing the weekly Maternity Benefit amount.

Revenue send a revised tax credit certificate (on a 'Week 1 basis') to Anne’s employer, showing the following tax credits and rate band to be applied from 14 October 2013:

Annual and Weekly Tax Credits and Rate Band
  Annual Weekly
Tax Credits €3,300* €63.47
Rate Band €32,800* @ 20% Balance @ 41% €630.77 @ 20% Balance @ 41%

*Estimated for the purpose of this example.

This tax credit certificate is issued on a 'week 1 basis', which means that the employer is to apply this in payroll on a week by week basis and is not to back date it to 1 January 2013.

Anne returns from her maternity leave on 14 October 2013. Her first pay day after returning to work falls on 18 October 2013. Her gross pay is €700. Her employer calculates her tax as follows:

Gross Tax	   €630.77 @ 20%		   €126.15		
		   € 69.23 @ 41%      		   €28.38	
		   €700.00		           €154.53

Less Tax Credits				   €63.47	
Net Tax payable					   €91.06	

Anne’s full gross pay of €700 is liable to USC and PRSI as normal.

Example 2 - Employer does not pay salary while the employee is on maternity leave

Sarah is employed by XYZ Ltd and earns €700 per week. The tax credit certificate which issued to her employer at the start of 2013 shows the following total tax credits and 20% rate band are to be applied from 1 January 2013:

Annual and Weekly Tax Credits and Rate Band
  Annual Weekly
Tax Credits €3,300 €63.47
Rate Band €32,800 @ 20% Balance @ 41% €630.77 @ 20% Balance @ 41%

Sarah is on maternity leave from 13 April 2013. As she qualifies for Maternity Benefit payments from DSP she will receive (say) €262 per week which she keeps. Sarah’s employer does not pay her salary while she out on maternity leave.

  • Maternity leave period 13 April 2013 to 30 June 2013 (11 weeks) - Sarah receives the Maternity Benefit payments from DSP. Maternity Benefit payments payable up to 30 June 2013 are not liable to tax. She is not paid by her employer.
  • Maternity leave period 1 July 2013 to 14 October 2013 (15 weeks) - Sarah receives the Maternity Benefit payments from DSP. Maternity Benefit payments payable from 1 July 2013 are liable to tax. She is not paid by her employer.

From 1 July 2013, Revenue receive Sarah’s Maternity Benefit details directly from the DSP and reduce her annual tax credits and rate band by the Maternity Benefit amount, as follows:

Weekly Maternity Benefit:	      €262
This weekly figure is 'annualised':   €262 x 52 weeks = €13,624

Reduce the 20% Rate Band

Current rate band		      €32,800
Less Maternity Benefit		      €13,624 (annualised – notional)
Revised rate band		      €19,176

Reduce the tax credits

Current tax credits		     €3,300.00
Less Maternity Benefit x 20%	     €2,724.80 (€13,624 x 20%)(annualised – notional)
Revised tax credits		     €  575.20

Revenue send a revised tax credit certificate (on a 'Week 1 basis') to Sarah’s employer, showing the following tax credits and rate band to be applied from 1 July 2013:

Annual and Weekly Tax Credits and Rate Band
  Annual Weekly
Tax Credits €575.20 €11.07
Rate Band €19,176.00 @ 20% Balance @ 41% €368.77 @ 20% Balance @ 41%

Sarah’s employer transfers these new figures to the payroll record.

Sarah will not be paid by her employer for the period of her maternity leave. The tax due on her Maternity Benefit payments is being collected by the reduction in her tax credits and rate band.

Note for couples who are taxed under joint assessment

The above example used sample annual tax credits of €3,300 and a rate band of €32,800. Where the individual in receipt of Maternity Benefit payments does not have sufficient tax credits and rate band to collect the full amount of tax due on the Maternity Benefit, and where joint assessment applies, the balance will be collected from their spouse or civil partner by reducing their spouse’s or civil partner’s tax credits and rate band.

At end of Maternity Benefit period

In October 2013, DSP notifies Revenue that Sarah’s Maternity Benefit payments have now ceased. Revenue adjust Sarah’s weekly tax credits / rate band record by removing the weekly Maternity Benefit.

Revenue send a revised tax credit certificate (on a 'Week 1 basis') to Sarah’s employer, showing the following tax credits and rate band to be applied from 14 October 2013:

Annual and Weekly Tax Credits and Rate Band
  Annual Weekly
Tax Credits €3,300* €63.47
Rate Band €32,800* @ 20% Balance @ 41% €630.77 @ 20% Balance @ 41%

*Estimated for the purpose of this example.

This tax credit certificate is issued on a 'Week 1 basis', which means that the employer is to apply this in payroll on a week by week basis and is not to back date it to 1 January 2013.

Sarah returns from her maternity leave on 14 October 2013. Her first pay day after returning to work falls on 18 October 2013. Her gross pay is €700. Her employer calculates her tax as follows:

Gross Tax	   €630.77 @ 20%		   €126.15		
		   € 69.23 @ 41%      		   €28.38	
		   €700.00		           €154.53

Less Tax Credits				   €63.47	
Net Tax payable					   €91.06	

Sarah’s full gross pay of €700 is liable to USC and PRSI as normal.

Note:

In this example, as Sarah was not paid during her period of maternity leave and her tax credits exceed the tax due on her Maternity Benefit payments, she may be due a refund of tax, in which case she should contact her Revenue office.

15. What happens if my Maternity Benefit claim spans two tax years?

Maternity Benefit payable in year one is taxed as outlined in Question 14. The balance payable in year two will be taxed by a reduction of tax credits and rate band, on a cumulative basis, from the beginning of the new tax year, which means that tax due on the Maternity Benefit for the second year is spread over the full tax year.

Taxation of Maternity Benefit, Adoptive Benefit, and Health & Safety Benefit payable up to 30 June 2013

Up to 30th June 2013 Maternity, Adoptive, and Health & Safety Benefit are not regarded as income for the purposes of the Income Tax Acts and should be disregarded for all tax purposes.

The tax treatment of these three benefits is similar and references to ‘Maternity Benefit/maternity leave’ throughout this document may be taken to include each of the other two Benefits.

Whether the payment must be taken into account by the payroll office will depend on the particular circumstances or arrangements between employers and employees while employees are on maternity leave and in receipt of these payments from the Department of Social Protection (DSP).

The treatment in specific situations up to 30th June 2013 is outlined below:

1. Employers who pay full wages, salary, etc. to employees as normal while out on maternity leave and recover the payments from the employees or directly from the DSP.

In such circumstances, only the difference between the wages, salary, etc. paid and the payments recovered are subject to tax, USC and PRSI in the pay period.

Example

An employee is out on maternity leave from 10 January 2013 and receives their normal gross salary of €700 per week. Maternity Benefit of (say) €262 per week is paid directly to the employer (or handed over in full by the employee to the employer).

The employee's weekly salary of €700 paid over by the employer to the employee is effectively made up of:

  Maternity Benefit   €262
Company salary        €438
               	      €700

The company salary portion (€438) is chargeable to tax, USC and PRSI. The Maternity Benefit portion (€262) is not chargeable to tax, USC or PRSI.

2. Employers who pay full or top-up wages, salary etc. to employees while out on maternity leave and the employees retains the payments.

Where an employer pays an employee full or partial wages or salary while out on maternity leave and the employee retains the payment, tax, USC and PRSI should be charged only on the full amount of wages or salary actually paid.

Example

An employee whose normal pay gross pay is €700 per week is out on maternity leave from 1 February 2013. They receive Maternity Benefit of (say) €262 per week from DSP and keep the payments. Their employer pays them a top-up salary of €438 per week.

Only the top-up of €438 is chargeable to tax, USC and PRSI. The Maternity Benefit the employee receives from DSP is not chargeable to tax, USC or PRSI.

3. Employers who do not pay wages, salary etc. to employees while out on maternity leave and the employee retains the payments.

If the employee is not entitled to any pay on the usual pay day, the employer, if requested by the employee or by someone acting on her behalf, should repay the appropriate amount of tax, having regard to her cumulative pay at that pay day and the corresponding cumulative tax.

Alternatively, on the employee's return to work after a period of maternity leave, any refund of tax, which may be due to the employee, can be calculated having regard to her cumulative emoluments at the date of the pay day in question and the corresponding cumulative tax. In this situation the employer should contact the employee's local Revenue office to confirm that it is in order to make such a refund.

It is important that an employer does not make a refund unless he/she is in possession of a current year cumulative Tax Credit Certificate in respect of the employee in question.

Back to Top


Print this page