Taxation of certain social welfare payments received by employees

How to pay an employee who is receiving Illness Benefit

Note

The information in this section refers to current employer obligations. For employer obligations before 1 January 2019, please see the Employer’s Guide to PAYE.

Where there is a sick pay scheme in operation, the employer should only tax the pay-related portion of an employee’s salary. Revenue collects the tax due on any Illness Benefit payments by reducing the employee’s tax credits and rate bands. Employers must use the tax credits and rate bands from the most recent Revenue Payroll Notification (RPN) issued by Revenue. 

Below are three examples explaining how the Illness Benefit process operates.

  • Example 1 (Illnes Benefit is paid directly to the employer)

    Pat is weekly-paid (Friday pay day) and has instructed the Department of Social Protection (DSP) to pay any Illness Benefit directly to his employer. He is out sick from Wednesday 11 March 2026.

    Pay day: Friday 13 March 2026

    The employer pays Pat as normal, as the DSP do not pay Illness Benefit for the first three days of a claim.

    Pay day: Friday 20 March 2026

    The employer has received a payment of €200 from the DSP. Pat is normally paid €500 per week. For taxation purposes, the €200 should not be included in the calculation of:

    • Pay As you Earn (PAYE)

    • Universal Social Charge (USC)

    • Pay Related Social Insurance (PRSI).

    The employer reduces the weekly taxable pay to €300 (€500 – €200).

    Pay day: Friday, 27 March 2026

    The employee returns to work on Tuesday 24 March. An updated RPN is received from Revenue with reduced tax credits and rate band. The employer only taxes the pay-related portion of the salary as the Illness Benefit has been included on the most recent RPN.

    The employer must not include the Illness Benefit received on the payroll submission to Revenue.

  • Example 2 (Illness Benefit is paid directly to the employee)

    Niamh is paid fortnightly and her employer operates a sick pay scheme. She is out on sick leave from 3 March 2026 and all Illness Benefit payments are being paid directly to her.

    Pay day: Friday 6 March 2026

    The employer pays Niamh as usual.

    Niamh returns to work on 17 March 2026. She was paid Illness Benefit of €244 by the DSP which she hands over to her employer. An updated RPN is received from Revenue with reduced tax credits and rate band on 18 March 2026.

    The employer will need to contact Niamh directly for the details of the Illness Benefit claim.

    Pay day: Friday 20 March 2026

    The employer should reduce the taxable pay by the amount of Illness Benefit received to date (€244). They must  then apply the most recent RPN received on 18 March 2026.

  • Example 3 (The employer does not operate a sick pay scheme)

    Áine is paid weekly and is on sick leave from 29 January 2026.

    She is paid on Friday 30 January for the three days she worked that week. The employer does not pay her on 6 or 13 February because she is still on sick leave.

    Áine returns to work on 17 February 2026 and Revenue issues an updated RPN to the employer the next day. This notification takes into account the amount of taxable Illness Benefit that Áine received. 

    On the next pay day (Friday 20 February) Áine is taxed as usual on her pay. This is for the period from 17 to 20 February using the most recent RPN.

Next: Taxing maternity, paternity, parent's, adoptive, and health and safety benefits

Published: 21 May 2026 Print this page

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