Last Updated January 2017
Taxation of Illness Benefit
The regulations regarding the taxing of Illness Benefits (Formerly known as Disability Benefit) are applied by DCU as follows:
Staff paying PRSI at Class A may be entitled to payments from the Department of Social Protection (DSP). DCU are obliged firstly to deduct these benefits from your pay while on full pay from the University and also to tax and deduct Pension Related Deduction on certain portions of these benefits. DCU must always assume that the employee is in receipt of the benefit unless notified by the DSP to the contrary.
It is therefore vital that you apply for Illness Benefit at the beginning of your illness. You must apply for it within seven days of the start of your illness. If you do not claim for the Benefit within the correct time, you may lose out on payment for each day that you delay. For example, if you become ill on 1 March, but you apply for Illness Benefit on 10th March, you may lose out on three days’ payment because you have applied after 7th March.
It should also be noted that when completing your claim for Illness Benefit that you request payment to be made directly into your OWN bank account and NOT made directly to your employer..
You must also supply the payroll section with a copy of your IB8 form by post or email a pdf copy to firstname.lastname@example.org. This form is sent to you by the DSP when your claim is sanctioned. This will give payroll the full information required to apply the appropriate deductions. Failure to supply this form could result in an under or over deduction of tax etc.
Unless the Department of Social Protection instructs the Payroll Section that you are not entitled to Illness Benefit the following method will apply:
- For the first six days of any one illness there is no entitlement to sick pay from DSP and therefore there is no change in pay.
- While you remain on full pay less Illness Benefit from the University, the Illness Benefit is added to your other pay and the combined sum has Tax and PRD deducted but there is no liability to PRSI or USC on the Illness Benefit.
- Once you go onto half pay or less from the University, the payroll section no longer deduct the value of the Illness Benefit from your pay, but it does have to continue to apply all other appropriate deductions due. Again the method used to do this is to add the Illness Benefit to your reduced pay.
- If you do remain out long enough to go onto no pay from the University. The payroll section is obliged to apply the appropriate deductions of any Illness Benefit that you receive from the first date at no pay until your return to work. These deductions will be applied to your pay upon your return to the payroll.
If you find yourself in the position of having to claim Illness Benefit you can contact the payroll section, email@example.com to have the above explained in detail based on your personal tax position.