If you pay an employee when they are ill, a PRSI contribution applies to the amount of pay. Some employers pay an employee when they are out of work due to illness as long as he or she hands over to the employer any Disability Benefit payment he or she may receive from the Department of Social and Family Affairs. In these circumstances, you should calculate the rate of PRSI contribution on the amount of sick pay
minus the amount of Disability Benefit.
If you pay an employee during illness and you allow him or her to keep the Disability Benefit payment, the normal PRSI contribution is paid on the full amount of the sick pay, ignoring the Disability Benefit payment.
If you do not pay an employee who is absent through illness, no PRSI contributions are due.
The first six weeks of Disability Benefit in any tax year and any payments for dependent children are non-taxable. Employers must make certain adjustments to their normal PAYE procedures to take account of the taxable portion of the Disability Benefit. You can get more information in Revenue's
PAYE Notice To Employers January 2005 and in Revenue's guide IT50, both of which are available on the Revenue website