Maternity benefit - does it make any difference tax wise who the MB is paid to?

duedate

Morning,

I'm due to go on maternity leave in mid-November and will be claiming the state maternity benefit.

On the claim form, it gives the option of getting the 230 euro a week benefit paid directly to me or to my employer.

My employer is paying a small percentage of top up pay.

Does it make any difference from a tax point of view if the state benefit gets paid to my employer & then passed on to me, or gets paid directly to me & then my employer just pays the top up amount?

Are there any pros/cons to getting it paid to my employer & then down to me?

I've looked at the online examples but still not sure.

Thanks.

Cakerbaker

duedate wrote: »

Morning,

I'm due to go on maternity leave in mid-November and will be claiming the state maternity benefit.

On the claim form, it gives the option of getting the 230 euro a week benefit paid directly to me or to my employer.

My employer is paying a small percentage of top up pay.

Does it make any difference from a tax point of view if the state benefit gets paid to my employer & then passed on to me, or gets paid directly to me & then my employer just pays the top up amount?

Are there any pros/cons to getting it paid to my employer & then down to me?

I've looked at the online examples but still not sure.

Thanks.

I had mine paid to my employer so my fortnightly salary and taxes remained the same (my employer topped me up to my full salary). My understanding is if you the maternity benefit and wages paid separately you may end up owing tax at the end of the year as you may not pay any / enough tax on the 2 amounts compared to the amount you would pay on the total amount. If you owe tax at the end of the year it would be taken back from next years wages. Hope that makes sense!

duedate

Thanks cakerbaker, that does make sense alright so I will just go with that - one less thing to worry about come end of year hopefully!

Cakerbaker

duedate wrote: »

Thanks cakerbaker, that does make sense alright so I will just go with that - one less thing to worry about come end of year hopefully!

If your top up and maternity benefit are less than your normal salary you may even be entitled to a bit of a tax refund as your tax each week would have been based on the fact you would be earning a certain amount for the year so if it's less than that you should get some tax back.

duedate

But not if they reduce my tax credits & cut off as they should due to MB being taxed now?

And yes, sadly my top up & mb will be significantly less than my usual take home pay.

Cakerbaker

this is just something I've come up with from my own research so others may correct me. I'm using made up figures here and obviously this will depend on whether you're on the higher or lower rate of tax but if you've been earning €500 a week up to now, your tax has been calculated on the basis of earning €500 every week. If you're now earning €300 a week between now and the end of the year you'll have overpaid tax at the beginning of the year so may be entitled to a refund. Again, this is just my understanding so someone else may be able to give a more definitive answer. I got full pay but am now taking the 4 months unpaid. I figure I'll be due a refund as the unpaid period will bring me from the higher tax rate to the lower and I've been paying tax at the higher rate for 8 months of the year.

Just Retired

There is no real advantage either way as you should only pay the same amount of tax USC PRSI etc. by years end.I will cite my situation as regards State Benefits paid out during my Employment.The Company rule was you get paid your full Salary ("Top Up") whilst Claiming Illness Benefit.(A Taxable Event).However I had to Sign over the Illness Benefit to my Employer,as full salary was paid.This ("Top-Up") would decrease over say a period of time,depending on the terms and conditions of my contract of employment.
The signing over of the Benefit did a number of things: 1)It ensured that the correct tax was deducted as the illness benefit was processed:-viz.Basic Monthly Salary e.g.€2,500.00c
Illness (Maternity) Benefit €920.00c.Your Basic Salary would now be €2,500.00c Minus €920.00c i.e.€1,580.00c.But in order to "Capture" the correct Tax,the Taxable amount would be as if it were your normal salary i.e.€1580.00c+€920.00c.This ensures that you would not be over taxed.However if this system is in use do ensure that it is processed through the company's payroll,check your payslip.When this system is used You will only pay USC/PRSI on €1,500.00c (Top-Up portion) and not on any State Benefits. Also The Employer's portion of PRSI applies to the Top-Up only. Top-Up from Employers can mean various levels of Top Ups, and not necessary the example given above.Whatever your amount of Top-Up is,it is deducted in the same way as set out above,and all income less deductions are remitted,including M.B.,to your nominated account.
The other way is to have your S.R.C.O.P.(Standard Rate Cut-off Point) and Tax Credits Cert.adjusted in order to capture the correct deduction for the maternity benefit.This would be of practical use From Next Jan.'17 until the balance of whatever your benefit M.B. time is.This way you collect the M.B.or paid directly into your nominated account from the Department of Social Protection etc. Your employer then works with the adjusted SRCOP/Tax Credits cert. and the correct Deductions from your Top-Up Pay are applied and all should be in order, again USC/PRSI are only applied to the Top-Up Pay. If you are going to use this method,you will have to contact your Local Revenue office,and ask them about obtaining an adjusted Cert.Assume you do this,and when the Benefit period is up,you will need to inform revenue,and have the cert corrected to it's normal SRCOP/Tax Credits,for the remainder of the Tax Year in question.Your employer WILL NOT contact the revenue office on your behalf, you must do this of your own accord.
There are Pros and Cons for whatever method is used.In signing over the M.B.to your employer,you can be assured the correct deductions are made as explained above,and includes your M.B. Plus Top-Up Salary,amounting to no more than your normal Take home pay,this may be an advantage if your employer's maternity/Illness benefit schemes lasts for 6 mths.It would of course depend on your amount of Top-Up,however if your employer only operates a Top-Up system,i.e.they do not process M.B.payments through the payroll system,you will have to ensure that the SRCOP/Tax credits are adjusted in order to ensure correct deductions are made to the Top-Up pay as explained above.
Find out from your employer what way they operate this scheme,or if you know of someone who was in receipt of M.B.whilst they were employed and ask their experience on it?
I hope this will be of some use to you.It is important to check all of your Payslips and that all is in order with them,during the M.B.Period.