Introduction
Paternity Benefit Taxation
- Paternity Benefit is a payment provided to employed or self-employed individuals who are on paternity leave from work and meet the relevant PRSI contribution conditions.
- It applies to births and adoptions occurring on or after September 1, 2016.
- Paternity Benefit is subject to PAYE.
- Revenue collects this tax by adjusting the individual's tax credits and cut-off points via their Revenue Payroll Notification (RPN).
- If the employee receives the benefit payment directly, it does not go through the payroll (unless the Employee subsequently gives the payment to their employer to process through payroll)
- If the employer receives the benefit to pass on to the employee, it should be processed as a non-taxable addition.
- Paternity Benefit is exempt from PRSI and the Universal Social Charge (USC).
Using Quick Setup to set up Paternity
You can use the Quick Setup facility to set up Paternity
Select the Employee you wish to set up Paternity for in the Employee Screen. At the top of the screen, click the Quick Setup button
Enter the amount of Paternity
In the Quick Setup Dialogue tick 'Taxable Statutory Paternity'
A section will appear where you can enter the amount of Paternity the employee getting per pay period.
If the employee is paid paternity directly from social welfare and they are not forwarding the payment to their employer, click the 'Employee Kept Paternity Cheque', otherwise make sure that 'Employer Kept Paternity Cheque' is ticked.
Click 'Save' to save the amount
Entering directly into the elements grid
If you have used the Quick Setup utility, notice that it has created a new element in the Employee Elements grid.
You could have also entered the details directly into the Elements grid without using the Quick Setup facility.
Note that:
- The Type column is Paternity
- PAYE, PRSI and USC columns are all unticked
If you entered the details directly into the grid, do not forget to click Update Employee to save it.
Even though paternity is liable for PAYE, note that the PAYE column is still unticked. This is because Revenue will tax the paternity by issuing a new RPN with adjusted tax credits/standard rate cut off point.
Employee Kept Paternity Cheque
If the employee kept the Paternity payment issued by the Department of Social Welfare, then a deduction will also be set up.
If you used 'Quick Setup' and ticked 'Employee Kept Paternity cheque' then this deduction will be automatically set up.
The employee should not also be paid the benefit by the employer as well as keeping the Social Welfare payment, so we need to put in the deduction.
Topping up Paternity Pay
Sometimes the employer may 'Top Up' the payment, maybe to meet contractual obligations.
To do this, add another element by entering it directly into the Elements grid. Make sure that PAYE, PRSI and USC are all ticked.
Grossing up
If the employer wishes to 'Gross Up' the top up, then tick the G.Up column for the top up in the elements grid. 'Gross Up' means that the amount is Net pay rather than Gross pay, ie, the amount is 'after tax'
