Changes to Maternity Benefit from 01 July 2013
One of the key & most controversial changes of budget 2013 was that Maternity benefit is to become a taxable source of income from the 01st of July 2013. It will continue to be exempt from universal social charge (USC) which is in line with other social welfare payments.
So what does this mean? As things stand any woman who was on maternity leave would have received €6,812 worth of maternity benefit payments in the six months after the birth of their child without having to pay any tax on it. From the first of July however this payment is to be included as a taxable source which means you could be losing up to 41% of it to tax.
So why is the government doing this? The government is trying to fix an anomaly whereby certain women end up with higher take home pay while they are on maternity leave. This happens because sometimes companies give employees a top up where they pay the difference between the maternity benefit & what the employees normal gross pay but with a portion of this being exempt from the tax the take home pay of the person on maternity leave could end up higher than if they were not on maternity benefit. The measure will bring in €15m in extra tax revenue in 2013, and €40m in a future years.
As an employer it is worth noting that you will need to update their payroll software to make sure it can accommodate this new taxable source of income. You will also need to review your maternity leave/benefit policy.
For more information on Maternity benefit please see http://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/social_welfare_payments_to_families_and_children/maternity_benefit.html