Maternity Pay

L

lindy

Guest
Hi
Any help appreciated, i am going on maternity leave in April and investigating the most cost effective way of getting paid, my employer will pay me 100% wages so should i pass the maternity ben cheque to him and keep getting my wages at normal or is it more tax efficent to reduce my wages by the maternity ben amount and cash the cheque myself?

Also as i shall be out over a few public holidays are these added on? how does that work,
Thanks
Lindy
 
thanks but no because it doesnt answer my question re best tax efficieny to me!! thanks anyway
 
Maternity benefit is not taxable so if your employer can't factor this into payroll calculations when paying you 100% of your normal earnings then you might be better off getting paid net of maternity benefit and keeping the cheque yourself. I guess this means that your employer should deduct maternity benefit from your gross salary and THEN calculate tax/PRSI deductions. I think that there was a topic on AAM about somebody whose employer did it the other way around - calculated normal net pay and then subtracted maternity benefit from that which meant that the employee lost out.
 
Mrs Z got hit that way. I think.

At the end of the day your tax return and the treatment of that by the Revenue is what will determine the correct tax owing. Different treatments can result in timing differences as to when you or the Revenue get the actual money, but the net outcome should be the same (as long as a return is completed).

I think the problem arises when the employer continues paying 100% salary (and expects to get the amount of the benefit cheques paid back) without taking account of the fact that some of it should now be tax free.

For example - you are on €1,000 gross each month and take home €600. Now you get €100 benefit as well. This makes €1,100 gross and €700 take home. Your employer asks for the €100 back and you appear to be back to the old amounts *EXCEPT* that it should now be €900 gross, €570 (or whatever) take home, plus €100 tax free from the benefit making a total of €670, but as above you are now getting only €600.

All washes out in the end, but I just don't understand why employers do it this way except to avoid having to issue two instructions to the payroll department - reduce gross pay at the start and re-instate it at the end.

z
 
maternity benefit

You are entitled to claim for any public holidays during your period of maternity leave.
By the way, your employer agreeing to pay 100% salary is great. I'm just back from maternity leave a month or so. My employer didn't help out at all. He's not obliged to. Maybe if the issue of maternity benefit and income tax doen't benefit you too much you might just let it go unless you're pretty confident he won't eithdraw the offer if it gets too messy.
 
Re: maternity benefit

Say, your existing salary is €4000 per month and you will be getting €928 maternity benefit a month.

Situation A) A very generous employer continues to pay you €4000 per month and asks for the cheque back:

Your net position will not have changed. You will be getting the same as you were always getting. It will cost your employer: €3502(4000 + prsi less 928) .

Situation B) Your employer should let you keep the cheque and should reduce your gross pay by1657. ( 1657 less 44% tax = €928) . You will be no worse off and you could be better off if it brings you down to a lower tax bracket.

The cost to your employer will be €2595 ( 4000 - 1657)+prsi.

So everyone benefits if you take a cut in your gross pay instead of refunding the social welfare cheque.

Brendan
 
tax benefit

I think maternity benefit is not reckoned for incomne tax purposes - so even if it doesn't bring you into a lower tax bracket, you are into a tax saving if your employer is paying you the (gross) difference between the benefit and your normal pay. I never checked out the law on this, but I have personal experience of just such a tax benefit arising.
 
Re: tax benefit

I think maternity benefit is not reckoned for incomne tax purposes
Click to expand...

That is correct.
 
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