How does the new paternity legislation affect your business?

Tracey Glacken from Glacken Accountants discusses Paternity Legislation and the impact on the small business.

Over 40 years ago Sweden introduced paid paternity leave for fathers and from 1st September 2016 Paternity Benefit is now available in Ireland.

It applies to a person in respect of any child born to them or placed with adoptive parents. The person must be in employment/self employment and covered by PRSI. Paternity Benefit provides a weekly payment of €230 for two weeks. Paternity Benefit must begin on or within 26 weeks of the estimated due date/date of placement and must end no later than 28 weeks from this date.

A report carried out in March 2016 by OECD stated that over half of all OECD countries grant aid parental leave but in many countries fathers account for less than one in five of those taking parental leave. So will Ireland be any different? The Department of Social Protection has estimated that between 30,000-40,000 fathers might apply for the benefit in a full year. Of the 35 countries in the OECD Ireland was only 1 of 9 countries that did not offer paid paternity leave before September. Some countries offer up to 53 weeks of paid leave.

The positive impacts of parental leave include helping the mother recover from childbirth, greater share of the childcare burden, and the support of women’s careers.

Claiming the benefit

In order to claim the benefit you need to give your employer at least 4 weeks’ notice and provide proof of the expected date of delivery. You also need to be able to make your application online via www.welfare.ie

Your employer then completes a form to confirm that you are entitled to Paternity Leave for the dates provided.

If you are self employed a doctor must certify the due date. For the self employed person they will receive a guaranteed income of €230 per week to allow them to enjoy the first few weeks of their newborn’s life at home.

There is no statutory obligation on the employer to continue to pay normal salary during the paternity leave. Some employers may wish to ‘top up’ their employees’ salary during this time as is done in some cases during maternity leave for the mother. During the announcement of the bill the Government stated that there would be no change to employers PRSI to fund this initiative. The rule that employees must give their employer 4 weeks notice will allow the employer to plan for the time which the employee is absent.

Employee rights are protected during their leave. Their working conditions cannot worsen and if pay or working conditions improve while the employee is off then they are entitled to these benefits once they return.

Employers should now update their company policies to take account of this new benefit. Overall, there should be no financial burden on the employer with this change.

Impact on Payroll

Paternity Benefit (including any increases for adults and child dependants); payable by the Department of Social Protection (DSP) is liable to tax. USC and PRSI will not apply.

Revenue will receive details of the benefit payments which will be updated onto Revenue’s records.

Individuals, who pay their tax through the PAYE system will, where possible, automatically have their annual tax credits and rate bands reduced by the amount of the Paternity Benefit payment. Employers/pension providers will be advised of the adjusted tax credits and cut-off points on employer tax credit certificates (P2Cs).

The self employed will include the benefit on their Form 11 at the end of the tax year.

Software to help you

Sage Micropay now enables compliant processing of the new paternity benefit statutory entitlement that came into place from September 1st 2016. Ensuring compliant treatment of leave and the associated payments.

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Tracey Glacken

Owner at Glacken Accountants

Tracey Glacken is owner at Glacken Accountants. Glacken Accountants work with SME’s in the areas of audit, financial statements preparation, personal and company taxation, company secretarial and business planning.

Tracey is a member of the Institute of Certified Public Accountants in Ireland and has worked for over 13 years in practice. Tracey has advised clients in many different sectors from small start-up business to medium sized companies and has extensive experience in statutory audit, financial and management reporting. See www.glackenaccountants.com for more information.