SimplePay has a built-in item to accommodate the special tax and reporting requirements related to medical insurance.
There are a few possible scenarios, all of which can be accommodated on the system:
- you pay any part, or all, of your employee’s medical insurance premium – in which case a taxable Benefit in Kind (BIK) will arise
- you pay the full premium over to the insurer, but the employee re-imburses you for the full amount by means of a salary deduction
- you pay the full premium over to the insurer – covering both the employee and a family member – but the employee will re-imburse you for the family member’s premium by means of a salary deduction; the payment of the employee’s premium will also give rise to a BIK
To add the medical insurance item, you should follow these steps:
- Go to an employee’s profile and click on Add (next to Regular Inputs) > Medical Insurance.
- Total gross: enter the gross annual premium if available. A monthly premium will have to be annualised by multiplying it by 12. If a family member’s premiums are also paid, you should add the family member’s gross annual premium to that of the employee.
- Eligible for trs: tax relief at source (TRS) is limited to the first €1,000 for an adult (an individual aged 21 and over) and the first €500 for a child (an individual under 21 years of age).
- For example, if the premiums are being paid for an adult employee and their adult spouse, you should enter 1,000 + 1,000 = 2,000 in this field. Or 1,000 + 500 = 1,500 for an adult employee and one child (under 21 years).
- Employee gross: enter any amount to be paid back by the employee.
- For example, if an 800 gross premium (entered into Total gross) is split 75/25 between you and the employee, you would enter 25% x 800 = 200 in this field. Or if an amount of 1,800 was entered as the Total gross amount, but 800 of that relates to the employee’s spouse and you only agreed to pay the employee’s portion, you should enter 800 in this field – being the amount that is paid back by the employee.
Once these inputs have been captured, the system automatically calculates the BIK on the total gross premium paid by the employer (Total gross – Employee gross). It also calculates the nett amount that needs to be deducted from the employee’s payslip – for example, to cover the wife’s premiums – as well as the TRS liability owed by your company to Revenue.
All of these amounts can be reviewed in the accounting report available from the Pay Runs tab.