Tax Relief on Health Insurance: A Guide for Employers in Ireland

Offering health insurance as part of an employment package in Ireland can be an attractive benefit-in-kind supplied by employers seeking to formulate attractive rewards and benefits packages to attract and retain talent. Health insurance is something which gives employees peace-of-mind and can be something which is highly sought by employees seeking to move jobs.   

Related Blog: What is Benefit in Kind and Why Must Employer’s Know About It? 

Our Reward Navigator findings noted that 38% of employers in Ireland surveyed said that they provided health and wellness benefits as part of their rewards package, and 22% of employees said that it was their favourite form of reward.  

Including health insurance as part of a rewards package is a great way to mix an attractive employee perk with a tax-efficient offering. Our Reward Navigator series has informed us that in Ireland, 58% of employers have found that their reward offerings have had a positive impact on employee retention and motivation. With tax relief on premiums, employees pay less than they would for equivalent coverage purchased independently, making it a more cost-effective offering for them.  

Related Guide: Download our step-by-Step Rewards guide for expert insights
 
Ireland’s tax relief framework plays an important role in making health insurance more accessible for employees. 

Health insurance is something which is of great value to employees in Ireland and adds greatly to employee satisfaction and retention. For employers, it can provide a competitive edge in attracting talent, as many employees take the presence or absence of health insurance as a deciding factor in accepting or declining a position.  

For employers, providing health insurance can provide valuable support for employees in terms of health and wellbeing and works to keep your employees feeling good and able to focus on their tasks. It can often lead to greater productivity. 

Many employees find their health insurance a great source of support, with plenty availing of health and wellness treatments such as therapy, massage, and many more.

Ireland’s Tax Relief Framework for Health Insurance 

Tax Relief at Source (TRS): 

• The government applies tax relief directly to health insurance premiums at the standard rate of 20%.
• This relief is calculated on the first €1,000 per adult and €500 per child of the premium.
• The reduced premium (post-tax relief) is what individuals or employers pay to insurers, simplifying the process. 

Benefit-in-Kind (BIK) and Employers: 

• When an employer pays for an employee’s health insurance, it is considered a benefit-in-kind (BIK).
• Employees still receive the TRS, reducing their perceived cost. Employers must report the BIK for payroll and taxation purposes. 

Accessibility and Affordability: 

• By reducing the upfront cost of health insurance, TRS makes it more accessible to both individuals and employers.
• For employers, this framework helps create cost-effective benefits packages to attract and retain talent without significant financial strain. 

Streamlined Administration: 

• The relief is applied automatically through insurers, meaning there’s minimal administrative burden for employers or employees. 

Employers offering health insurance as part of their benefits package can highlight the affordability facilitated by the tax relief.  

This framework supports the adoption of private health insurance in workplaces, which is particularly valued given the pressures on Ireland’s public healthcare system.  

Employers must be certain that they are ensuring their compliance with Ireland’s tax legislation when offering health insurance to avoid fines or other regulatory issues.  

For employers, an integrated payroll solution and HR system can be helpful in accounting for employer-provided health insurance policies in payroll systems.  

Related Resource: Medical BIK Information from Revenue.

Long-term Benefits 

Employee Loyalty: 

Health insurance is consistently ranked as a highly desirable employee benefit, and signals a company’s investment in its staff's wellbeing, fostering loyalty and increasing employee retention. In competitive job markets, health insurance can be a deciding factor for prospective hires. 

Reduced Absenteeism: 

Providing private health insurance improves employees' access to quicker medical care, reducing recovery times and limiting sick days. Employees who can manage their health proactively are less likely to require extended leaves. 

Promoting a Culture of Care 

A robust health insurance plan demonstrates that the company prioritises its workforce’s health and wellbeing. This contributes to a positive workplace culture, enhancing morale and productivity. Employers who foster this culture often report higher engagement levels and satisfaction among employees, which supports overall business success. 

Take a step-by-step approach to review what benefits are currently in place and set realistic goals for improvement within your means. 

1. Evaluate current benefits packages and gather employee feedback to understand the demand for health insurance.
2. Consider your organisation’s budget and potential return on investment in terms of employee retention and productivity.
3. Engage with health insurers to identify group plans tailored for businesses. Many providers such as Laya, VHI, or Irish Life offer customisable options with added perks like wellness programs, mental health support, or fitness discounts, which can further enhance employee satisfaction.
4. Compare plans to ensure coverage aligns with employee needs and organisational goals.
5. Work with payroll teams or software providers to accurately manage BIK implications for health insurance.
6. Ensure compliance with tax laws, leveraging automated systems to account for tax relief and simplify reporting obligations. 

Providing health insurance as a workplace benefit is a win-win for employers and employees. Tax relief makes it a cost-effective addition, while the perceived value contributes to better employee satisfaction, loyalty, and wellbeing. 

By offering health insurance, employers position themselves as proactive, caring organisations, supporting a healthy and productive workforce.