Managing PHI And Ill-Health Early Retirement In Ireland: A Guide For Employers

Employers that offer permanent health insurance (PHI) or ill-health early retirement should apply the relevant contract, policy and scheme procedures consistently. In an August 2026 Workplace Relations Commission (WRC) decision, an employer that blocked an employee's ill-health retirement case because of a protected health and safety complaint was found to have penalised the employee under the Health and Safety legislation

Points for employers:

• PHI generally pays an eligible employee a percentage of salary (for example, 75%) through payroll. The policy wording sets eligibility, the payment level, the disability test and any waiting period.
• Under many schemes, employees can apply after a set period of continuous absence, such as six months. The insurer's medical adviser then assesses eligibility.
• A policy may require the employment contract to remain in place for PHI payments to continue although some more modern policies will allow payments to continue post termination of employment. The effect of termination or any return-to-work arrangement depends on the contract and policy wording, so employers should take legal advice before terminating employment.
• If the insurer discontinues PHI, the employer should meet the employee, obtain its own occupational medical assessment based on a full job description, and consider suitable alternative vacancies and reasonable accommodation. The employee can appeal to the insurer and may then complain to the Financial Services and Pensions Ombudsman (FSPO), subject to applicable time limits.
• In George Moloney v Bus Éireann (ADJ-00059707, 14 August 2026), the WRC found penalisation under section 27 of the Safety, Health and Welfare at Work Act 2005. It directed the employer to pay €40,000 compensation and to process the ill-health retirement case within 10 weeks.
• Keep retirement decisions separate from any personal injuries claim, record decisions in writing and train managers to recognise protected acts.

What Are PHI and Ill Health Early Retirement Benefits?

Many employers provide employees with an income continuance scheme (also referred to as income protection insurance and/or permanent health insurance benefit) (“PHI”) and/or ill-health early retirement benefit as part of the terms and conditions of employment.

PHI will provide eligible employees with a percentage of their salary whilst they remain unfit for and absent from work due to illness/injury and ill health early retirement is generally linked to the employer’s pension scheme and may allow an employee to access pension benefits early.

Employees can also arrange (and pay for) their own personal PHI but this article focuses on PHI which is provided by the employer as a term of employment.

Whilst PHI and ill health early retirement benefits are very valuable benefits for employers to provide to their employees, and can be powerful talent attraction and retention tools, they can also create complex legal obligations and issues for employers.

What Employment Law Risks Arise Around Long-Term Sick Leave?

Applications for PHI and/or ill health early retirement are naturally preceded by a period of absence on grounds of ill health, often a prolonged period.

Disability Discrimination Risk

It is likely that the reason for that absence will meet the legal definition of a “disability” under the Employment Equality Acts, 1998-2021. Employers have extensive legal obligations under the legislation to ensure that employees are not discriminated against arising out of their disability.

Termination and Benefit Access

Employers also need to consider whether any termination of employment on grounds of the employee’s medical incapacity will adversely impact on the employee’s access to PHI or early retirement on grounds of ill health benefits, which could in turn, depending on the contractual position, expose an employer to a breach of contract claim.

Penalisation After Health and Safety Complaints

Furthermore, if the reason for the ill health absence is a workplace accident, the employee may have issued personal injuries proceedings against the employer and, as evidenced by the recent case of George Moloney –v- Bus Éireann, an August 2026 decision of the Workplace Relations Commission (“WRC”), discussed further below, employers must also ensure that they are not treating an employee adversely arising out of the issuing of such proceedings.

How Does PHI Work in Practice?

PHI is a slightly unusual benefit in so far as the policy under which the benefit is provided is in the name of the employer and if an employee is approved to receive PHI, the benefit is generally paid by the Insurer to the employer, who in turn remits the payment to the employee through payroll. The employer pays a premium to secure the continuance of income and payment of benefits for an employee during disablement through accident, injury or sickness.

Eligibility and Application

Most employers who provide PHI will set out that, once an employee is continuously absent for a specific period, such as six months, the employee can apply for PHI. Eligibility requirements and the disability test depend on the wording of the policy.

Insurer Assessment and Payments

On application for PHI, the employee will be assessed independently by the insurance company’s medical advisor to determine whether they qualify for PHI. If the employee qualifies, then generally the arrangement is that the employee will be paid a certain percentage of their salary (for example, 75%) while absent from work, which money will be paid directly by the insurance company to the employer, who in turn pays the employee directly for the period of absence.

It is also generally the case that a condition of the policy is that the contract of employment remains intact and termination of employment will automatically disentitle the employee to the benefit, although this will depend entirely on the wording of the policy and it is possible that a policy will provide for continuation of payment of the PHI post termination of employment.

Ongoing Reviews and Appeals

1. Insurance companies who provide PHI arrange regular medical assessment of any employee in receipt of the benefit, to determine whether or not the employee continues to meet the qualifying criteria.
2. Should an employee not meet the criteria at assessment, the insurance company will advise the employer that it is discontinuing the benefit, and the employer must in turn advise the employee of this.
3. An employee generally has the right of appeal to the insurance company and, if that appeal is unsuccessful, an external appeal to the Financial Services and Pensions Ombudsman can be pursued.
4. An employer is under an obligation to provide all reasonable assistance to the employee in making any appeal.
5. If the appeal is unsuccessful, the employer must deal directly with the employee in terms of the employee’s return to work or otherwise.

What Should Employers Do When PHI Is Discontinued?

The first step for any employer faced with PHI having been discontinued by the Insurer is to arrange to meet the employee to discuss the matter directly. It may be the case that the employee does not accept the Insurance Company’s view that they are fit to return to work. Alternatively, the employee may accept the situation and may then be keen to return to work, for financial reasons if for no other reason.

Independent Occupational Assessment

Either way, the employer will need to have the employee independently medically assessed on its own behalf to ascertain the employee’s fitness to return to work or otherwise. It will be very important in this regard that a full and detailed job description is given to an occupational physician in advance of the review to ascertain the employee’s fitness to return to work.

There may have been many changes to the manner in which the employee carries out his/her job during the period of their absence and it is vitally important that the occupational physician is made aware of how the job is done at the date on which the employer requires the independent medical assessment.

Dismissal on Medical Grounds

If the independent occupational medical assessment on behalf of the employer reveals that the employee remains unfit to do the job, notwithstanding the insurance company’s assessment, then the employer must give consideration as to whether or not there are suitable alternative vacancies in the company for the employee.

Before considering termination, employers should assess, in conjunction with their occupational medical advisors, whether there are any reasonable accommodations that could or should be made by the employer to facilitate the employee’s return to the workplace, including adjustments to equipment, premises or working hours, subject to the disproportionate-burden test. If these options do not enable a return to work, then the employer should take legal advice before considering termination on medical grounds, having consulted the employee. All employers should obtain legal advice before doing so.

Return to Work and Redundancy

If the employee is deemed fit to return to work or fit to return to work provided certain reasonable accommodations are made by the employer, the employer must give consideration to facilitating the employee’s return to work. If the employer has no positions available, then the employer must look at the issue of redundancy. The employee who has been in receipt of PHI is not automatically the employee to be selected for redundancy.

To select on that basis alone could constitute unfair selection on grounds of disability contrary to the provisions of the Employment Equality legislation. Therefore, the employer will have to engage in fair redundancy selection as between all employees carrying out the role previously occupied by the absent employee, as is the case with all redundancies.

This area is a tricky one for employers and can throw up many issues. For example, it is generally accepted that the employer can take no steps to terminate the employment of an individual in receipt of PHI, as to do so would disentitle the individual to the benefit. In redundancy situations, employees in receipt of PHI should be the last to have their employment terminated, to ensure they are in receipt of PHI for the longest possible time.

Protecting Employment During Appeals

Furthermore, when an employee is appealing to the Insurance Company arising from the decision to discontinue the benefit, the employment contract should remain in being.

However, employers should give careful consideration to what commitments they are prepared to give to employees who are making an appeal to the Financial Services and Pensions Ombudsman, as applicable FSPO time limits can vary and the process itself can be lengthy.

An employer may therefore wish to place time limits and conditions on the commitment not to interfere with the employment contract during that time period.

How Does Ill Health Early Retirement Work in Practice?

Terms and conditions of ill health early retirement will vary by pension scheme. Often, the approval of the Trustees of the employer’s pension scheme will be required. It is extremely important that employers apply the procedures and decision-making processes fairly and consistently, to avoid any claims of discrimination or penalisation, as outlined further below.

What Did the WRC Decide in Moloney v Bus Éireann?

George Moloney –v- Bus Éireann - ADJ-00059707, 14 August 2026

The Complainant argued that he had been penalised in breach of section 27 of the Safety, Health and Welfare at Work Act 2005, (under which the compensation which can be awarded by the WRC is unlimited), on the basis that the Respondent had departed from its usual procedure for assessing ill-health retirement because he had raised a health and safety complaint and had brought personal injuries proceedings against it.

Background to the Complaint

The Complainant had worked for the Respondent as a coachmaker since September 1984, a physically demanding role that required extensive use of vibrating and pneumatic tools. In 2023, following a period of sick leave for an unrelated condition, he sought to return to work and was diagnosed with a hand condition.

An occupational health assessment linked the condition to prolonged use of vibrating tools, and the Respondent indicated it would either find him an alternative role or consider him for ill-health retirement.

His solicitors wrote to the Respondent on 10 August 2023 asserting that the requirement to use such tools over a prolonged period amounted to an unsafe system of work. Very notable for employers is that fact that this solicitor’s letter was deemed to be notification to the employer on behalf of the employee of a health and safety complaint.

The employee then raised a formal grievance on 26 June 2024 – not about the use of the vibrating tools but rather about the lack of update from his employer on re-deployment or early retirement, and he gave evidence that it was only through the grievance appeal outcome of 7 February 2025, notified to him on 17 February 2025, that he understood any decision on ill-health retirement was being tied to the progress of his personal injuries claim.

The Complainant confirmed that his case was that the Respondent had refused to progress his retirement on ill-health grounds because he had instituted personal injury proceedings arising from his workplace injury. He stated that the first occasion on which this link was explicitly communicated to him was in correspondence dated 3 October 2024, which indicated that the issue of early retirement on ill health grounds was linked to the management of his personal injury claim.

The Complainant maintained that, had he not pursued legal proceedings, he believed he would have been medically retired.

Jurisdiction and Adjournment Arguments

The Respondent argued that the complaint could not be separated from the parallel High Court personal injuries proceedings, that a WRC decision risked overlapping with or prejudicing issues the High Court would decide, such as liability and loss of earnings, and it asked the WRC either to decline jurisdiction or adjourn the hearing until the High Court proceedings concluded. This often comes up as an issue in WR proceedings where there are parallel Court proceedings for personal injury.

In this instance, the Adjudication Officer rejected the argument that the parallel High Court proceedings removed the WRC's jurisdiction, confirming that the WRC's role was limited to deciding whether the Complainant had been penalised under section 27, and that concerns about overlapping financial loss were unfounded because compensation under section 28 does not depend on proof of actual or future loss in the way civil damages claims do.

The adjournment application was also refused, as the hearing notice had issued within the legal term with no postponement request made at the time, and the Complainant had already waited close to 14 months for a hearing.

Protected Act and Penalisation

The Adjudication Officer noted that a claim under section 27 turns on two questions: first, whether the employee carried out a protected act, and second, whether he was penalised to his detriment as a result.

On the first question, the solicitors' letter of 10 August 2023 was found to be a protected act, since it expressly attributed the Complainant's condition to prolonged exposure to vibrating tools and characterised the requirement to use that equipment as an unsafe system of work.

The fact the letter was sent in contemplation of litigation did not change its character as a health and safety complaint. The WRC Adjudicator noted from previous case law in this area that there is no requirement that the complaint be made personally by the employee or through any particular procedural mechanism. This is a significant finding from an employer’s perspective.

On the second question, the WRC Adjudicator found that it was undisputed that the Respondent departed from its ordinary process and prevented the Complainant's case from progressing because of the personal injury proceedings he had issued.

The resulting denial of access to the ill-health retirement process carried obvious financial penalty given the pension and retirement benefits potentially available under the Welfare Scheme for Regular Wages Staff, a policy which formed part of his terms and conditions of employment. Instead, the Complainant’s income had been limited to Invalidity Pension from the Department of Social Protection.

Accordingly, on the balance of probabilities, it was found that the Respondent's refusal to permit the Complainant's case to progress through the policy provided for ill-health retirement process was causally connected to the protected act (the letter from his solictors) and constituted a financial penalty, a detriment, within the meaning of Section 27(2)(d) of the Act.

Accordingly, the Complainant was subjected to penalisation contrary to Section 27 of the Safety, Health and Welfare at Work Act 2005 and his complaint was well founded.

Orders and Compensation

The WRC Adjudicator went on to state as follows;

The penalisation was therefore directly connected to the protected act and had significant financial implications for the Complainant. While it is not possible to conclude that the Complainant would ultimately have been granted ill-health retirement, he was denied the opportunity to have his case considered in accordance with the Respondent's own procedures.

Having regard to all of the circumstances, including the seriousness of the penalisation, the detrimental consequences for the Complainant and the need to provide an effective remedy, pursuant to Section 28(a) of the Safety, Health and Welfare at Work Act 2005, I declare the complaint to be well founded.

Furthermore pursuant to Section 28(b) of the Act, I direct the Respondent as follows:

• The Respondent is directed, within 10 weeks of the date of this decision, to process the Complainant's case for consideration under the Welfare Scheme for Regular Wages Staff in accordance with its normal procedures and without regard to the existence of any civil proceedings. This shall include referral to the appropriate decision-making body, including the Board of Trustees if required under the scheme, for determination in accordance with the scheme's provisions.
• Pursuant to Section 28(c) of the Act, I direct the Respondent to pay the Complainant compensation of €40,000.

What Should Employers Do After This Decision?

• Apply ill-health retirement procedures consistently and without regard to whether the employee has raised a health and safety concern or related legal proceedings.
• Keep ill-health retirement assessments entirely separate from the management or defence of any related personal injuries claim.
• Document and communicate decisions on ill-health retirement in writing, promptly, and ensure employees are told clearly where their case stands in the process, including referral to any relevant board or trustee body.
• Train managers handling workplace grievances to recognise protected acts, including correspondence from solicitors raising health and safety concerns, even where litigation is in contemplation or underway.

Why Does the Bus Éireann Decision Matter for Employers?

This decision confirms that an employer's internal procedures, if they have the practical effect of linking access to a benefit such as ill-health retirement to the existence or progress of litigation, can amount to unlawful penalisation, regardless of whether it is framed as a general rule rather than a targeted decision against one employee.

It also clarifies that parallel High Court proceedings do not oust the WRC's jurisdiction over a penalisation complaint, since the remedies under section 28 do not require the same proof of loss as a civil claim, so employers cannot rely on pending litigation to defer or avoid a penalisation complaint.

Employers should treat this as a reminder that litigation strategy and employee welfare processes need to be kept on separate tracks, with decisions on entitlements such as ill-health retirement made on their own merits and through the normal channels.

Managing PHI and Ill-Health Retirement Consistently

Every decision on PHI or ill-health early retirement should start with the employment contract and applicable policy or scheme wording. Apply the process consistently and record each step in writing. In Moloney v Bus Éireann, the WRC ordered €40,000 compensation and directed the employer to process the retirement case within ten weeks. The decision did not establish that retirement would have been approved.

Employers should take advice before terminating employment or delaying a benefits application where long-term absence, disability or related litigation creates uncertainty about the applicable procedure.

Employers facing these decisions can contact Jennifer Cashman or speak with RDJ's Employment Law team.

Frequently Asked Questions About PHI and Ill-Health Early Retirement for Employers

How long can an employee continue to receive PHI?

This depends on the wording of the policy, so the starting point should always be the contract of employment and the policy terms. Insurers arrange regular medical assessments of any employee in receipt of the benefit, and the benefit is discontinued if the employee no longer meets the qualifying criteria.

Can an employer terminate the employment of an employee who is receiving PHI?

The contract and policy wording determine the effect of termination on PHI payments. Some policies require the employment contract to remain in place, while others may provide for payments after termination. Employers should obtain legal advice before taking any step to terminate employment.

What should an employer do if the insurer discontinues PHI?

The employer should meet the employee and obtain an independent occupational medical assessment based on a full and current job description. If the employee remains unfit, it should assess reasonable accommodation and suitable alternative vacancies, consult the employee and take legal advice before considering termination.

Can an employer delay an ill-health retirement application because the employee has issued personal injuries proceedings?

In this case, refusing to progress the application was penalisation because it was causally connected to a protected health and safety complaint. Employers should follow the scheme's normal procedures and keep the retirement assessment separate from related personal injuries proceedings.

Does an employee on PHI have to be selected first for redundancy?

No. Selecting an employee for redundancy solely because they receive PHI could constitute disability discrimination. Employers must apply fair selection criteria. The timing of termination also requires advice on the employment contract and PHI policy, particularly if termination would end the benefit.

Author: Jennifer Cashman, Partner | Róisín Lyons, Emma Wroblewski and Isobel Wall, Trainee Solicitors