COVID-19: Temporary Wage Subsidy Scheme

Effective from Thursday, 26 March 2020, the Irish Government will provide additional financial support of up to €410 per week for employees and employers affected by the Covid-19 pandemic.  Please see below an overview of the Temporary Covid-19 Wage Subsidy Scheme (“the Scheme”).

In summary

• The Scheme replaces the Covid-19 Employer Refund Scheme previously announced;
• It enables qualifying employees, whose employers are affected by the pandemic, to receive financial support directly from their employer;
• It is expected to run for 12 weeks from 26 March 2020;   
• The key requirement is that an employer keeps employees on payroll throughout the Covid-19 pandemic, meaning employers can retain links with employees for when business picks up after the crisis; and
• The Scheme will be operated by Revenue.

Overview of the Scheme

Under the Scheme, a qualifying employer can pay a non-taxable amount equal to the employee’s net take home pay or €410 per week for each qualifying employee, whichever is the lesser.  A qualifying employer will thereafter be entitled to a refund from Revenue for the non-taxable amount.  From April 2020, the Scheme will become a subsidy payment initiative based on 70% of the average net weekly pay* for each employee up to a maximum payment of €410 as follows:

• Category 1 – average net weekly pay of less than or equal to €586:
  • A Scheme subsidy of up to €410.
    
• Category 2 – average weekly pay of greater than €586 and less than or equal to €960:
  
  • A Scheme subsidy of up to €350.
    
• Category 3 -  average weekly pay of greater than €960:
  
  • No Scheme subsidy. 
    

While the Government encourages employers to top up pay to the employees normal level, this is not a requirement of the Scheme. 

(*Based on the average net weekly pay during January and February 2020).

Key features of the Scheme

• Employers make the relevant payment through their normal payroll process as a non-taxable payment;
• Qualifying employers will be reimbursed for amounts paid to employees and notified to Revenue via the payroll process;
• The reimbursement will, in general, be made within two working days after receipt of the payroll submission;
• Income tax, USC and Employee Pay Related Social Insurance (PRSI) will not apply to the Scheme payment.  However the Scheme payment may be subject to income tax and USC on review at the end of the year; and
• Employer’s PRSI will not apply to the Scheme payment and will be reduced to 0.5% for any top up payment.

How to Qualify for the Scheme

This Scheme is open to employers in all sectors whose business activities are adversely impacted by the Covid-19 pandemic.  The Scheme is confined to employees on the payroll as at 29 February 2020, and for whom a payroll submission has already been made to Revenue in the period from 1 February 2020 to 15 March 2020. 

In order to qualify for the Scheme, employers must meet the following criteria:

• They must be experiencing significant economic disruption due the Covid-19 pandemic;
• They must be able to demonstrate a minimum of 25% decline in turnover or in customer orders;
• They must be unable to pay normal wages and other outgoings; and
• They must retain their employees on their payroll.

The employer is also expected to make best efforts to maintain as close to 100% of normal income as possible for the subsidised period. Revenue has confirmed that interest and penalties may apply to any abuse of the Scheme by self-declaring incorrectly, not providing funds to employees or non-adherence to Revenue, and any other relevant, guidelines. The Scheme also provides for the publication of details of the employers who have participated in the Scheme.

Registering for the Scheme

Employers already registered with Revenue for the purposes of the Covid-19 Employer Refund Scheme, are not required to take any further action and can make payroll submissions from 26 March 2020 under the new Scheme arrangements.
Employers, or their agents, wishing to register for the scheme can apply to Revenue via ROS, MyEnquiries and selecting ‘Temporary Covid-19 Wage Subsidy Scheme’. Employers who fulfil the qualifying criteria, not already registered are advised to do so as soon as possible. 

Temporary suspension of employee right to trigger a redundancy

Many employees have been placed on short time or lay off a result of the employer’s compliance with Government policy to prevent, limit, minimise or slow the spread of infection of Covid-19. Section 12 of the Redundancy Payments Act enables an employee on short time or lay off to trigger the employee’s redundancy in certain prescribed circumstances. The Government has (for a temporary period currently running up to 31 May 2020) suspended this entitlement.

Further Guidance

Revenue has today published a FAQ guidance document – see link. 

However, further clarity is required on the operation of the Scheme and we understand that Revenue will issue detailed guidance shortly.  

If you would like to discuss any questions on how your business might potentially avail of the Scheme or any of the Covid-19 measures, please contact a member of our Tax Team, or Emmet Whelan or Elaine Kelly from our Employment Law Team, or your usual ByrneWallace contact.

Please note that the content of this summary does not amount to professional advice. Legal and tax advice should be sought in respect of specific queries. The Covid-19 situation is evolving rapidly and this update is provided on the basis of information available from State sources as at 26 March 2020.