COVID-19: Temporary Wage Subsidy Scheme

Significant new measures have been announced to provide financial support to Irish workers affected by the Covid-19 crisis.

Firstly, the current Covid-19 unemployment payment will be raised to €350 per week and the Covid-19 self isolation payment will also be increased to €350 per week.

The main initiative though comes in the form of a Wage Subsidy Scheme to encourage Employers to keep staff affected on the payroll and is also extended to cover the self-employed which is very welcome. In broad terms, the initiative is designed to see the Government funding up to 70% of salaries, up to a maximum of €38,000 per year. In general, this would equate to a take home pay of €410 per week for an employee earning €38,000 per annum.

The new Temporary Wage Subsidy Scheme will run for 12 weeks from 26 March 2020, replaces the previous COVID-19 Refund Scheme, and will enable employees, whose employers are affected by the pandemic, to receive significant supports directly from their employer.

This Temporary Wage Subsidy Scheme will be available to employers who keep employees on the payroll throughout the COVID-19 pandemic,meaning employers can retain links with employees for when business picks up after the crisis. Employers are expected to make best efforts to retain employees on their books and keep their wages as close to their full income as possible for the duration of the scheme.

The subsidy scheme applies both to employers who top up employees’ wages, and to those employers that aren’t in a position to do so.

The scheme will refund employers up to a maximum of €410 per each qualifying employee. However, employers should pay no more than the normal take home pay of the employee.

Employers make this special support payment to their employees through their normal payroll process and will then 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.

In April, the scheme will move to a 70% subsidy payment of the weekly average take home pay for each employee up to a maximum of €410.

As regards the PAYE/PRSI/USC deductions, it is welcome that the subsidy payment does not attract PAYE,USC Employees or Employers PRSI. In addition,any top up payment by the Employer will not attract Employees PRSI and will be liable to a significantly reduced Employers PRSI rate from 10.5% to 0.5%.

The Scheme is available to employers from all sectors whose business activities are being adversely impacted by the COVID-19 pandemic and who retain staff on payroll; some of the staff may be temporarily not working, or some may be on reduced hours and/or reduced pay.

To qualify for the scheme, employers must:

  • be experiencing significant negative economic disruption due to Covid-19
  • be able to demonstrate, to the satisfaction of Revenue, a minimum of a 25% decline in turnover
  • be unable to pay normal wages and normal outgoings fully
  • retain their employees on the payroll.

The Scheme is confined to employees who were on the employer’s 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.

It should be noted that the names of all employers operating this scheme will be published on Revenue’s website in due course,after the scheme has expired.

Any employer, already registered with Revenue for the purposes of the Employer COVID-19 Refund Scheme, is not required to take any further action. The employer may make payroll submissions from 26 March 2020 under the subsidy scheme arrangements on the same basis as they were doing for the Employer Refund Scheme, and €410 will be refunded in respect of each eligible employee per week.

This is a significant initiative that all businesses affected by Covid 19 should embrace.

If you require any assistance in the application process or in determining your qualification, please contact any member of our team.

Mairead O'Grady

Taxation Partner

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