COVID- 19 UPDATE: THE EMPLOYMENT WAGE SUBSIDY SCHEME
Since March 2020 the Irish Government has provided over €2.7 billion to subsidise wages for employees. These subsidies have been provided through the Temporary Wage Subsidy Scheme (TWSS). This scheme however is set to change with effect from 1 September with the introduction of the Employment Wage Subsidy Scheme (EWSS). This new scheme is broader than the TWSS and it is expected employers will remain in the scheme for at least 6 months.
Under the new EWSS, qualifying employers will be able to avail of a flat-rate subsidy depending on the number of eligible employees on their payroll. This will allow businesses whose turnover has fallen by 30% to receive a flat-rate subsidy of up to €203 per week per employee. New firms operating in impacted sectors may also be eligible. According to the Department of Business, Enterprise and Innovation, the Scheme is expected to support around 350,000 jobs into the beginning of 2021.
What is an Eligible Employer?
There are some key criteria that must be met in order for an employer to be eligible to receive the subsidy:
- Employers must have a valid tax clearance and continue to maintain its tax clearance for the duration of the scheme;
- Employers must be able to demonstrate that the business will experience a 30% reduction in turnover or customers between 1 July and 31 December 2020; and
- Employers must demonstrate the reduction is caused by Covid-19.
In order to demonstrate this reduction in turnover or customer numbers, the business can draw comparison between the same period in 2019, unless the business came into existence after 1 November 2019, then the business can rely on projected turnover.
Employers who avail of the subsidy will be required to carry out a review on the last day of every month to ensure that they continue to meet the eligibility criteria. It is also worth noting that employers do not need to demonstrate an inability to pay wages to qualify
Who is an Eligible Employee?
One of the key features of the new scheme is that it will now pay a flat rate subsidy per employee for individuals on the payroll in the qualifying period (1 July 2020-31 March 2021), significantly this will take into account new hires and seasonal staff, previously excluded from the TWSS. The amount of the subsidy will be determined by the normal gross pay;
- For every employee paid between €203 and €1,462 gross per week, the subsidy is €203.
- For every employee paid between €151.50 and €202.99 gross per week, the subsidy is €151.50.
No subsidy will be paid for those earning less than €151.50 or more than €1,462 gross per week.
How will the EWSS work?
Under the EWSS, the employer will pay the employee their normal wages and will then receive a refund from the Revenue in respect of each qualifying employee. The subsidy will be paid by Revenue to the employer as soon as is practicable after the return due date but may be up to 6 weeks. The timeline for this refund, payable to employers, may cause difficulty for some businesses and has come under criticism from some employer representative bodies.
The EWSS will operate on a self-assessment basis and it will re-establish the requirements to operate PAYE on all payments including the normal deductions of income tax, USC and employee PRSI. The EWSS will charge a reduced rate of employer PRSI at 0.5% on wages paid which are eligible for the subsidy.
Employers who have previously registered for the TWSS must separately register for the EWSS through ROS.
In the context of employment law it ought to be noted that an employer will still be bound by relevant statutory provisions in relation to rates of pay and the Terms and Conditions of Employment with each employee. If an employer needs to reduce salary or hours of effected employees as a result of Covid 19 then this can only be done through the agreement of the parties.
If you have any questions about the Employment Subsidy Scheme or need assistance determining your eligibility, please contact Emma Richmond of our Employment Department or your usual Whitney Moore contact.
You can also contact us on our dedicated COVID-19 Helpline on 01 6110016.