The Legislation:
On Friday 27th March, 2020, the Emergency Meausures in the Public Interest (COVID-19) Bill 2020 was passed by the Dáil Éireann.
Section 28 of the Bill is a key provision from an employment law perspective. It provides a legislative basis for the recently introduced Temporary Wage Subsidy Scheme (the “Scheme”) being operated by the Irish Revenue Commissioners (Revenue).
General Points of Note regarding the Scheme:
The scheme is expected to last a period of 12 weeks, starting from 26th March, 2020.
The Government is encouraging employers to operate the Scheme, by retaining employees on their books and making best efforts to maintain a significant, or 100% salary for their employees for the period of the Scheme.
There are certain criteria an employer must meet and certain administrative steps an employer must take to be eligible to apply for the Scheme. These are set out in detail in Guidelines published by Revenue.
Revenue Guidelines for Employers Availing of the Scheme
Revenue have published guidelines in respect of this Scheme which it will be important to be aware of when applying for the Scheme. Those guidelines can be found here: https://revenue.ie/en/news/articles/guidance-on-the-temporary-covid-19-wage-subsidy-scheme.aspx
To avail of the Scheme employers will need to self-declare to Revenue that they have or will experience significant economic disruption due to Covid-19. They should be able to show that they meet the criteria laid out in Revenue’s published guidance on Employer Eligibility and Supporting Proofs which can be found at this link: https://revenue.ie/en/corporate/communications/documents/guidance-on-employer-eligibility-and-supporting-proofs.pdf
Revenue’s guidelines confirm that to avail of the Scheme an employer needs to be:
Payments under the Scheme
There will be two phases to the Scheme which is currently in Phase 1.
By 20th April, the Scheme will move to Phase 2 which will encompass a subsidy payment based on each employee’s normal net weekly pay.
Phase 1 Payments under the Scheme:
In the interim, during Phase 1, the Scheme will initially refund employers up to a maximum of €410 per each qualifying employee regardless of the employee’s income.
However, it appears that during Phase 1 if employers are refunded more than they would be entitled to under the Scheme (e.g. the amount refunded is more than 70% of the employee’s net weekly pay as mentioned below), the difference will need to be refunded to Revenue.
Employers availing of the Scheme in respect of any employee should not pay the employee in question any more than the normal weekly net pay of that employee.
Phase 2 Payments under the Scheme:
Further guidance is awaited. However, subsidy payments under Phase 2 of the Scheme are expected to operate as follows:
Employers are permitted and encouraged to top up payments to bring employees up to or as close as possible to their normal net weekly pay.
It appears no subsidy will be payable to employees who have a net weekly pay of greater than €960. Furthermore, based on the current Revenue Guidelines, it seems that such employees would not qualify even if they agree to a temporary pay cut.
Breakdown on Payslips:
The employer is obliged to show the amount of the subsidy on the employee’s payslip. Revenue guidance states that employers should separately identify this subsidy element on the employee’s payslip as a payment described as “non-taxable pay”.
Scope of Employees covered by the Scheme
The Scheme is confined to employees who were on the employer’s payroll as at 29th February, 2020 and for whom a payroll submission has already been made to Revenue in the period from 1st February 2020 to 15th March, 2020.
The Scheme is available both to employers who still have their employees working (whether full or reduced hours) and to those who have had to lay off employees.
The Scheme includes fulltime, part-time and short time work arrangements.
Interestingly, even employees who are on sick leave or self-isolating due to Covid-19 can qualify for the Scheme. However, employers must not operate this Scheme for any employee who is making a claim for duplicate support from the Department of Employment Affairs and Social Protection.
It is also of note that employers who have laid off employees as a result of Covid-19 can rehire them and avail of the Scheme so long as the other conditions for eligibility are met. There are specific guidelines on how this works in practice on the Revenue website and in particular at the attached link: https://revenue.ie/en/employing-people/documents/pmod-topics/guidance-on-operation-of-temporary-covid-wage-subsidy-scheme.pdf
Revenue’s Assessment of a 25% Decline in Business
Employers applying to avail of the Scheme should familiarise themselves with the guidelines provided by Revenue in respect of employer eligibility for the Scheme and supporting proofs which are outlined in detail at a link mentioned earlier in this Article.
The said guidance confirms that eligibility will initially be determined, largely on the basis of self-assessment and declaration by the employer concerned, combined with a risk focused follow up verification by Revenue involving an examination of relevant business records where that is considered necessary. Employers should retain their evidence/basis for entering the Scheme.
Revenue has confirmed their approach will be based on a presumption of honesty and businesses are expected to approach the Scheme in a similar manner.
In relation to the likely reduction in turnover of 25% or more, the guidance states that this is a reduction in expected turnover for Q2, 2020 and that the employer is best placed to determine that. The Revenue guidelines referenced above set out some non-exhaustive examples of what the employer may base this judgement on.
Significantly, an employer that has been hit by a significant decline in business but has strong cash reserves, that are not required to fund debt, will still qualify for the Scheme but the Government would expect the employer to continue to pay a significant proportion of the employees’ wages.
There had been concern as to whether availing of the Scheme could have amounted to a declaration of insolvency. The Revenue Guidance states that a declaration by the employer is not a declaration of insolvency but rather a declaration which states that, based on reasonable projections, there will be, as a result of disruption to the business caused or to be caused by the Covid-19 pandemic, a decline of at least 25% in the future turnover of, or customer orders for, the business for the duration of the pandemic and that as a result the employer cannot pay normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.
Should Revenue seek to validate employer eligibility for the Scheme, it has confirmed that it will adopt a reasonable, fair and pragmatic approach in considering whether the criteria have been met
Abuse of the Scheme
Penalties will 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. Therefore it is vital for all employers availing of the Scheme to keep abreast of the updates on the Revenue guidelines.
Publication of names of Employers availing of the Scheme
Employers should be aware that the names of all employers to whom a temporary wage subsidy has been paid shall be published on the Revenue website.
Important Note on the Scheme for Employees
Income tax, USC, LPT, if applicable, and PRSI are not deducted from the Temporary Wage Subsidy. However, the subsidy will be liable to Income Tax and USC on review at the end of the year.
30th March 2020
Anne O’Connell Solicitors
Fitzwilliam Hall
Fitzwilliam Place
Dublin 2.
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