The Temporary COVID-19 Wage Subsidy Scheme

The Government announced new measures to provide financial support to Irish businesses affected by the COVID-19 crisis. 

As part of these measures, Revenue will operate a Temporary Covid-19 Wage Subsidy Scheme.

The scheme enables employees, whose employers are affected by the pandemic, to receive significant supports directly from their employer. The scheme will run for 12 weeks from 26 March 2020. Draft legislation governing the scheme will be published shortly.

The operation of the 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. Additionally, the operation of the scheme will reduce the burden on the Department of Employment Affairs and Social Protection (DEASP) which is dealing with the other Covid-19 related payments.

Employers are encouraged to facilitate employees by operating the scheme, by retaining employees on their books and by making best efforts to maintain a significant, or 100% income, for the period of the scheme.

Key Features of the scheme

  • replaces the previous COVID-19 Refund Scheme
  • initially, and from this Thursday (26 March 2020), the subsidy 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
  • the subsidy scheme applies to employers who top up employees’ wages and those that aren’t in a position to do so
  • employers make this special support payment to their employees through their normal payroll process
  • employers 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 subsidy payment based on 70% of the weekly average take home pay for each employee up to a maximum of €410*
  • income tax and USC will not be applied to the subsidy payment through the payroll
  • employee PRSI will not apply to the subsidy or any top up payment by the employer

Who does the scheme apply to?

The scheme is available to employers from all sectors (excluding the public service and non-commercial semi-state sector) whose business activities are being adversely impacted by the COVID-19 pandemic.

The scheme is available for employers 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. Provided the employer meets the conditions set out below and subject to the levels of pay to the employees the employer may be eligible for the scheme for some or all of the employees.
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.

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

Registering for the Temporary Wage Subsidy Scheme

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.

Operating the scheme from Thursday 26 March 2020

The employer runs the payroll as normal, entering the following details for each relevant employee under the Scheme:

  • PRSI Class set to J9
  • a non-taxable amount equal to the employee’s net take home pay or €410 whichever is the lesser,
  • if an employer is not making any payment to the employee, they should include a pay amount of €0.01 in Gross Pay
  • if an employer is making additional wage payments to affected employees, they should include this amount in the Gross Pay
  • it is important that employers do not include the Temporary Wage Subsidy payment in Gross Pay
  • the payroll submission must include pay frequency and period number.

Income tax, USC, LPT, if applicable, and PRSI are not deducted from the Temporary Wage Subsidy.

In many cases the payment of the Temporary Wage Subsidy and any additional income paid by the employer will result in the refund of Income Tax or USC already paid by the employee. Any Income Tax and USC refunds that arise as a result of the application of tax credits and rate bands can be repaid by the employer and Revenue will also refund this amount to the employer.

Employers must not operate this scheme for any employee who is making a claim for duplicate support (e.g. the Pandemic Unemployment Payment ) from the DEASP.

Based on the information provided in payroll submissions and adherence to the maximum limits, described above, Revenue will credit employers with the temporary wage subsidy paid to each employee.

Penalties will apply to any abuse of the Subsidy Scheme by self-declaring incorrectly, not providing funds to employees or non-adherence to Revenue, and any other relevant, guidelines.

A small but important change for many businesses is the limit for contactless credit card payments has been raised from €30 to €50.

Other supports for businesses

In addition to the Subsidy Scheme being announced, the Government has already announced a range of measures including:

  • financial supports - including a €200m Strategic Banking Corporation of Ireland Working Capital scheme;  a €200m Rescue and Restructuring Scheme available through Enterprise Ireland for vulnerable but viable firms;  the maximum loan available from Microfinance Ireland has been increased from €25,000 to €50,000 (these loans are now interest free with no repayments for 6 months);  Local Enterprise Offices in every county will be providing vouchers from €2,500 up to €10,000;  a Finance in Focus grant of €7,200 will be available to Enterprise Ireland and Údarás na Gaeltachta clients  
  • ther supports including a First Responder support service - through the Intreo Offices and development agencies, Enterprise Ireland and IDA Ireland in each region to provide tailored supports for affected businesses;  the Department of Employment Affairs and Social Protection Short Term Work Support Scheme#  
  • deferral of Business Rates -  the Government has agreed with local authorities that they should defer rates payments due from the most immediately affected businesses, primarily in the retail, hospitality, leisure and childcare sectors, until the end of May.  
  • taxation measures to alleviate short-term difficulties  - Revenue has also posted specific advice for businesses experiencing trading difficulties as a result of COVID-19 including information on tax returns, the application of late payment interest, debt enforcement, tax clearance and customs.    
  • banking and credit measures - all the banks have announced that they will offer flexibility to their customers, and they may be able to provide payment holidays or emergency working capital facilities.  The main non-bank lenders also confirmed their intention to also support the range of measures announced by the country’s main retail banks which is to be welcomed. A deferral of up to 3-months on loan repayments will be available to many businesses.  In addition, the banks are adopting a customer-focussed approach to these businesses with a wide variety of tailored supports including extensions of credit lines, risk guarantees, and trade finance.   These supports complement the range of Government supports available through the Strategic Banking Corporation of Ireland. 
    The Central bank has confirmed that it will allow banks to dip into their rainy-day capital reserves to keep lending flowing. It is anticipated that this move could free up considerable additional credit for households and businesses. 

Through these uncertain and critical times, our multi-disciplinary Business Continuity team can advise on a full range of continuity planning and resource services. We can harness our expertise across audit and advisory, tax, transaction and management consulting, to work with your people towards minimizing your risk of operational and commercial exposure to help you serve your clients.