COVID-19: State funded support for employers – the Wage Subsidy Scheme
In an attempt to address the financial anxiety being experienced by workers and businesses alike across Ireland the Government has announced the introduction of the National COVID-19 Income Support Scheme which contains a number of measures aimed at providing financial support to employers during these turbulent times. The Income Support Scheme recognises the universal negative impact of the outbreak of COVID-19 on all sectors of the economy and contains targeted financial supports designed to off-set the financial impact COVID-19 will have on large swathes of the workforce.
Of greatest significance to employers is the introduction of a Temporary Wage Subsidy Scheme which is due to take effect from midnight tomorrow, 26 March 2020. Under this Scheme, the Government will subsidise employees' wages, on a temporary basis, subject to a number of conditions. While the introduction of this Wage Subsidy Scheme has been widely welcomed by employers and employees alike, it is hoped that a number of concerns that have already been expressed in relation to the qualification criteria and the potential beneficiaries of the wage subsidy will be addressed as the legislation underpinning the scheme, the Emergency Measures in the Public Interest (COVID-19) Bill 2020 (Emergency Measures Bill), passes through the expedited legislative process over the next 48 hours.
Financial Supports for Employers and Employees
Under the COVID-19 Income Support Scheme:
- a temporary wage subsidy of 70% of take home pay up to a maximum weekly tax free amount of €410 is to be introduced
- the COVID-19 Pandemic Unemployment Payment is to be increased from €203 to €350
- the self-employed will become eligible to claim the COVID-19 Pandemic Unemployment Payment from the Department of Employment Affairs and Social Protection
- the COVID-19 illness benefit payment is to be increased from €305 to €350
Since the announcement of the introduction of the National COVID-19 Income Support Scheme, the Revenue Commissioners have published guidance on the Wage Subsidy Scheme and the Emergency Measures Bill has also been published.
Emergency Measures Bill
The Emergency Measures Bill:
- provides the statutory basis for the introduction of the Wage Subsidy Scheme
- amends the Redundancy Payments Act 1967 so as to provide that employees who have been temporarily laid off or kept on short time as result of COVID-19 will not be entitled to claim redundancy after 4 weeks on lay off or short time, as is currently the case, but will instead only be able to do so after the expiry of the 'emergency period', currently set at 31 May 2020
- contains a number of other measures including simplifying the recruitment of retired health professionals, the re-enlistment of retired defence force members, and protection for residential tenants from eviction or rent increases for the duration of the crisis
The Bill passed the first stage in the Dáil yesterday and is scheduled to complete all the remaining stages in the Dáil tomorrow, 26 March. It is expected that the Bill will be considered by the Seanad when it sits on Friday, 27 March.
Wage Subsidy Scheme
We have summarised below the key takeaways for employers on what we currently know about the Wage Subsidy Scheme. However, we expect that the Emergency Measures Bill will be subject to amendment as it progresses through the legislative process. We also expect Revenue will publish further Guidance on the Scheme over the coming days so we recommend you check the A&L Goodbody COVID-19 Hub regularly where we will post updates on the Bill and Revenue Guidance in the coming days.
The Wage Subsidy Scheme replaces the COVID-19 Refund Scheme that was initially announced on 17 March 2020. The Scheme is expected to operate for a minimum of 12 weeks, and employees on lay off or short-time will be able to benefit from the Scheme. The Scheme is open to all employers from all sectors who satisfy the following conditions:
- Adversely Affected – the employer must self-declare that their business has been adversely affected by COVID-19 and be in a position to demonstrate a minimum 25% decline in turnover or customer orders, and an inability to pay normal wages and other outgoings. It is understood that the decline in turnover or customer orders will need to be evidenced in respect of the period 14 March 2020 to 30 June 2020 and, in that sense, the declaration an employer needs to make to avail of the Scheme is a forward looking declaration;
- Keep Employees on Payroll - the employer must have the "firm intention" of continuing to employ employees and to pay them by keeping them on payroll. It remains to be seen what, if any, evidence will need to be produced by employers to verify this intention
- Make Best Efforts to Top Up Salaries – it seems that in order to avail of the scheme employers must be unable to pay employees normal wages – however, it is unclear if employers must be in a position to evidence this at the outset or whether they can subsequently demonstrate this on a retrospective basis. The Bill also provides that employers are obliged to make 'best efforts' to top up employee salaries but it does not seem there is an absolute requirement to do so in order to avail of the Scheme. In this regard, the Revenue Guidance suggests employers need only top up employees' wages by €0.01 in order to avail of the Scheme but Government expectation is obviously that well-resourced employers who can afford to meaningfully top up employee wages will do so
- Eligible Employees – an employee is eligible for benefit under the Scheme if they have been paid by their employer in the period 1 February 2020 to 15 March 2020 and were on their employer’s payroll as at 29 February 2020. This latter criterion seems to preclude new joiners post 1 March 2020 benefitting from the Scheme. The Bill also makes clear that an employee cannot be in receipt of duplicate support (e.g. the COVID-19 Pandemic Unemployment Payment from the DEASP)
Amount of the Subsidy
The Scheme will reimburse employers who satisfy the above conditions for payments made to eligible employees as follows:
- Where the employee earns less than €38,000 gross per annum, employers will receive a subsidy of up to 70% of the employee’s take home income, up to a maximum weekly tax free amount of €410
- Where the employee earns between €38,000 and €76,000 gross per annum, employers will receive a subsidy of up to a maximum weekly tax free payment amount of €350
- Employees earning more than €76,000 per annum are not covered by the Scheme
Revenue has indicated that further Guidance in respect of the amount of the subsidy will be issued in the coming days. We expect the exclusion of employees earning over €76,000 from the Scheme will be the subject of scrutiny in the coming days as, in the absence of a wage subsidy from the State, certain employers may be left with no option but to place their best paid staff on unpaid lay off, with those employees being left in the invidious position of having to apply directly to the DEASP for the COVID-19 Pandemic Unemployment Payment, whereas their less well paid colleagues continue to receive payroll payments (that could be topped up) directly from their employer.
The Revenue Guidance makes clear that the wage subsidy payment will not be subject to income tax, USC or PRSI. Any top up payment made by the employer will not be subject to employee PRSI and subject to a materially reduced employer PRSI rate of 0.5%.
We expect further clarity on how the Wage Subsidy Scheme will operate in practice in the coming days. The introduction of this Scheme is certainly a step in the right direction but it is clear from our initial review of the Emergency Measures Bill and Revenue Guidance that the legislation and guidance will need to be refined if this scheme is to be 'fit for purpose' and attract the take up the Government is hoping for. In circumstances where employers are not obliged to adopt the Scheme, the Government would be well advised to take on board feedback from all relevant stakeholders before finalising the Emergency Measures Bill and rolling out the Scheme.
We will provide regular updates on the Wage Subsidy Scheme, as well as all other COVID-19 developments for employers. Please regularly check the A&L Goodbody COVID-19 Hub to ensure you are up to date with the latest developments.
For more information in relation to the Wage Subsidy Scheme, please contact Michael Doyle, Partner, or any member of the A&L Goodbody Employment team.
Date published: 25 March 2020