Employers: Everything you need to know on COVID-19 Wage Subsidy

Here we answer some FAQs:

1. Will my business qualify?

To qualify you need to:

• 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 your employees on the payroll

How Revenue will look to audit/review employers when the time comes to check to see if they met the above criteria is uncertain.

As an employer, you need to be aware of the criteria and, that in order to register for the scheme, you are declaring that you will meet all of the above.

You should also be aware that names of all employers who register for the scheme will be published.

2. I have built up a small fund in my business bank account for a rainy day. It would cover me for one month’s wages but I want to make sure I have income to restart the business, will I still qualify?

It is our interpretation at this point that you will, but Revenue would encourage you top up your staff to their normal full wages. The revenue’s guidelines state that “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.”

3. How much is covered?

All staff earning up to €960 net of taxes per week on average (which usually equates to €76,000 per annum gross) and who have been on your payroll since at least 29^th Feb will qualify for a subsidy.

For employees whose Average Net Weekly Pay is €586 or less (which usually equates to about €38,000 gross per annum) the employer will be entitled to a subsidy of 70% of the employees Average Net Weekly Pay subject to a maximum subsidy of €410 per week.

For employees whose Average Net Weekly Pay is between €586 and €960 per week the maximum subsidy is reduced to €350 per week.

Any employees whose Average Net Weekly Pay is greater than €960 per week will not receive a subsidy.

However, employers should pay no more than the normal take home pay of the employee.   

Let’s look at some examples:

Q: I have 2 staff, one on €25,000 per annum and one on €45,000 per annum. What subsidy am I likely to get for each of them per week?

Let’s assume that both employees have the normal standard tax rate bands and tax credits.

The employee on €25k per year should usually have net take home pay of €420 per week. 70% of their usual net weekly take home pay would be €294. As this is less than the maximum subsidy allowed of €410 in this wage bracket then you should receive the full €294 from Revenue.

The employee on €45k per year should usually have net weekly take home pay of €658. 70% of the usual net weekly take home pay would be €461. As this is in excess of the maximum allowed subsidy in this wage bracket of €350 then you will only receive the €350 maximum.

Employers are encouraged to top up these payments to their employees where possible and by as much as possible.

However, the payments to employees should never exceed what they would usually receive as their average net weekly take home pay.

4. Can I top up my staff to their full pay?

Yes. Unlike the previous COVID-19 scheme the subsidy scheme applies both to employers who top up employees’ wages and those that aren’t in a position to do so.

5. How fast will I get the money back?

The reimbursement will, in general, be made within two working days after receipt of the payroll submission.

6. Do I need to lay staff off or put them on a shorter week to qualify for the scheme?

There is nothing in the legislation to say that the employees must be laid off or placed on short time.

7. I am a director of a business and I pay myself 50k, can I qualify for this scheme as well as my staff?

On our current reading of the draft legislation, directors can be included in this scheme.

Sole Traders and other self-employed individuals are not eligible for this scheme and must apply to the DEASP for the Pandemic Unemployment Payment.

8. How do I calculate an employee’s weekly average earning?

Net weekly pay is the employee’s Average Net Weekly Pay for January and February 2020 based on submissions made to Revenue by 15 March 2020.

To calculate the Average Net Weekly Pay, using the values in the payroll submission for each pay date in January and February 2020.

1. Take the employee’s Gross pay and from it subtract the Income Tax Paid, the USC Paid and the Employee PRSI Paid
2. Total this figure for each pay date in January and February 2020 and divide this by the number of insurable weeks (capped at 9) for the period.
3. This gives you the employee’s average pay that is to be used for the subsidy amount.

Once you have satisfied yourself that you would like to go ahead and get on the scheme here is what you need to do

 

Published: 27/03/2020

Date published 27 Mar 2020 | Last updated 27 Mar 2020

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.