Further to our note on the 25th of March we have now received more information, from both the Revenue and the Government.
Finally, Revenue have given some guidance on what companies should qualify for this scheme. 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.
There appears to be 2 main criteria:
Reduction of 25% in turnover or a reduction of 25% in customer orders from the period 14 March to 30 June 2020.
The reduction is based on what the expected turnover would have been for the period. This expected turnover could have been based on Q1 2020 or based on Q2 2019. It is up to each company to determine what their projected turnover would be.
For instance, a company who has drafted budgets for each quarter should be easily be able to determine and prove whether a 25% reduction has taken place.
Companies should create a document highlighting how they concluded that a 25% reduction will occur and how they came to their decision to make the application for the subsidy scheme. They should then retain this note in case Revenue ever question the application.
The Business is unable to meet its normal wages or normal outputs (overheads)
This one isn’t as easy to prove and may lead to debates with Revenue in the future. However, they have given examples of what might be needed to prove this. These include copies of correspondence with banks asking for a holiday on loan repayments, any correspondence with trade unions looking to implement wage cuts, evidence of reliance on debt to fund day to day activities.
Revenue’s guidance indicates that the key focus for them will be on the fact that the Covid-19 virus caused significant negative economic disruption to the employer.
Revenue have indicated that they will consider any evidence which proves a company has been negatively affected by the virus.
Regarding companies not yet receiving turnover, such as R&D type companies, Revenue give an example that they would qualify if they saw a 25% reduction in investment.
Thankfully Revenue have clarified that a company with strong cash reserves will still qualify but that the government would expect the employer to continue to pay a significant proportion of the employee’s normal wage.
Summary of eligibility
Based on the above we are of the view that a company who can clearly show that turnover is down 25% and show that they have been negatively affected by the economic disruption should qualify for this scheme. If they have substantial cash reserves, then they will need to top up the government subsidy to ensure qualification.
Also please note that all employers who qualify for this scheme will be listed on Revenues website.
Payroll from March 26th to April 20th
For companies that do qualify then this scheme will apply from March 26th until April 20th. A different scheme will apply after that. This note is therefore only applicable until April 20th.
Unfortunately, the new guidelines and FAQ received yesterday differs slightly from advice received from Revenue on the 24th of March. The scheme for the next few weeks will now look like this:
An employer will receive from Revenue €410 for each employee who qualifies, irrespective of their salary
The employer will then have to calculate the actual subsidy themselves and following this calculation, if there is then a refund due back to revenue, by the following method:
- Calculate the employees average net weekly salary (normal take home pay) in January and February of 2020
- Multiply this amount by 70%. This is the subsidy amount
- The Subsidy amount is limited to a maximum of €410 per week for a person with a gross salary of €38,000 or under. The subsidy amount is limited to a maximum of €350 for someone with a gross salary of between €38,000 and €76,000. There is no subsidy allowed for someone with a gross salary over €76,000
- For instance, a person with net weekly earnings of €450 will be due a subsidy of 70% of this, which amounts to €315. The employer can top this up by 30% or not but they are encouraged to do so
- In the example above the employer will have received a subsidy of €410 for the employee. Therefore, the employer will owe the Revenue the difference, i.e. €95
- Also, if the employees net wage is below €410 then the employer can only pay them their average net earnings and the employer will have to refund the difference to revenue of between the €410 and the amount paid to the employee
- If the employer laid off an employee, they can re-instate that employee and claim for this scheme as long as that employee was on the payroll at the end of February
Employers can use this scheme for some employees and temporarily lay off other employees depending on the demands of the business
It would appear that employees receiving under €500 net salary a week would be entitled to a subsidy of less than €350 a week. The same employee if temporarily laid off could instead apply directly for the Covid-19 Pandemic Unemployment Payment and then receive the full €350 from the government and do so without having to work.
This anomaly may lead to many employees in this wage bracket ending up applying directly for the Pandemic Unemployment Payment rather than be included as part of the wage subsidy scheme. This is obviously dependant on whether or not the employer can afford to top up the wages of the employee.
The advantage of the Wage Subsidy Scheme in this regard for the employee is that as the economy hopefully improves over the 12 week period the employer maybe able to afford to restore them to their normal take home pay with the assistance of the government supported wage subsidy scheme.
It is important to note that Pandemic Unemployment payment scheme is for a period of 12 weeks only (previously this was 6 weeks) and once the 12 weeks ends the employee would have to apply for job seekers which is currently less than the amount of € 350 p/w.
Employee with an average net salary of €800 a week in January and February. 70% of this is €560. However, this person’s annual salary is above €38,000 therefore the subsidy is limited to €350. The employer can pay the employee €350 per week and €410 would be refunded by Revenue within 2 working days. The employer will need to refund the €60 back to Revenue in due course. The employer should make every effort to discharge the full amount of the normal weekly wage to the employee, therefore a top up of a net €450 should be made where possible. However, the employer does not have to do so and can make a net top up of anything between €.01 cent to €450.
Employee with an average net salary of €586 a week in January and February. 70% of this is €410. This person’s annual salary would be circa €38,000 therefore the subsidy is limited to €410. The employer can pay the employee €410 per week and would be refunded this amount by Revenue within 2 working days. The employer should make every effort to discharge the full amount of the normal weekly wage to the employee, therefore a top up of a net €176 should be made where possible. However, the employer does not have to do so and can make a net top up of anything between €.01 cent to €176.
Employee with an average net salary of €500 a week in January and February. 70% of this is €350. The employer can pay the employee €350 per week and would be refunded €410 by Revenue within 2 working days. The employer will need to refund the €60 back to Revenue in due course. The employer should make every effort to discharge the full amount of the wages to the employee, therefore a top up of a net €150 should be made where possible. However, the employer does not have to do so and can make a net top up of anything between €.01 cent to €150.
Overview of which Scheme applies to which individual
- Employee is temporarily laid off – Pandemic Unemployment Payment of €350. Employee applies themselves to the Social Welfare
- Self Employed temporarily ceases trading - Pandemic Unemployment Payment of €350. Person applies themselves to the Social Welfare
- Employees are cut to a 3-day week – Short Term Work Support. Essentially a form of Job Seekers Allowance. The maximum available is €81.2 for those 2 days. Employee applies themselves to the Social Welfare
- Employee/self-employed is certified to self-isolate – Pandemic Illness Benefit of €350 a week for 2 weeks. Employee applies for this themselves directly with the Social Welfare
- Employee/self-employed is diagnosed with Covid-19 – Pandemic Illness Benefit of €350 a week for duration of illness. Employee applies for this themselves directly with the Social Welfare
- Employee keeps working and company qualifies for the Wage Subsidy Scheme – Wage Subsidy Scheme applies. Each employee is entitled to a subsidy within the relevant limits as described in the body of this note. The Employer Operates the Wage Subsidy Scheme.
- Employee keeps working and company does not qualify for the Wage Subsidy Scheme – No reliefs available
- Self Employed keeps working – no reliefs available
- Unemployed individual already on existing benefits or allowances before Covid-19 measures – no change/increase to payment entitlements
Hopefully the above gives some clarity to what each employee is entitled to for the next number of weeks and how the wage subsidy scheme should be operated by employers. Of course, these schemes and supports seem to be changing on a daily basis but we will continue to provide updates on this throughout the next few weeks.
If you have any queries or concerns on how to operate the scheme, please contact either Dave or Mark on the details below.
Dave O’Brien (email@example.com) / Mark Ryan (firstname.lastname@example.org)
Quintas Tel: 021 4641400