COVID-19 WAGE SUBSIDY SCHEME - LOOK BEFORE YOU LEAP

The finer details of the COVID-19 wage subsidy scheme were announced today and while the intentions of the scheme are good, best intentions don’t always reflect best outcomes. There appear to be some unintended land mines in the scheme which are probably a result of the haste in which the legislation was drafted.

This is a scheme to assist employees, this is NOT a bail out for employers. By attempting to reduce the payroll burden on the employers, the Government is staving off a tsunami of jobseekers benefit applications by subsiding an employees net pay for twelve weeks. The government is undertaking to pay 70% of an employees weekly net pay up to a maximum of €410 tax free. However, employees on an average weekly pay of €960 are not entitled to the subsidy so employers will need to make a decision on whether to pay those employees their regular salary, agree a reduced salary or lay off those members of staff. Employees on an average net pay between €586 to €960 receive a reduced rate if €350 per week.

In addition to the subsidy, the scheme allows employers to make a Top Up to their employees weekly salary to the employees normal average net pay. If an employer Tops Up an employees salary by more their normal weekly pay there is a Euro for Euro reduction in the scheme. So if an employer Tops Up a salary by €100 in excess of the employees net pay, the subsidy is reduced by €100.

From reading the revenue website, the finer details of the scheme are not clear as the website only outlines the Key Features of the Scheme highlighting the headline rate of 70% and €410 per week, it’s only on further reading and additional guidance that the finer details become apparent. The important thing to take away from this is is designed to provide financial support to employees in the first instance and should not be considered a bail out to employers. Revenue have also stated that the subsidy is subject to income tax and although it will not be taxable in real time, employees will be taxed on the subsidy received as part of a year end review.

We’ve published an operational guide to the COVID-19 Wages Subsidy Scheme which details shows how the subsidy is calculated and outlines some of the other potential issues with the scheme which includes publication of the employers name on the revenue website.