Changes to the Temporary Wage Subsidy Scheme

23 Apr 2020

Changes to the Temporary Wage Subsidy Scheme

Operational changes to the Government’s Temporary Wage Subsidy Scheme (TWSS) were announced by Minister Paschal Donohoe on 15 April 2020. These come into effect for payroll submissions to Revenue on or after 4 May 2020.

Background

Introduced in March 2020 and operated by Revenue, the purpose of the TWSS is to encourage employers to keep employees on the payroll throughout the COVID-19 pandemic, retaining links for when business picks up after the crisis. When initially introduced, the TWSS was criticised for an anomaly whereby some employees on low pay were better off leaving payroll to avail of the COVID-19 Pandemic Unemployment Payment, a separate measure introduced to support individuals who have been laid off or lost their income due to the pandemic. This anomaly is addressed in the Minister’s recently announced TWSS update.

What is changing?

Briefly, the changes announced by Minister Donohoe on 15 April 2020 are:

• an increased subsidy (from 70% to 85%) for employees with previous average net weekly pay of up to €412,

• an extension of the TWSS to some previously excluded high earners,

• A reduction in the subsidy for employees earning more than €586 per week where their employer pays 60% or more of their average net weekly pay. This is calculated using a tiered approach.

There are no changes in the subsidy rates for employees whose previous average net pay was between €500 and €586 per week. These employees will continue to receive a subsidy of up to 70% of previous net income, up to a maximum of €410 per week.

Interim arrangements

Up to 4 May 2020, the TWSS will refund employers €410 for each qualifying employee. Previously, employees whose average net weekly pay exceeded €960 did not qualify for the TWSS scheme. However, from 16 April onwards, where an employee’s pre-COVID average net weekly pay was greater than €960, and their post-COVID net weekly pay has fallen below €960, the Temporary Wage Subsidy Scheme will be available for these individuals.

Updated TWSS rates from 4 May 2020

From 4 May 2020, the TWSS will move to a system based on the employee’s average net weekly pay. This is calculated as average net weekly pay in January and February 2020 as per the employer’s payroll submissions to Revenue. The updated TWSS rates are summarised below. No backdating will apply.

• An 85% subsidy (previously a 70% subsidy) will be payable for employees whose previous average net weekly pay did not exceed €412.

• A flat rate subsidy of €350 will be payable for employees whose previous average net weekly pay was more than €412 but no more than €500.

• A 70% subsidy will be payable for employees whose previous average net weekly pay was more than €500 but no more than €586, subject to a maximum subsidy cap of €410.

• A maximum subsidy of €350 will be payable to employees whose previous average net weekly pay was in excess of €586 but no more than €960. The subsidy will be calculated based on the amount of additional payments made by the employer, if any. (See Below).

Subsidy for employees earning more than €586 per week

Gross Amount paid by Employer - Subsidy

· Up to 60% of employee’s previous average net weekly pay = Up to €350 per week

· Between 60% and 80% of employee’s previous average net weekly pay = Up to €205 per week

· Over 80% of employee’s previous average net weekly pay = No subsidy payable

Ensuring employees are not better off under the TWSS scheme

The Minister’s update states that tapering of the subsidy will apply in all instances where the gross pay paid by the employer plus the subsidy amount exceeds the employee’s previous net weekly pay. This is to ensure that no employee would be better off under the scheme. The only exception where tapering will not apply is where an employer pays an additional payment which when added to the subsidy does not exceed €350.

Qualifying criteria for employers

There are no changes to the previously announced qualifying conditions for employers. Briefly, these are that employers must be significantly adversely impacted by the COVID-19 crisis with at least a 25 percent decline in turnover. Employers must be unable to pay normal wages and normal outgoings fully and must retain their employees on the payroll.

As with all self-assessment processes, it is vital that employers keep supporting documentation on file as this may be required by Revenue at a later date. For further information and/or advice, contact ifac’s payroll team on payroll@ifac.ie.

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