As part of the recently published July Stimulus package, the Irish government announced a new Employment Wage Subsidy Scheme (EWSS) which will replace the existing Temporary Wage Subsidy Scheme (TWSS) with effect from 1 September 2020. The EWSS is expected to run until 31 March 2021.
Financial Provisions (COVID-19) (No.2) Bill 2020 (published on 24 July and signed on 30 July 2020), provides the legislative footing for this new wage support scheme and sets out various details of the scheme, including
- the employer and employee eligibility criteria;
- the rates of subsidy payable; and
- other administrative aspects.
To be eligible to participate in the EWSS, the employer must be able to demonstrate to the satisfaction of the Revenue that their business has been significantly disrupted by reason of COVID-19. Specifically the employer needs to demonstrate at least a 30% decline (or such other percentage as the Minister for Finance may specify) in either the turnover of the employer’s business or in customer orders received during the period 1 July 2020 to 31 December 2020, as compared to the same period in 2019.
In cases where the business of the employee has not operated for the whole of the corresponding period in 2019, the following will apply:
- Where the business operations have commenced on or before 1 November 2019, the 30% decline test must be determined in 2020 by reference to the same reference period last year in which the business was in operation. For example, if the employer’s business commenced on 1 September 2019, then a 30% decline in the period 1 September 2020-31 December 2020 must arise as compared to 1 September 2019-31 December 2019.
- Where the business operations have commenced after 1 November 2019, the employer must be able to show that the turnover or customer orders during the period 1 July to 31 December 2020 will be at least 30% less than what the turnover or customer orders would have been had there been no disruption caused by COVID-19.
The Bill provides that Revenue will publish guidelines to assist employers in determining whether the reduction in turnover/customer orders will occur by reason of COVID-19 and the disruption that COVID-19 is causing to business. The Bill requires employers to review their eligibility criteria at the end of each month for July 2020 to March 2021. If as a result of the review, it transpires that the employer does not meet the eligibility criteria they should withdraw themselves from the scheme on ROS with effect from the first day of the following month.
Any employer who is entered in the register established and maintained under the Child Care Act 1991 will be considered eligible for the scheme without having to satisfy the reduction in turnover or customer order tests. This would include pre-schools, play groups, creches and other services catering for pre-school children in addition to creches etc that cater for primary school children.
In order to be eligible for the EWSS throughout the entire period, the employer must be entitled to a tax clearance certificate. An employer can only register for the new EWSS if they have tax clearance prior to entering. If a payroll submission in without a registration for EWSS being submitted, it will be rejected. This is a key requirement as it requires employers to be fully up to date with all tax filings and tax payments (if such tax amounts due are outside the scope of a warehousing agreement with Revenue). It is therefore absolutely essential that, should an employer have outstanding tax returns (e.g. VAT, VAT RTDs, Corporate tax returns etc) and/or outstanding tax liabilities (not covered by a warehousing agreement) that these outstanding tax returns are filed together with any outstanding taxes paid prior to entering into the new EWSS.
Interaction with existing TWSS
Where an employer is entitled to receive a subsidy for an employee under the existing TWSS during July and August 2020, the employer shall not also be entitled to claim a subsidy under the EWSS in respect of the same employee.
Assuming employers meet the qualifying criteria, the EWSS will be available from 31 July for:
- TWSS employers who have non-TWSS employees (i.e. new hires), and
- Non TWSS employers, who have not previously availed of the TWSS
Any employee who was considered an eligible employee under the existing TWSS provisions will also be considered an eligible employee for the EWSS. When TWSS ceases to be claimed for an employee (latest 31 August) an EWSS claim can commence.
The new EWSS extends the definition of eligible employee to now include an individual who is on the payroll of the employer at any time in the “qualifying period” i.e. at any time between 1 July 2020 and 31 March 2021. Previously, with a small number of limited exceptions, an employee was only considered eligible for the TWSS where they were included on the employer payroll on 29 February 2020.
Revenue has now confirmed that in cases where TWSS was not previously being claimed, that payments under EWSS can be backdated to 1 July.
The initial drafting of the bill excluded an individual who is a proprietary director of a company. It would seem, however, that following a government announcement on 31 July, proprietary directors who retain ordinary employees on payroll will also be eligible with effect from 1 September. A Finance Bill amendment is anticipated in respect of this.
An individual who is connected with the employer (unless such connected person received pay from the employer between 1 July 2019 and 30 June 2020 ) is excluded from EWSS under the Bill.
The extension of the EWSS to seasonal workers and new hires is a very welcome development, particularly to those sectors such as hospitality or other seasonal businesses who perhaps were closed in February 2020 or operating at a reduced capacity.
Rates of Subsidy
Under the EWSS, eligible employers will receive a per-head subsidy on a flat rate basis which will be determined based on the amount of gross pay that the employer pays to the eligible employee as follows:
|Gross Pay||Subsidy Payable|
|€151.50 – €202.99||€151.50 per week|
|€203 – €1,462||€203 per week|
Revenue have confirmed that EWSS support will be backdated to 1 July for eligible employers who did not qualify for TWSS.
The rates payable under the new EWSS have been simplified considerably compared to the rates payable currently under the TWSS. Under the existing TWSS, those employees with gross pay in excess of €960 per week are not eligible for the subsidy. This upper gross pay limit has been increased to €1,462 under the new scheme. However, a lower gross pay limit of €151.50 is now provided for which doesn’t exist under the TWSS.
The EWSS payments to the Employer will now be monthly and no longer weekly. The EWSS payments will be paid on the 14th of the next month. As a result, for weekly paid employees, the employer will not receive the EWSS repayment until six weeks after the first weekly payroll submission of that particular month.
Tax & PRSI
Revenue has confirmed that all gross payments made to employees under the EWSS should be fully liable to PAYE, USC and employee PRSI in the normal way.
Employers will be required to operate PRSI on all gross payments to be made to their employees having regard to guidelines to be published by the Revenue. However a 0.5% rate of employers PRSI will continue to apply for employments that are eligible for the subsidy.
The Bill includes a specific anti-avoidance provision which seeks to counteract
- contrived situations whereby any gross pay due to an employee is deferred, suspended, increased or decreased with a view to securing the wage subsidy or
- situations where an employee is laid off and removed from the payroll and replaced with two or more employees in relation for whom the subsidy would be available.
If Revenue identify any such cases, the employer will be treated as having never been eligible for the scheme and any subsidy payments received would need to be refunded, together with possible interest and penalties.
As was the case for the TWSS, the names and addresses of all employers who receive a wage subsidy payment under the new EWSS will be published on revenue.ie
Please contact a member of our Team for more information.
+353 42 933 9955