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On 24 March 2020, the Irish government announced as part of its National COVID-19 Income Support Scheme the introduction of a “Temporary Covid-19 Wage Subsidy Scheme” to provide financial support to Irish workers and companies affected by the crisis.

Temporary COVID-19 Wage Subsidy Scheme

The scheme, which will run for 12 weeks from 26 March 2020, replaces the COVID-19 Employer Refund Scheme previously announced which focused on assisting employers with employees who were laid off without pay. The new scheme provides wage subsidies to enable employers to preserve the important link between employers and their employees, whether they are laid off or face reduced working hours or pay as a result of the adverse business impact of COVID-19.

It is a very welcome development for many employers seeking to support their workforce through the crisis period. It is hoped that these measures will allow affected businesses to resume their activities at sustainable levels once COVID-19 restrictions have been removed.

In summary, the key features of the scheme include:

  • In Phase 1 of the scheme (the transitional phase) which applies from Thursday 26 March 2020 up to no later than 20 April 2020, the subsidy scheme will refund employers up to a maximum of €410 per week for each qualifying employee. However, employers should pay no more than the normal take home pay of the employee and will need to refund subsidy amounts received in excess of the amounts due to lower paid workers whose net average weekly take home pay is less than €410.
  • In Phase 2, the scheme will move to tailored subsidy payments calculated for each eligible employee based on 70% of the weekly average take home pay for each employee up to a maximum payment of €410. Revenue is to issue further detailed guidance on the calculation of the subsidy amount for different employee earning levels.
  • Employee Pay Related Social Insurance (PRSI) will not apply to the subsidy amount and employer PRSI will apply at a rate of 0.5%.

The subsidy is to be delivered by employers making the payment to employees as part of their usual payroll processes. Revenue will reimburse employers within two working days after receipt of the payroll submission. These payments are processed directly by Irish Revenue into ROS, Revenue’s online system which administers payroll taxes for the employer.

Employers who are in the position to make additional wage payments to affected employees should include this as additional gross pay subject to payroll taxes operated through payroll.

The subsidy remains taxable as part of the employment income of the employee. Where a refund of payroll taxes arises to the employee as a result of reduced pay, this can be refunded to the employee through payroll and Revenue will also refund this amount to the employer.

This scheme is open to impacted employers in all sectors. The employee must have been on the payroll in February 2020. 

The employer is expected to make best efforts to maintain as close to 100% of normal income as possible for the subsidised period. There will be severe penalties for any abuse of the scheme.

To qualify for the wage subsidy scheme, employers must:

  • self-declare to Revenue that they have experienced significant negative economic disruption due to COVID-19,
  • demonstrate a minimum of 25% decline in turnover or customer orders being received,
  • be unable to pay normal wages and other outgoings, and
  • retain their employees on the payroll.

Employers who have already registered for the previous COVID-19 support scheme are automatically registered for the wage subsidy scheme.  

Irish Revenue has issued guidance in relation to the operation of the transitional phase of the scheme which is available here.

Guidance regarding employer eligibility for the scheme has also issued. The full guidance is available here.

Frequently asked questions

At the outset of the FAQ document, Revenue outlines that there are two phases to the temporary COVID-19 Wage Subsidy Scheme.

Phase 1 is intended to be a “short, transitional phase that builds on the current emergency Employer Refund Scheme that has been operational since 15 March 2020”. The refund of €203 per employee per week which would have been due to employers under the refund scheme is increased to a maximum of up to €410 in respect of all employees for employers who operate the subsidy scheme regardless of whether the employer makes an additional payment to the employee’s earnings or not.

Phase 2 is expected to commence no later than 20 April 2020. In Phase 2, the level of subsidy being paid to employers will be based on each individual employee’s Average Net Weekly Pay, subject to the maximum weekly amounts (as outlined below). 

Some of the key points provided in Revenue’s guidance are as follows:

Quantum of subsidy

During the transition period the scheme provides:

  • For those employees earning less than or equal to €586 per week net, a maximum subsidy payment of the lower of €410 or 70% of the employee’s Average Net Weekly Pay;
  • For those employees earning over €586 per week net and less than or equal to €960 per week net, a maximum subsidy payment of €350 (or 70% of the employee’s Average Net Weekly Pay if less than €350). Where an employee’s Average Net Weekly Pay is more than €960 net per week, no subsidy payment is available.

However, it should be noted that where the €410 Revenue payment in Phase 1 to the employers exceeds the maximum subsidy amount due to the employee, e.g. because it exceeds the average net weekly pay for that employee, the excess is refundable by the employer to Revenue.

The FAQs remind employers that it is not intended that the combination of the subsidy payment and any other net pay being paid to the employee by the employer should exceed the employee’s average weekly net pay amount.

Revenue indicates in the FAQs that the “Average Net Weekly Pay” should be calculated using the values in the payroll submission for each pay date in January and February 2020 – as follows 

  • Take the employee’s Gross pay for every pay period in January and February,
  • Subtract the Income Tax Paid, USC Paid and Employee PRSI Paid,
  • 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. This gives you the employee’s average pay that is to be used for the subsidy amount.

In FAQ 4.7 Revenue has included an example related to monthly employees which suggests an entitlement for the March 2020 monthly payroll to a subsidy amount which is the lower of €203 x 4 (€812) or 70% of the employee’s net weekly pay. This, Revenue advised, is based on a 4-week March with four weeks at the €203 rate which applied under the previous support scheme. Further details on the applicable rates for bi-weekly payrolls, etc. are set out in the FAQs. 


It would appear from the FAQs that employers who have already laid off employees could now rehire them and pay the subsidy amount to them. To be eligible, the employees had to be on payroll at the end of February 2020. It is important to note that Revenue can cross check the employee details returned through payroll to verify this. Where the employee has already been returned by the employer as ceasing their employment, and the employer rehires them, the employer will have to create a new employment for the employee and record a new Employment ID for the employee.

If an employee was in employment but did not receive normal pay in January or February 2020, e.g. due to factors such as reduced pay or off-pay leave, the FAQs suggest that the employer can either operate the scheme based on their Average Net Weekly Pay; pay the employee without receiving a subsidy refund; or the employee could instead apply directly to the Department of Employment Affairs and Social Protection (DEASP) for the COVID-19 Pandemic Unemployment Payment.

Further guidance regarding employer eligibility is set out below. 

Tax and PRSI treatment

  • The subsidy payment is exempt from PAYE, USC and employee PRSI but continues to be subject to income tax/USC by review at the year end. There is no more insight available as to how this will work in practice.
  • The FAQs confirm that Employer PRSI on any top-up payment is reduced to 0.5%. The employee’s entitlement to benefits and social welfare assistance remain unaffected by this change in PRSI designation.
  • The FAQs advise that if an employee is due a refund of tax or USC, Revenue will refund this to the employer along with the wage subsidy.

Other points to note

  • The earliest period to which the Temporary Wage Subsidy Scheme can be backdated is the payroll week commencing Monday 23 March 2020.
  • The guidance confirms that the scheme allows for the payment by employers of additional taxable payments or “top-up payments”. 

Revenue guidance on “Employer Eligibility and Supporting Proofs”

To recap, in order to qualify for this subsidy, an employer must be able to demonstrate that it has been significantly adversely impacted financially as a result of COVID-19 and has an inability to pay wages. Revenue has issued helpful guidance regarding its approach to confirming employer eligibility and examination of supporting proofs.

Revenue stresses that employer eligibility will initially be determined on the basis of self-assessment and declaration by the employer concerned, combined by a risk focused follow up verification by Revenue involving an examination of relevant business records where that is considered necessary.

Revenue goes on to state that key indicators that an employer has been significantly impacted by the crisis are that the employer’s turnover is likely to decrease by 25% for quarter 2, 2020; that the business is unable to meet normal wages or normal outputs and any other indicators set out in their guidelines. In terms of a comparator period, Revenue indicates that the employer can look at the prior month, another quarter, the same quarter in 2019, or another basis that would be considered appropriate by the employer.

Helpfully, Revenue’s advice is that it will not be looking for proof of qualification at this stage but may in the future so it would be important for employers to retain evidence and document their basis for asserting qualification for the scheme.

In the guidance, Revenue sets out a number of illustrative rather than exhaustive examples of the types of supporting proofs it could seek to review/obtain. One of the examples included a scenario where the decline in turnover is less than 25% but the business believes it will suffer such a decline prospectively, suggesting that such a business could qualify.

Another welcome point addressed in guidance relates to employers that have experienced a significant decline in business but who still have strong cash reserves (that are not required to fund debt). These employers can still qualify for the scheme but the government “would expect the employer to continue to pay a significant proportion of the employee’s wages”.

Finally, with regard to the employer declaration, Revenue mentions that this is “simply a declaration which states, that based on reasonable projections, there will be, as a result of….COVID-19, a decline of at least 25% in the future turnover of, or customer orders for, the business for the duration of the pandemic and that as a result the employer cannot pay normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.”

Legislation to enact the measures passed on 27 March 2020. Revenue continues to update its guidance to address questions on the operation of the scheme and is expected to issue additional detailed guidance on the operation of Phase 2 of the scheme. 

Other income support measures

In addition to the “Temporary Covid-19 Wage Subsidy Scheme” the government has put in place further enhanced income support measures, including:

  • Where employees who have been laid off, they can avail of an enhanced emergency COVID-19 Pandemic Unemployment Payment by making an application direct to the DEASP. This payment has been increased from €203 to €350 per week. Those claiming under the existing scheme will receive the increased €350 amount.
  • Self-Employed individuals will be eligible for the COVID-19 Pandemic Unemployment Payment of €350 directly from DEASP rather than receiving payments from Revenue.
  • The COVID-19 illness payment available to workers who have who have either been told to self-isolate or have been diagnosed with COVID-19 of €203 has also been increased to €350 per week.

In addition to these measures, taxation measures to alleviate short-term difficulties faced by businesses are already in place. Irish Revenue has posted specific advice for businesses experiencing trading difficulties as a result of COVID-19 including information on tax returns, the application of late payment interest, debt enforcement, tax clearance and customs. Guidance also refers to the possibilities of accelerating interim refunds of Professional Services Withholding Tax (PSWT) as well as certain instalment R&D tax credit refunds due in 2020.

The broader package of measures enacted on 27 March 2020 also includes enhanced protections for people facing difficulties with their mortgages, rent or utility bills.

These are welcomed measures to provide income support to employees while also providing businesses with an opportunity to return to normal operations after the pandemic concludes.


If you have any related questions or need further information about KPMG’s response to COVID-19, please get in touch with our People Services team for assistance.

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