The government announced on the 23rd July the “July Job Stimulus” which is the next phase of their economic plan to deal with the ongoing threat of COVID-19. Draft legislation supporting these measures was issued the following day in the form of the COVID-19 (no.2) 2020 Bill.
A jobs-led recovery from the serious economic impact of the pandemic is at the heart of the overall strategy and this latest announcement is a forerunner to a National Economic Plan to be introduced later this year. Objectives to secure the public finances, keep abreast of technological developments and the strive for a greener economy must all now be achieved whilst living with COVID-19.
The package of measures includes a mixture of tax and grant based measures aimed at aiding businesses to get back on their feet post lockdown whilst also facing the new reality.
Maintaining employment in addition to implementing several measures to support those individuals who have lost their jobs as a result of the pandemic is central to the latest announcements.
The Temporary Wage Subsidy Scheme (TWSS) has played a vital role in retaining thousands of employees in employment and providing much needed cashflow assistance to those employers who have been hit badly by the pandemic. The latest figures released show that 63,500 employers have received payments under the scheme to date in respect of over 626,000 employees.
As businesses emerge from lockdown and attempt to trade their way back to profitability, the government has correctly recognised that providing cash wage supplements to businesses remains a crucial pillar of the immediate way forward.
A new Employment Wage Support Scheme will be introduced from 31 July until the end of March 2021. It will run concurrently with the Temporary Wage Subsidy Scheme (TWSS) until 31 August at which stage the TWSS will cease.
Under this new scheme, eligible employers will receive a flat-rate subsidy of up to €203 per employee per week, the precise amount to be determined by reference to the employee’s gross salary.
To be eligible to participate in the scheme until April 2021, the turnover of the employer must have fallen by 30% (which is an increase from the 25% decline in turnover or customer orders required under the existing scheme). This turnover test will be measured by reference to the period from July to December 2020 as against the same period last year.
The package has broadened the availability of the subsidy scheme which will now be open to seasonal workers and new hires. This will be of particular benefit to certain parts of the hospitality sector who may have been closed during the lockdown or operating at a significantly reduced capacity.
The government is also preparing for the situation where employers are forced to temporarily reduce working hours of their employees into the longer term. We understand that following the end of the Employment Wage Support Scheme in April, a short-time work wage subsidy may be developed and introduced and that this is currently under consideration.
Both the EWSS and the potential for a more longer term short-term working subsidy should provide a significant amount of comfort and reassurance to employers and employees as we head into the months ahead and will continue to be a central plank in the immediate aim of rejuvenating the economy.
The latest announcements also confirm that the availability of the PUP has been extended to 1 April 2021.
This benefit, which is currently payable at a rate of either €203 or €350, will be gradually reduced between now and April based on the individual's pre-COVID income levels.
The aim is to gradually bring the payments in line with existing social welfare levels. This should address the anomaly that had arisen whereby employees were able to break the link with their employer and be financially better off claiming the PUP.
The PUP will not be available for new claimants with effect from 17 September 2020.
A small update to the Cycle to Work scheme is proposed, no doubt designed to encourage reduced use of public transport.
The amendment is to provide that the allowable benefit in kind exempt expenditure will be increased from €1,000 to €1,500 in respect of e-bikes and €1,250 in respect of other bikes.
Further, an employee could previously only avail of the scheme once over a consecutive period of 5 tax years. The bill proposes to reduce this to a consecutive period of 4 tax years. This provides an opportunity to replace a bicycle under the scheme a year earlier than was previously allowed.
In addition to the extension of the wage subsidy scheme and the PUP, the government has committed to a significant investment in various schemes to help those who have lost their jobs find a new one, retrain, or develop new skills. Some of these measures will include:
The Government reiterated in the stimulus package that it would shortly pass legislation to formally provide for the warehousing scheme announced back in May which allows businesses affected by COVID-19 to delay payment of their PAYE and VAT debts, in part or in full, up until 12 months after normal trading resumes with no interest or penalties.
This measure provides employers with significant liquidity support.
The ability for employees to work from home during the pandemic period has been a necessary reality, and this trend will continue to play a major part in the business recovery phase.
Whilst the government has acknowledged this in the July Job Stimulus document, there is no detail included as to whether there will be any measures to recognise this shift in working arrangements.
Specifically, the government should review what changes are required in the employment tax space to ensure that we have a system that continues to be fit for purpose.
While some temporary measures have been released throughout the course of the pandemic to simplify some of the benefit in kind rules relating to company cars and vouchers, additional and more permanent benefit in kind and employee expense concessions seem appropriate.
For example, new guidance may be needed to help classify business travel which now needs to be undertaken direct from home on a more regular basis.
Also the definition of an employee’s “normal” place of work which is central to determining tax free travel and subsistence may need to be reviewed in light of new working arrangements.