close
Share with your friends

On 14 August 2020, Revenue released additional guidance on the operation of the Employment Wage Subsidy Scheme (EWSS). The introduction of the scheme was provided for in the Financial Provisions (COVID-19) (No.2) Act 2020 (Act No. 8 of 2020) which was signed into law on 1 August 2020, writes Olive O'Donoghue of KPMG.

While most of the key points provided for in the guidance have already been publicised either in the Act or in commentary around the Act, the guidance does provide additional practical insight into the operation of the scheme and does provide a bit more clarity in respect of assessing employer eligibility for the scheme.

An overview of the new EWSS, including a summary of main points to note from the Revenue guidance is set out below (the full guidance can be found here).

How are employers and employees eligible for the new EWSS?

Employer Eligibility

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. Revenue has set out examples of how to assess the decline in customer orders in different sectors in their new guidance. Where it is not possible to apply the turnover test or customer order test to the business in question, an alternative reasonable basis may be applied. In such cases, guidance should be sought from an employer’s local Revenue district before entering the scheme.

In cases where the business of the employee has not operated for the whole of the corresponding period in 2019, the following will apply:

  1. 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.
  2. 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 30% reduction in turnover or customer orders may be applied at the level of the entity as a whole or, where formally structured into individual business divisions before pandemic restrictions applied in March 2020, at the level of the individual business division. In these cases, each business division of such an entity meeting the eligibility criteria may be eligible for the scheme. While an employer may apply the eligibility tests to each business division separately, the employer will need to prove that each separate business division meets the eligibility criteria.

Depending on the structure of the entity, a single employer registration for a number of separate divisions may be in place. Provided it can be demonstrated that specific employees were wholly or mainly (more than 50%) employees in the impacted division, a subsidy may be claimed in respect of that employee. Similarly, employees based in a head office division may be treated as eligible employees to the extent their working time is spent wholly or mainly (more than 50%), performing functions related to the eligible business division.

In addition, where an employee is employed in an associated company but provides services wholly or mainly to a company meeting the eligibility criteria, the employing company can claim a subsidy in respect of that employee.

Helpfully, under the new EWSS, there is no requirement for the employer to have to demonstrate an inability to pay wages which caused significant confusion and uncertainty amongst employers under the TWSS.

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. If an employer does not currently hold tax clearance, an application can be made online via ROS under the “Manage Tax Clearance” option.

The scheme requires employers to review their eligibility criteria at the end of each month for July 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.

Where the employer becomes eligible once more in following months, they can re-register for the scheme and claim from the date of re-registration. The claim cannot be backdated for the period of de-registration. 

Employee Eligibility

An employee in receipt of gross wages of between €151.50 and €1,462 (subject to the below exception) for an eligible employer will qualify as an eligible employee. 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.

As the Financial Provisions (COVID-19) (No. 2) Act excluded from the definition of an eligible employee an individual who is a proprietary director (PD) of a company, we awaited guidance from Revenue confirming the availability of the EWSS in respect of PDs following a government announcement on 31 July. 

On 31 August, Revenue issued a press release confirming the availability of the EWSS in respect of PDs and the qualifying condition to be met. 

From 1 September the EWSS may be claimed in respect of PDs where:

  1. The employer meets the eligibility criteria for the EWSS,
  2. The PD is on the payroll of the eligible employer, and
  3. The PD has been paid wages which were reported to Revenue on the payroll of the eligible employer at any stage between 1 July 2019 – 30 June 2020. 

Further guidance is provided where an individual is a PD of two or more eligible companies. 

Revenue have confirmed a claim for the EWSS may only be made by one company for the duration of the scheme. The PD is required to elect which company will make the EWSS claim. The election made by the PD cannot be changed during the period of the scheme.  The election is deemed to be made on the first submission of an EWSS claim in respect of the PD. 

Revenue guidance also confirms that 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.

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.

Revenue guidance confirms that employees otherwise employed as part of a business e.g. domestic employees such as childminders, housekeepers, gardeners etc are not eligible for the EWSS. 

Rates of subsidy payable

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

€0

€151.50 - €202.99

€151.50 per week

€203 - €1,462

€203 per week

>€1,462

€0


Revenue have confirmed that EWSS support will be backdated to 1 July for eligible employers who did not qualify for TWSS.

Operational aspects of the EWSS

i) Registration for the EWSS

The employer will be required to register for the EWSS on ROS and this facility will be available from August 18th. As part of this registration process, the employer will be required to declare that the eligibility criteria are met. The date of registration cannot be backdated prior to the date of application. For claims in respect of payments in July/August, there is no requirement to backdate the claim. 

ii) Claiming the EWSS

Under the new EWSS, the subsidy to be paid to the employer is akin to an employment support grant. Under the new scheme, the employer will pay the employee their normal wages and will then receive a subsidy from the Revenue in respect of each eligible employee following submission of the payroll return based on the table set out above.

To indicate that a subsidy is being claimed for an eligible employee, the employer must include ‘EWSS’ as the payment type in the ‘Other Payments’ section on the payroll submission and input the digit zero or one cent (depending on payroll software capabilities) as the value of the payment.

The subsidy will be paid by Revenue to the employer via a bank transfer (as is the case now) as soon as practicable after the return due date (14th of the following month).

The above will apply for payroll submissions with a payment date on or after 1 September 2020. For any claims to be made for July/August, a ‘sweepback’ with payment made in September. A template will be available from Revenue in late August that will need to be filed with Revenue before 5 September. This will include employee names, PPSNs, employment ID, payment frequency, insurable weeks etc. Revenue will use this file to calculate the total subsidy and pay into the designated bank account as soon as practicable after 14 September. 

iii) Tax and PRSI position

Revenue has confirmed that all gross payments made to employees under the EWSS should be fully liable to PAYE, USC and PRSI in the normal way.

However, while employer PRSI will have been included at the higher rate through the payroll submission, a reduced rate of 0.5% will apply for employments that are eligible for the subsidy. Revenue will make an adjustment to the liability returned in the payroll submission, reducing the amount that becomes due and payable for the relevant month. 

iv) Publication

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. 

v) Anti-avoidance

Certain anti-avoidance provisions were included in the Act which seek to counteract:

  1. 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
  2. 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.

Revenue confirmed in their guidance that safeguards will be included to minimise abuse by employers in this regard. 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. 

Get in touch

To find out more about how KPMG perspectives and fresh thinking on tax issues can help your business or organisation thrive, get in touch with Olive O'Donoghue, Thalia O'Toole or Claire Davey.

Read more