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As part of the July Stimulus package released on 23 July, the 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 two wage subsidy schemes will run concurrently until 31 August when the TWSS will cease. An employer cannot receive EWSS support in respect of an employee where TWSS is already being claimed during this period.

The EWSS provides many employers with an important financial lifeline for the next 9 months. The government is setting aside €2.35 billion in employment subsidies under the EWSS which underpins the importance being placed on maintaining current employment levels within the economy. The inclusion of new hires under the scheme will provide welcome support to employers who will look to expand their workforce in the future.

Financial Provisions (COVID-19) (No.2) Bill 2020, which was published on 24 July, 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 and operational aspects

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, they their business have 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:

  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.

While the introduction of a further wage support scheme is welcomed, the reference period for eligibility of 1 July to 31 December 2020 is likely to be a disappointing condition for many employers who may have suffered significantly as a result of COVID-19 in the first half of 2020 and are now expected to need a further 30% decline in the second half of the year in order to avail of any government wage supports from 1 September.  

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.

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.

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.

The Bill 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. 

Eligible Employees

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 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.

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.  

For comparative purposes, we have included the TWSS rates below.

Employees previously earning up to €586 net per week

Average net weekly pay

Subsidy

Up to €412

85% of AWNP, up to a max of €350

Between €412 to €500

Flat rate of €350 

Between €500 to €586

70% of AWNP, up to a max of €410

 
Employees previously earning in excess of €586 net per week

Gross top up payment

Subsidy available

Up to 60% of ANWP 

€350

More than 60% but less than 80% of ANWP

€205

More than 80% of ANWP

NIL

Operational aspects of the EWSS

i) Registration for the EWSS

The employer will be required to register for the EWSS in the same way as it would have done for the TWSS. In other words, for those employers who are looking to enter the EWSS, they will be required to login ROS and register by way of declaring that the eligibility criteria are met. 

ii) Claiming the EWSS

While the existing TWSS is considered a payment to the employee (albeit it is administered by the employer), under the new EWSS, the subsidy to be paid to the employer is now more 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.

The subsidy will be paid by Revenue to the employer via a bank transfer (as is the case now) within a few days after the employer submitting their payroll return to Revenue for the relevant pay period. 

iii) Tax and PRSI position

While the Bill is silent on the tax treatment of the subsidy payments, it does provide that 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.

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.

However, employer PRSI at the reduced rate of 0.5% will apply for employments that are eligible for the subsidy.

iv) 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 (new hires), and
  • Non TWSS employers, who have not previously availed of the TWSS

v) 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. 

vi) Anti-avoidance

The Bill includes a specific anti-avoidance provision which seeks 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.

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. 

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