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COVID-19: worker pay protection – what it means for businesses

Julie Austin
26/03/2020

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Ireland

"The impact of COVID-19 on our economy and employment has been sudden and will be enormous."

On the 24th of March 2020, the Irish Government announced new and unprecedented measures to cocoon the Irish economy by assisting those who have already experienced job loss as a result of the COVID-19 pandemic and to protect those who are still in employment.  We have set out below the existing and new key measures. 



Key Measures  

1. Assisting those who have lost employment or are placed on temporary lay-off

The Government is increasing the COVID-19 Pandemic Unemployment Payment from €203 to €350 per week. Initially to be paid for a 6 week period, this payment will now be available for the duration of the pandemic, to all employees and crucially, the self-employed, who have lost their job or who are placed on temporary lay-off due to the Covid-19 pandemic. This payment cannot be topped up by employers at present.

The new flat rate payment of €350 per week, is approximately 75% of average earnings in the employment sectors most affected, and the first payments will be made on Friday 27th of March 2020.

The Employer Refund Scheme

On the 15th of March 2020, the Government introduced the Employer Refund Scheme, administered by the Department of Employment Affairs and Social Protection (DEASP). This Scheme enables employers to pay employees who are temporarily laid off due to the COVID-19 pandemic a flat rate payment of €203 per week, through the normal payroll process. This amount is not subject to tax, USC or PRSI. Employers could then apply to the DEASP for a refund of that amount.

This enabled employers to maintain their connection to their employees. The Scheme has now been replaced by the new COVID-19 Wage Subsidy Scheme (see below) and any employer who had already registered for the Refund scheme will automatically transfer over to the new Wage Subsidy Scheme and does not need to re-apply. Revenue will contact those businesses directly to confirm that they meet the conditions for this new scheme.
 

2. Assisting those who are working reduced hours - Short Time Work Support

Where an employee has been temporarily placed on a shorter working week, eligible employee will qualify for Short Time Work Support. The rate of payment will depend on the employee's average weekly earnings in the governing contribution year and the change in your work pattern. The payment is only available to employees who were previously working full-time therefore it will not apply to part-time employees.

3. COVID-19 illness benefit

The COVID-19 Illness Benefit will also increase from €203 to €350 per week and can be topped up by employers. This will be paid to people who are self-isolating on medical advice or who have been diagnosed with COVID-19. It will be paid for a maximum of 12 weeks where a person is self-isolating but will be paid for the duration of a person's absence from work if they have been diagnosed with COVID-19.

4. Protecting jobs - the new COVID-19 Wage Subsidy Scheme

In its latest measure to protect people from further job losses, the Government announced that it is establishing a Temporary COVID-19 Wage Subsidy Scheme to encourage employers and companies badly affected by the COVID-19 emergency, to retain their staff on the payroll.

Through this Wage Subsidy Scheme, the Government will co-fund 70% of employee's salaries, up to a cap of €410 per week, net of tax. That equates to the weekly take-home pay, of a worker earning approximately €38,000 gross per annum. Workers earning between €38,000 and €76,000 will be entitled to assistance capped at €350 per week, while workers earning above €76,000 will be excluded from the scheme. 

Employers are being encouraged to top up the Wage Subsidy payment to as close to 100% of normal wages as possible for the subsidised period. While the €410 will be paid tax free to employees, and employer-paid top up will be taxed in the normal way.

Self-employed persons who qualify, will be paid the Covid-19 Pandemic Unemployment Payment of €350 rather than the COVID-19 Wage Subsidy payment.

How it will operate

Payments under the Scheme shall be made by employers to their employees via payroll, as normal. Employers will then be reimbursed for the amounts that have been notified to Revenue via the payroll process, generally, within 2 working days of Revenue's receipt of the payroll submission.

This payment will be administered by Revenue, with the intention that this will reduce the burden on the Department of Employment Affairs and Social Protection (DEASP) which is dealing with the other Covid-19 related payments.  

Further Government guidance is accessible here

Eligibility
The scheme is open to employers from all sectors (excluding the public service and non-commercial semi-state sector) regardless of size, including not-for-profit organisations and charities.

To avail of the Scheme, employers must retain staff on payroll; some staff may be temporarily not working (lay off) or some may be on reduced hours and/or reduced pay (short time). Provided the employer meets the conditions set out below and subject to the levels of pay to the employee's the employer may be eligible for the scheme for some or all of the employees.

To take advantage of the scheme, employers must meet the conditions set out below, and subject to the levels of pay to the employees, the employer may be eligible for relief for some or all of the employees:-

  1. Demonstrate significant negative economic disruption due to Covid-19

  2. Demonstrate a decrease in turnover of at least 25%

  3. Be unable to pay normal wages and normal outgoings fully

  4. Retain their employees on the payroll

Only employees who were on the employer’s payroll as at 29 February 2020, and for whom a payroll submission has already been made to Revenue in the period from 1 February 2020 to 15 March 2020 can benefit from the Scheme.

Employers will be able to avail of this Scheme for a period of 12 weeks, from the 26th of March 2020. Employees who are not eligible for the scheme can apply for the COVID-19 Pandemic Unemployment Payment.

Registering for the Scheme
For employers who have already registered for the Employer Refund Scheme, they will automatically transfer over to the new Wage Subsidy Scheme and do not need to re-register; employers should simply make payroll submissions from the 26th of March 2020 under the subsidy scheme arrangements on the same basis as they were doing for the Employer Refund Scheme.

For new applicants, registration for the new COVID-19 Temporary Wage Subsidy Scheme can be done via the online Revenue portal "ROS", and the application guidelines for this process may be found here. Applicants must complete a “Covid-19: Temporary Wage Subsidy Self-Declaration” and provide bank account details so that the payment can be made directly to the applicant's account.

The Emergency Measures in the Public Interest (Covid-19) Bill 2020 is still in draft form and being debated. It is expected to be enacted in the coming days at which time we will have greater clarity.

Conclusions

The Taoiseach's announcement of the COVID-19 Wage Subsidy Scheme on 24 March 2020 has been welcomed and has received a lot of support. In addition, emergency legislation was announced, which aims to introduce a number of emergency measures such as rent freezes, the prevention of evictions and various measures to make it easier for health care professionals and members of the defence forces to re-register and return to work. The cumulative effect of these measures, has been to reassure the public at large businesses that an unprecedented level of State support is going to be provided, and that provision will be fast tracked to provide rapid relief and support.

It remains to be seen whether the COVID-19 Wage Subsidy Scheme will be extended beyond 12 weeks if necessary. Nevertheless, the suite of supports to protect the Irish economy during these unprecedented circumstances, is hoped to place the country in the best position to recover at speed when the COVID-19 pandemic has been brought under control. The situation continues to evolve at a great pace, and the supports that have been introduced, reflect the evolving circumstances.

How we can help

We are working with employers across various sectors, who have been impacted by COVID-19 and who are looking closely at whether or not they can avail of the new State supports to protect their businesses.  Please call or email any member of our team for more information and advice as to how your business can take advantage of the new COVID-19 Wage Subsidy Scheme.

Written by Julie Austin and Kate Hawthorn 

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Areas of Expertise

Employment