COVID-19 Wage Subsidy Scheme: A New Phase 2 and updated guidance from Revenue

Apr 16, 2020

This week the Minister for Finance announced changes to the Temporary Wage Subsidy Scheme. These changes are intended to deal with some anomalies in the scheme.  A second phase ‘Phase 2’ of the scheme will be effective from 4 May 2020, for payroll submissions on or after that date.  No backdating is allowed.  Employees on lower incomes will likely benefit most from the changes. Guidance from Revenue on how Phase 2 will operate is expected over the coming days. What we do have now are updated FAQs from Revenue, published 16 April, which answer some of the questions from members on the current version of the scheme, such as: the impact of the subsidy on pension contributions and pensionable pay; treatment of PRSI contributions and insurable weeks for employees; and the calculation of employers’ PRSI. 

 

Phase 2 – effective 4 May 2020 onwards

The announced changes to the Wage Subsidy Scheme suggest that the method for calculating the subsidy amount and allowable employer top ups may involve more complex calculations and detailed payroll processes under Phase 2 than under the first phase.  The details we have on Phase 2 are at the moment confined to the press release from the Department of Finance. This tells us that a tiered approach will apply when determining the max subsidy available to employees with an average net weekly pay in excess of €586, and who are in receipt of a top up to their weekly pay from their employer.  For some employees, they more be worse off under Phase 2 of the scheme than they were under phase 1.  The average net weekly pay based on a Revenue formula is essentially the total net pay for each pay date in January and February (pre-COVID-19) divided by 9 to give an average.  It is this amount that is used for the subsidy calculations. 

A much-welcome enhancement is the extension of the scheme to support employees who had an average net weekly salary greater than €960 (€76,000 gross p.a.) but whose post-COVID-19 pay has fallen below €960 per week.  A subsidy may be available in respect of these employees based on the level of reduction in their pay and their amount of the employer top up payment.   Per the details we have, the subsidy will be tapered to ensure that the net weekly pay does not exceed €960 per week.

Any relevant information we receive on Phase 2 will be reported to our dedicated Wage Subsidy Scheme page on our COVID-19 Hub.

 

Updated Revenue FAQs

The updates to the Revenue FAQs published on16 April bring us to Version 6 of the Revenue’s guidance on the scheme. The updates are highlighted in grey. The common query from members on the impact of the subsidy on tax and pensions is answered in this document, i.e. the impact of the subsidy on the tax approval status of an employer occupational pension scheme (1.11) and the employees’ ability to make a pension contribution (1.7 and 1.10). Other updates include:

  • the interaction with PAYE Exclusion Orders (3.14);
  • the calculation of employers PRSI (4.2);
  • calculating the average net weekly pay (4.3);
  • correcting payroll submissions (4.10); and
  • returning overpayments of the subsidy to Revenue (6.1).

We expect clarification from Revenue on group companies over the coming days. There is likely to be another update to the FAQs. The tax treatment of the Wage Subsidy in the hands of the employee is also expected at a later stage. Indications are that this will follow guidance on Phase 2 of the scheme. We understand that the tax treatment of the pandemic unemployment payment (PUP) of €350 is undecided by DEASP and Revenue at this stage.

We have also raised some initial points with Revenue on the position for employers as they gradually re-open or resume activity.

We are continuing to obtain timely clarifications. As we receive relevant updates we are advising all members via the appropriate channels. Please check in regularly on the COVID-19 Hub for latest updates.