COVID-19: Employer Alert - Employment Wage Subsidy Scheme - Arthur Cox
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EMPLOYMENT
TAX
COVID-19: Employer Alert –
Employment Wage Subsidy
Scheme
20 August 2020
The Employment Wage Subsidy Scheme (“EWSS”) will operate from
1 September 2020 to 31 March 2021 and replaces the Temporary
Wage Subsidy Scheme (“TWSS”) which will cease on 31 August 2020.
Revenue published its EWSS Guidelines availing of the EWSS continue to be bound • Have a tax clearance certificate
on 14 August 2020 in relation to the by mandatory statutory employment
operation of the EWSS (available here) obligations as well as the terms of an
(the “Guidelines”). employee’s contract of employment. TAX CLEARANCE
Any changes to an employee’s terms Employers must possess a valid tax
It is worth noting from the outset that and conditions of employment that
the Guidelines advise that the Minister clearance certificate to enter the EWSS
employers may need to make as a result and continue to maintain tax clearance
for Finance will continue to monitor the of the impact of the COVID-19 pandemic
economy and may amend the terms of for the duration of the scheme, in order
on their business such as reductions to to receive the applicable EWSS payments.
the scheme, specifically the end date, pay or hours, should be done following
the rate of subsidy payable and the If there are outstanding returns or
consultation and with the express or liabilities for the applicant or any of their
turnover test to determine employer implied agreement of employees. Failure
eligibility. Employers who will be availing connected parties, tax clearance will be
to do so may expose an employer to refused. Further information in relation
of the EWSS should therefore keep up to employment claims in either the civil
date with the most recent Revenue and to applying for tax clearance is available
courts or the Workplace Relations on the Revenue website here.
Government guidelines. Commission.
We have set out below an overview of the
current Guidelines. EMPLOYER ELIGIBILITY
REGISTRATION FOR THE EWSS
Employers can register for the EWSS 30% Test
TWO ELEMENTS through ROS from 18 August. Employers
An employer must be able to
The EWSS has the following two elements: will be required to agree to a declaration
demonstrate that:
on registration which includes “I
1. It provides a flat-rate subsidy to understand and accept that failure by 1. their business is expected to
qualifying employers based on the the business to adhere to the terms of experience a 30% reduction in turnover
numbers of paid and eligible employees the scheme could result in recoupment of or orders between 1 July and 31
on the employer’s payroll; and monies together with interest, penalties and December 2020 looking at the period
2. It charges a reduced rate of employer prosecution. I undertake that the business as whole rather than on a monthly
PRSI of 0.5% on wages paid to eligible will retain all records relating to the scheme, basis; and
employees. including the basis of eligibility, for review by 2. this disruption is caused by COVID-19.
Revenue.”
Importantly from an employment law This reduction in turnover or orders is
perspective, the Guidelines provide Employers must: relative to:
that “The scheme does not affect any
• Be registered for PAYE/PRSI as an • the same 6 month period in 2019
legal obligations that the employer may
employer where the business was in existence
have to their employee as regards any
terms, conditions or entitlements of their • Have a bank account linked to that prior to 1 July 2019;
employment, including pay.” Employers registration • where the business commenced
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COVID-19: Employer Alert – Employment Wage Subsidy Scheme
trading between 1 July and 1 November caused by the pandemic, an alternative the payroll and in receipt of gross wages
2019, the date of commencement to 31 “reasonable basis” should be applied. The of between € 151.50 and € 1,462 per
December 2019; or Guidelines state that it is not possible to week during the period of the EWSS.
• where a business commenced after be prescriptive as to what will satisfy this
test. It must however be the case that The following categories of employees
1 November 2019, the projected are specifically excluded in the legislation
turnover or orders for 1 July 2020 to 31 the 30% test cannot be applied to the
business in question before an alternative underpinning the EWSS1:
December 2020.
basis for assessing eligibility is used. In 1. Proprietary Directors
Employers should include all sources of all such cases, guidance from Revenue
trade income when considering turnover However, it was subsequently
should be sought through the relevant
specifically including sales, donations and announced by the Minister for Finance,
Revenue Division/Branch responsible for
State Funding. Paschal Donohoe TD on 31 July 2020
the tax affairs of the employer concerned
that the EWSS can be claimed in
Appendix I of the Guidelines provides respect of certain proprietary directors
additional guidance on determining (see details of announcement here).
MONTHLY REVIEW OF EMPLOYER
reduction in turnover or customer ELIGIBILITY It is understood that a decision is
orders. The 30% reduction in turnover being awaited on this point from the
or customer orders may be applied at Employers are required to undertake a Department of Finance and that the
the level of the entity as a whole or, if an review on the last day of every month Revenue Guidelines will be updated as
entity is formally structured (and has been (other than July 2020 and the final month soon as a decision has been made.
since before the COVID-19 pandemic of the EWSS) to ensure they continue to
restrictions in March 2020) into individual meet the eligibility criteria. If the business 2. Connected Parties who were not on the
Business Divisions, at the level of the no longer qualifies, they should deregister payroll and paid at any time between 1
individual Business Division. for the scheme from the following day July 2019 and 30 June 2020.
and cease claiming the subsidy. Where an employee has more than
• Each of the Business Divisions of such one employment with more than one
an entity which meets the eligibility If circumstances change in a later month
and the employer is again eligible, they eligible employer, each employer will
criteria may be eligible for the subsidy. make its own claim for the employee,
can reregister and claim from the date
• Each Business Division must have of reregistration. It is not possible to ignoring any other employment.
a clearly defined and distinct backdate the claim to include the period
management structure in place Where employees provide services
of deregistration. for a company who meet the eligibility
separate to the other Business
Divisions. criteria, but, for payroll purposes, they
are employed by an associated company,
• These structures must be formalised COMPLIANCE CHECKS then the subsidy may be available
and have been well established prior to The EWSS is operated on a “self- provided the group can demonstrate,
the pandemic. assessment” basis. Revenue will with supporting documentation, that the
Helpfully, the Guidelines set out a number undertake assurance checks and details eligible employees were, wholly or mainly
of examples of the application of the test on the operation of these checks will be (i.e. more than 50%), employed in one
for different businesses such as retail, provided in the coming weeks. Employers or other of a group’s trading companies
hotels, transport service providers and should therefore retain evidence of their which meet the criteria.
service providers. basis for entering and remaining in the
scheme.
RATE OF SUBSIDY
Reasonable Basis
The rate of the weekly EWSS subsidy
Where application of the “turnover” and ELIGIBLE EMPLOYEES the employer will receive per eligible
“customer orders” tests do not adequately A subsidy can be claimed in respect of employee is as follows:
demonstrate the disruption to a business employees of an impacted business on
GROSS WEEKLY PAY SUBSIDY
Employee paid more than €1,462 gross per week No subsidy
Employee paid between €203 and €1,462 gross per week €203
Employee paid between €151.50 and €202.99 gross per week €151.50
Employees paid less than €151.50 gross per week No subsidy
1
Financial Provisions (Covid-19) (No. 2) Act 2020 (No. 8 of 2020) which was enacted on 1 August 2020
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COVID-19: Employer Alert – Employment Wage Subsidy Scheme
Gross weekly pay includes notional pay pay employees their full gross weekly pay. BACKDATED CLAIMS IN LIMITED
(e.g. BIK) and is before deduction of items Unlike with the TWSS however, there will CIRCUMSTANCES
such as pensions and salary sacrifice. It be no tapering of the subsidy. Seasonal employees and new hires were
excludes any Department of Employment excluded from the TWSS. EWSS eligible
Affairs and Social Protection benefits employers, can backdate a claim for
which employees may have mandated PAYE AND PRSI EWSS to 1 July 2020 in certain limited
to be paid to the employer (e.g. illness/ EWSS will re-establish the normal circumstances:
maternity/adoptive benefit, etc.). These requirement to operate PAYE and normal
monies are disregarded when calculating • The employer was not eligible for TWSS;
PRSI on all payments. This includes the or
the amount of the subsidy to be paid (if regular deduction and remittance of
any). income tax, USC and PRSI at the normal • The employer had employees not
rates. eligible for TWSS but who are eligible
The subsidy will be paid directly into the for EWSS (this excludes any employee
employer’s designated bank account once Significantly, employer PRSI will be that was ineligible for TWSS as their
a month in arrears, as soon as practicable reduced to 0.5% in respect of employees net wages exceeded the permitted
after the return due date (14th of the for whom a subsidy is payable. The threshold due to tapering).
following month). Subsidies received reduced employer PRSI rate applies to the
are taxed as part of an employer’s gross weekly pay of the eligible employee These employees will be benefit from
trading income but are disregarded in and not just the subsidy. the EWSS as part of a “sweepback” with
the calculation of the 30% reduction in payment to be made in September 2020.
turnover. There are currently no PRSI classes
in existence which apply the correct This briefing is not intended as legal advice
As mentioned above, the scheme does combination of employee PRSI and this and employers are advised to consult the
not impact an employer’s existing reduced employer PRSI rate so employers most recent Revenue Guidelines and their
obligations to employees in relation to PRSI will initially be given at the normal tax and financial advisors in relation to the
terms and conditions of employment. On rate and a PRSI credit for the difference Employment Wage Subsidy Scheme.
that basis, the expectation seems to be between this rate and PRSI at the 0.5%
that employers availing of the EWSS will rate.
KEY CONTACTS
EMPLOYMENT
Cian Beecher Louise O’Byrne
Séamus Given Kevin Langford Partner Partner
Partner Partner +1 415 829 1193 +353 1 920 1185
+353 1 920 1210 +353 1 920 1226 cian.beecher@arthurcox.com louise.obyrne@arthurcox.com
seamus.given@arthurcox.com kevin.langford@arthurcox.com
Sarah Lawn
Associate
+353 1 920 1769
sarah.lawn@arthurcox.com
TAX
Fintan Clancy Caroline Devlin Ailish Finnerty David Kilty
Partner Partner Partner Partner
+353 1 920 1190 +353 1 920 1224 +353 1 920 1207 +353 1 920 1036
fintan.clancy@arthurcox.com caroline.devlin@arthurcox.com ailish.finnerty@arthurcox.com david.kilty@arthurcox.com
Dublin Belfast London New York San Francisco
+353 1 920 1000 +44 28 9023 0007 +44 207 832 0200 +1 212 782 3294 +1 415 829 4247
dublin@arthurcox.com belfast@arthurcox.com london@arthurcox.com newyork@arthurcox.com sanfrancisco@arthurcox.com arthurcox.com
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