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What is the Temporary Wage Subsidy Scheme?
On March 24th, 2020, the government announced that Revenue will operate the Temporary Wage Subsidy Scheme (TWSS). The aim of the scheme is to provide financial support to businesses and employees who have been affected by the COVID-19 crisis.
How much of an employee’s salary is covered?
The state will co-fund 70% of salaries up to a maximum of €410 per week. On April 15th, the Minister for Finance updated the scheme as it became apparent that some low-paid workers were better off claiming a social welfare benefit rather than remaining on payroll.
The breakdown is now as follows:
Employees with net weekly pay below €586 (€38,000 per annum)
For employees with previous average net pay of up to €412 per week (equivalent to almost €24,400) the subsidy will be increased from 70% to 85% of their previous net weekly pay.
For employees with previous average net pay of between €412 and €500 per week (equivalent to €24,400-€31,000 per annum), the subsidy will be up to €350 per week.
Employees whose previous average net pay was between €500 and €586 per week (equivalent to €31,000-€38,000 per annum) will continue to receive a subsidy of up to 70% of previous net income. This is up to a maximum of €410 per week.
Employees with net weekly pay above €586 (€38,000 per annum)
For employees with previous net pay of over €586 per week (equivalent to €38,000), the maximum subsidy payable remains €350 per week.
Minister Donohoe also announced that the wage subsidy is available to employees whose average pre-COVID-19 salary was greater than €76,000 gross, and whose net post-COVID salary has fallen below €960 per week. The arrangements applicable to gross incomes in excess of €38,000 will apply in such circumstances.
Employees with a net income above €960 per week have no entitlement to the subsidy.
The changes outlined above will apply for payroll with a pay date on or after May 4th and received by the Revenue Commissioners on or after that date (no back-dating of the increased subsidy will apply).
How can I find out if my business qualifies?
The Temporary Wage Subsidy Scheme is available to all employers in the private sector.
However, employers have to meet certain criteria to qualify. If you wish to apply, you must:
- Be experiencing significant negative economic disruption due to COVID-19.
- Be able to demonstrate, to the satisfaction of Revenue, a minimum of a 25% decline in turnover.
- Be unable to pay normal wages and normal outgoings fully.
- Retain employees on the payroll.
How can I find out if my employees are eligible?
Employees will only be eligible if they were on payroll as of February 29th, 2020. You must also have made a payroll submission to Revenue confirming an employee’s pay in the period from February 1st, 2020 to March 15th, 2020.
Your submission will then be examined by Revenue.
Can I put laid-off staff back on payroll and use the scheme?
If an employee was laid-off after February 29th, 2020, you’ll be allowed to put them back on the payroll for the purposes of the scheme.
Once your payroll submission confirms the employee was on payroll on February 29th, 2020, they’ll be eligible to partake in the scheme.
How do I apply for the scheme?
Through the Revenue’s online ROS system. Once there, click on the COVID-19 Temporary Wage Subsidy category.
If you’ve already registered for the Employer Refund Scheme, which entitled you to a refund of €203 per week per employee, you’ll be contacted by Revenue to confirm that you meet the qualifying criteria.
How do I prove turnover has declined by 25%?
To prove that your business is experiencing significant economic disruption, Revenue will seek proof:
- That your turnover is likely to decrease by 25% for quarter 2, 2020.
- That the business is unable to meet normal wages or normal outputs.
For businesses that have been forced to close as a result of COVID-19, it will be straightforward to demonstrate the decline in turnover.
Another method of proving the decline in turnover is to show orders from March 2020 as against February 2020.
Revenue will also accept a comparison with your 2019 turnover figures from the same period, or any other reasonable basis.
What financial records must I provide?
Revenue will take the nature and scale of the business into consideration when determining what level of financial records are required.
For example, if you submitted financial records to your bank to renegotiate loan repayments, Revenue will accept those records as evidence of the financial downturn your business has suffered. This will avoid unnecessary duplication.
The guiding principle is that you must be able to show that your business suffered significant negative economic disruption due to COVID-19.
Examples of documents that will be sufficient proof for Revenue might be:
- Copies of documentation submitted to a bank to renegotiate a loan.
- Copies of documentation that show that cash reserves in the business are required to fund debt that is equal or greater than the reserve amount.
- Copies of communications to employees, Trade Unions or staff representative bodies regarding salary/wage cuts owing to the COVID-19 pandemic.
- Evidence of reliance on the Government Credit Guarantee Scheme or overdraft facilities or other borrowings for capital purposes.
- For start-up businesses, evidence of a decline in investment by at least 25% arising from the COVID-19 crisis.
Where do I submit my financial documents?
Revenue won’t seek proof of your qualification for the scheme immediately. However, you must keep your documentary evidence/basis for entering the scheme.
Revenue will be carrying out subsequent checks based on their risk profiling, retrospectively confirming employers’ eligibility for the scheme.
As such, it’s a good idea to have your financial records relating to this difficult trading period ready for inspection at any time in the next six years.
What is the employer’s declaration?
The Wage Subsidy Scheme will operate in line with the Revenue’s normal basis of self-assessment.
You will be required to make a declaration, stating that, based on reasonable projections, there will be, as a result of disruption to the business caused or to be caused by the COVID-19 pandemic, a decline of at least 25% in the future turnover of, or customer orders affecting your business for the duration of the pandemic which is preventing you from paying normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.
Revenue has confirmed that complying with this requirement does not amount to a declaration of insolvency.