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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 TWSS is to support businesses and employees financially 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 to correct an anomaly in the scheme whereby some low paid workers were better off claiming a social welfare benefit rather than remaining on payroll.
The new breakdown is as follows:
Employees with net weekly pay less than €586 (€38,000 per annum)
For employees with previous average net pay of up to €412 per week (equivalent to almost €24,400), the wage 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, up to a maximum of €410 per week.
Employees with net weekly pay in excess of €586 (€38,000 per annum)
For employees with previous net pay in excess of €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 of more than €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 do I know if my business qualifies?
The TWSS is available to all employers in the private sector.
However, you have to meet certain criteria to qualify. 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 do 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 the employee’s pay in the period from February 1st, 2020 to March 15th, 2020.
Revenue will then examine your submission.
Can I put laid-off staff back on payroll and use the scheme?
If employees were laid-off after February 29th, 2020, you will be allowed to put them back on the payroll for the purposes of the scheme. Once the payroll submission confirms the employees were on payroll on February 29th, 2020, they will be eligible to partake in the scheme.
How do I apply for the scheme?
You will need to apply through the Revenue’s online ROS system and click on the COVID-19 Temporary Wage Subsidy category.
If you have already registered for the Employer Refund Scheme, which entitled you to a refund of €203 per week per employee from the state, you will be contacted by Revenue to confirm that you meet the qualifying criteria.
How do I prove that turnover is down 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.
Of course, some businesses have been forced to close as a result of COVID-19. For them, it will be straightforward to demonstrate the decline in turnover.
Another way of proving that you’ve experienced a decline in turnover is to show a decline in 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 basis that is reasonable.
What financial records do I need?
In general, Revenue will take account of the nature and scale of the business when determining what level of financial records are required.
If you submitted financial records to your bank to renegotiate loan repayments for example, Revenue will accept those records that you submitted to the bank as evidence of the financial downturn you 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 communications to employees, Trade Unions or staff representative bodies regarding salary/wage cuts owing to the COVID-19 pandemic.
- 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.
- 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 will not be looking for proof of your qualification for the scheme immediately, but you must retain your documentary evidence/basis for entering the scheme.
Revenue will be carrying out subsequent checks based on their risk profiling to retrospectively confirm employers’ eligibility for the scheme.
It is 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.