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The following guidance on the operation of this scheme has now been issued by the Revenue, particularly in relation to Employer eligibility.
Summary of the Scheme
Under the new scheme Employers will be able to make a payment to employees, without deduction of Tax / USC that is equivalent to 70% of the Employee’ average net pay – The employer then receives a direct subsidy from Revenue. This subsidy is capped at a maximum of either €350 or €410 depending on the individual’s average net pay.
The COVID-19 Payment is limited depending on the average After Tax / Net Pay
• Average Pay from €0 to €586 limits it to €410
• Average Pay from €586 to €960 limits it to €350
• The average pay is defined as average payments made to employees in the payroll submissions to the Revenue, for each pay date in January and February 2020.
The Government are encouraging Employers where possible, to Top-Up employees pay up to a maximum of 30% of the After-tax Pay. The top-up amount is subject to PAYE, USC and PRSI at the reduced “J9″ rates.
Guidance for Qualification
• Employers with strong cash reserves that have been hit by a significant decline can still qualify, but the Government’s expectation is that they are expected to pay a significant proportion of the employees’ wages.
• Turnover is likely to decrease by 25% for quarter 2, 2020 (they expect to provide further details on this no later than March 30th)
• The scheme is confined to employees who were on the employer’s payroll 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.
• Employees who were laid-off after 29 February 2020 may be taken back onto the payroll for the purposes of this scheme.
• The scheme will be on a self-assessment basis making it the employer’s responsibility to decide for themselves if they qualify.
• The declaration is based on reasonable projections, that there will be disruption to the business caused or to be caused by the Covid-19 pandemic.
• The key focus will be on the fact of significant negative economic disruption on the employer due to Covid-19.
• Revenue may in future, based on risk criteria, review your eligibility.
• You are expected to keep documentation.
• The critical requirement is to be able to show significant negative economic disruption due to COVID-19.
The Subsidy, while paid without deduction of Tax, will be liable to Income Tax and USC on review at the end of the year by the Revenue. While the Revenue say the Employer should pay no more than the normal weekly net pay, this may occur in the event a Tax / USC refund arises which will also be refunded to the employer by the Revenue.
Revenue’s general approach to businesses experiencing cash flow and consequent tax payment difficulties is to work towards agreeing mutually acceptable solutions that assist a return to viability as soon as possible.
Eligibility for this scheme will initially be determined, largely on the basis of self-assessment. To qualify for the scheme, a business must be experiencing a significant negative economic disruption due to the Covid-19 pandemic. A qualifying employer will declare that it is significantly impacted by the crisis. Key indicators are:
• That the employer’s turnover is likely to decrease by 25% for quarter 2, 2020 (this is a reduction in expected turnover for Q2, 2020).
• The employer is best placed to determine that and may base this judgement on the decline in orders in March 2020, in comparison to February 2020.
• If, for some reason the decline in turnover was less than 25%, the business should retain documentation supporting its rationale for believing that such a decline would be suffered.
• That the business is unable to meet normal wages or normal outputs and any other indicators set out in their guidelines
We understand that Revenue will not be looking for proof of qualification at this stage. They may in future, based on risk criteria review eligibility. In this context employers should retain their evidence/basis for entering the scheme. The critical requirement is to be able to show significant negative economic disruption due to COVID-19.
As outlined above, an employer that has been hit by a significant decline in business but has strong cash reserves, that are not required to fund debt, will still qualify for the Scheme but the Government would expect the employer to continue to pay a significant proportion of the employees’ wages.
The declaration by the employer is not a declaration of insolvency. The declaration is simply a declaration which states 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 for, the business for the duration of the pandemic and that as a result the employer cannot pay normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.
Further updates in relation to HR Matters
Lay-Off – Right to Request Redundancy Removed Temporarily
Emergency Measures, in the Public Interest (Covid-19) Bill 2020, outlines: Section 12 of the Redundancy payments acts shall not have effect during the emergency period in respect of an employee who has been laid off or kept on short-time due to the effects of measures required to be taken by his or her employer in order to comply with, or as a consequence of, Government policy to prevent, limit, minimise or slow the spread of infection of Covid-19. This will mean, once enacted that employees who have been temporarily laid off or are on short time as a result of the crisis will be unable to request redundancy after 4 weeks of Lay-off.
Benefit In Kind (BIK) and Lay-Off
If an employee is being paid, or receiving BIK, then they are considered to be in employment. If the employee is laid off and the employer wishes to continue an existing value BIK arrangement (e.g. modest health insurance, company vehicle) on the expectation that the employee will resume work then the employer can allow the employee to use the scheme but the employer will be required to report and tax the BIK benefit at a later stage. Full records of BIK should be maintained.
The Government has introduced this scheme with the spirit of helping Employers to retain employees where their business circumstances have deteriorated dramatically. It will hopefully aid many members to protect and maintain their employees.
Further guidance is to issue from the Revenue Commissioners over the coming days and Members should monitor the Revenue Website www.revenue.ie . We advise that Employer’s should satisfy themselves that they qualify for the scheme, before they make payments to the Employees and before they make a submission to the Revenue via ROS on line.
Posted: 27th March 2020