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Everything you need to know about the Covid-19 Wage Subsidy Scheme

15 Apr 2020

William Fry’s employment and benefits team explains who is eligible for the subsidy scheme brought in by the Government.

The Emergency Measures in the Public Interest (Covid-19) Act 2020 includes the latest in a raft of emergency income support measures for employers and employees adversely impacted by the Covid-19 pandemic: the State-funded Wage Subsidy Scheme.

While initially welcomed by employers as a means of keeping the lights on and continuing to employ staff with the benefit of some wage funding from the State, important questions are being asked about how the subsidy scheme will operate in practice.

For example, how can employers clearly evidence their business has suffered a 25pc decline in turnover or customer orders? Why are employees who earn in excess of €76,000 seemingly out of scope? To what extent does an employer have to show it has made best efforts to pay wages or top up affected employees’ income? What does it mean to be unable to pay wages?

The Wage Subsidy Scheme

Subject to the employee satisfying the eligibility requirements and the employer satisfying the qualifying conditions detailed below, the subsidy scheme will reimburse the following amounts:

  • For employees on less than €38,000 gross salary a year, the subsidy will amount to up to €410 net each week
  • For employees on between €38,000 and €76,000 gross salary a year, the subsidy will be up to a maximum of €350 net each week

There will be no subsidy available to employees on yearly salaries above €76,000.

Minister for Finance Paschal Donohoe, TD, today (15 April) announced that those earning less than €24,400 per year will see the subsidy paid by the State rise from 70pc to 85pc.

How do you know if you can avail of the Wage Subsidy Scheme?

There are a number of pre-conditions that employers will need to satisfy before availing of the subsidy scheme, including:

  • Self-declaring to Revenue that their business has been adversely affected as a result of Covid-19
  • Demonstrating that their business has experienced at least a 25pc decline in turnover or customer orders between 14 March and 30 June 2020 and an inability to pay wages
  • Continuing to employ benefiting employees by keeping them on the payroll
  • Using their best efforts to top up salaries (though it is unclear to what extent employers will need to demonstrate such efforts)

Who is eligible?

Employees at a certain salary level are eligible to avail of the scheme where:

  • They were paid by their employer between 1 February and 15 March 2020
  • They were on their employer’s payroll on the snapshot date of 29 February 2020
  • They remain on their employer’s payroll during the subsidy scheme period

It is intended that the Wage Subsidy Scheme will replace the current Covid-19 Refund Scheme and that employees of private sector companies, whether carrying out their duties or not, will benefit from the scheme, subject to the eligibility requirements set out above.

However, any employees availing of other Covid-19 payments, such as the Covid-19 Pandemic Unemployment Payment of €350 per week, cannot avail of the Wage Subsidy Scheme.

How long will the Wage Subsidy Scheme run?

Once up and running, it is currently intended that the Wage Subsidy Scheme will run for 12 weeks, although this timeframe may be reviewed depending on the development of the Covid-19 situation.

Are there sanctions to consider?

Yes. The Bill provides for penalties and interest for an abuse of the Wage Subsidy Scheme or failure to pay the subsidy amount to in-scope employees.

What next?

The introduction of the Wage Subsidy Scheme and enhancements to other income support measures in connection with the Covid-19 pandemic are vital steps forward in the Government’s efforts to balance the public health and economic priorities of the country.

The intentions behind the scheme to keep employees employed and maximise the State’s ability to hit the ground running post-pandemic make sense. However, the workings of the scheme in practice still need to be ironed out to ensure it is fit for purpose.

By Ailbhe Dennehy and Catherine O’Flynn, with contributions from Richard Smith

Catherine O’Flynn is head of William Fry’s employment and benefits department, where Ailbhe Dennehy is a partner and Richard Smith is an associate.

A version of this article originally appeared on the William Fry blog.

Updated, 2.50pm, 15 April 2020: This article was updated to include comments made this afternoon by Minister Paschal Donohoe about an increase in the subsidy for lower-paid workers.

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