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Ibec calls for ‘graduated’ Employment Wage Subsidy Scheme in 2021 budget

16 Sep 2020163 Views

Ibec has urged the Government to reconsider the ‘cliff-edge’ turnover threshold for Covid wage supports.

Ibec’s pre-Budget submission has warned that the Irish economy is “not yet ready to carry itself” without sufficient Covid-19 financial support from the Government.

The employers’ group is calling for changes to the Employment Wage Subsidy Scheme (EWSS), among other measures, stating that “the devastation Covid-19 has dealt the world will test Ireland in a way we have never experienced before”.

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The Temporary Wage Subsidy Scheme was initially introduced in March as a short-term emergency initiative. At the start of this month, it was replaced by the longer-term EWSS, which offers a flat-rate wage subsidy to employers that meet certain criteria, including a 30pc reduction in turnover or orders between 1 July and 31 December 2020. The EWSS is planned to run until the end of April 2021 but Ibec has urged the Government to reconsider this timeline.

The organisation said the 70pc “cliff-edge” turnover threshold should be graduated to minimise “significant adverse incentives to company operations”. For companies that are labour-intensive, for example, the loss of the whole subsidy once they reach 71pc of normal turnover could cause overall profits to fall until they reach close to 90pc of normal turnover.

Ibec recommended instead that the subsidy should be graduated between 70pc and 90pc, with firms losing part of the subsidy as they hit turnover or order milestones.

Overall, Ibec estimates that a continued package of necessary supports into 2021 would require around €6bn.

The organisation’s director of policy and public affairs, Fergal O’Brien, said: “As those supports are withdrawn in the first half of 2021, it is important that they are not all withdrawn at once. The economy is not yet ready to carry itself.” He added that the Government will need to implement new policy measures to “rehabilitate the economy, strengthen our competitiveness and ensure recovery”.

Ibec chief economist Ger Brady said that such measures should include “a clear plan to help protect sectors worst exposed to a difficult Brexit”. He recommended that firms experiencing a loss of income because of Brexit should be promised the opportunity to avail of a subsidy scheme on a temporary basis.

Speaking at the submission’s launch, Brady also said that he expects a budget deficit this year of €30bn. This will be followed, he said, by deficits of €15bn in 2021 and €5bn in 2022.

Ibec recommendations for returning to work

Ibec’s other recommendations for the 2021 Budget included measures for a safe return to workplaces. Ireland should work on a European level to extend concessional treatment of VAT on PPE to all workplaces, it said, instead of those in healthcare settings only.

It also called for additional funding for activation and hiring schemes until unemployment falls below 6pc. This would include schemes such as JobsPlus as well as more funding for higher education to address the record numbers receiving unemployment supports.

Open-ended budgets should be set for returning to work and retraining supports, it said, including €500m for in-employment training vouchers, €20m for the National Training Fund, increased funding for apprenticeships and expansion of the Youth Employment Support Scheme.

“The cost of this level of unemployment, both in social terms and to the exchequer, is unsustainable,” Ibec said. “Experience tells us that the consequences both for society and the labour market worsen as short-term unemployment turns to long-term unemployment.”

Lisa Ardill
By Lisa Ardill

Lisa joined the team as senior Careers reporter in July 2019 with previous experience in science communication and media. With a BA in neuroscience and a master’s degree in science communication, she is also a semi-published poet and a big fan of doggos.

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