COVID-19: Payroll Supports in the Pandemic- Phase 1

The COVID-19 pandemic has forced many businesses to make drastic changes to respond to the new requirements for social distancing and the severe drop-off in economic activity. Employers are now faced with the possibility of having to reduce staff payroll costs either by laying off employees or implementing staff payroll cuts.

In response to this, the Government, in conjunction with Irish Revenue, instituted the COVID-19: Temporary Wage Subsidy Scheme.  The Government will subsidise the employer for part of the net pay of the employee, thereby relieving the employer of some of their cash flow difficulties at this time while enabling employers to retain employees on the payroll.

The scheme is split between two “phases”. Phase 1 runs from 26 March until 3 May 2020. We have included an overview of the key points of Phase 1 below. Further questions on the scheme are available here.

Phase 2 will begin on 4 May 2020 and it is anticipated that these conditions will be in place until the conclusion of the scheme. Our article on the key points relating to Phase 2 of the COVID-19: Temporary Wage Subsidy Scheme is available here

Here are some of the key points of Phase 1 of the COVID-19: Temporary Wage Subsidy Scheme:

  • The scheme is open to employers from ALL sectors who self-declare to Revenue that they have experienced significant economic disruption due to COVID-19 (at least a 25% decline in turnover over the period of the COVID-19 crisis) and, as a result, they are unable to meet normal wages and outgoings.
  • The scheme will apply 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 and 15 March 2020. This ALSO includes company directors.
  • If the employee’s Average Revenue Net Weekly Pay is less than or equal to €586, Revenue will refund employers 70% of the employee’s net weekly pay up to a cap of €410.
  • If the employee’s Average Revenue Net Weekly Pay is between €586 and €960, Revenue will refund employers 70% of the employee’s net weekly pay up to a cap of €350.
  • There is no subsidy under the scheme where an employee earns more than €960 net per week.
  • However, if an employee’s pre Covid-19 gross salary was greater than €76,000 BUT their salary has now fallen below that amount, they will be qualifying employees for the COVID-19: Temporary Wage Subsidy Scheme for wage payments from 16 April, subject to tapering.
  • Employers cannot amend payroll notifications previously submitted to Revenue in order to include the Wage Subsidy payments.
  • Employers will include this subsidy amount in their normal payroll as a non-taxable amount. Once the employer notifies Revenue of the non-taxable amount of the wage subsidy included in the payroll, employers will be reimbursed for the amounts paid to the employees.
  • The reimbursement will be made within two working days after receipt of the payroll submission to Revenue.
  • Employers should not pay employees more than the employee’s Average Revenue Net Weekly Pay.
  • Income tax, USC, Employee PRSI and Employer PRSI will NOT apply at the date of payment of the COVID19 wage subsidy; however employees will be liable to Income Tax and USC on the subsidy received on review at the end of the year.
  • During the scheme the employer can make additional payments to the employee to fully or partially make up the difference between the amount of the employee’s normal Average Revenue Net Weekly Pay and the subsidy. This additional payment is commonly referred to as the “top up” payment. If an employer makes “top up” payments to employees, income tax and USC will apply to these payments.
  • Employee PRSI will not apply to “top up” payments. Employer’s PRSI on any “top up” payments will be reduced from 11.05% to 0.5%.

Feel free to ring Dara Burke, Director of Taxation, on 021 4321321 or to email her at dara.burke@mcavoy.ie if you’d like to query or discuss any of the above issues.

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