COVID-19: Payroll Supports in the Pandemic- Phase 2

Since the launch of the COVID-19: Temporary Wage Subsidy Scheme on 26 March, more than 41,000 employers have signed up to avail of the Government subsidy. Under the terms of the scheme, the Government subsidises employers for part of the net pay of employees, thereby relieving employers to retain employees on the payroll without incurring significant cash flow difficulties.

The scheme is split between two “phases”. Phase 1 runs from 26 March until 3 May 2020. 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.

Many of the conditions to qualify and operate Phase 2 of the COVID-19: Temporary Wage Subsidy Scheme are the same those applicable to Phase 1. Our overview of Phase 1 of the COVID-19: Temporary Wage Subsidy Scheme is available here.

Below are some of the key points of Phase 2 of the COVID-19: Temporary Wage Subsidy Scheme:

  • The changes commencing in Phase 2 will affect qualifying employees with a pay date of 4 May 2020 or after. It will not apply to payroll notifications submitted to Revenue for period before 4 May. Employers should not amend previously submitted payroll notifications to reflect the changes in the Scheme commencing in Phase 2.
  • Where an employee’s Average Revenue Net Weekly Pay is less that €412, Revenue will refund employers 85% of the employee’s Average Revenue Net Weekly Pay up to a cap of €350.
  • Where an employee’s Average Revenue Net Weekly Pay is between €413 and €500, Revenue will offer employers a flat-rate subsidy of €350 per qualifying employee.
  • If an employee’s Average Revenue Net Weekly Pay is between €501 and €586, Revenue will refund employers 70% of the employee’s Average Revenue Net Weekly Pay, up to a cap of €410.
  • As in Phase 1, employers should not pay employees more than their Average Revenue Net Weekly Pay.
  • Phase 2 of the COVID-19: Temporary Wage Subsidy Scheme also introduces tapering to the wage subsidy for employees earning between €586 and €960 Average Revenue Net Weekly Pay. The maximum subsidy available for these employees is €350 per week. 
  • Where an employer can pay an employee a gross salary equal to 60% of their net weekly earnings, the employee can receive a subsidy of €350.
  • Where an employer can pay an employee a gross salary of between 60 – 80% of their net weekly earnings, the employee can receive a subsidy of €205.
  • Where an employer can pay an employee a gross salary equal to 80% or more of their net weekly earnings, the employee is not entitled to receive a wage subsidy payment.
  • There is no subsidy under the scheme where an employee earns more than €960 Average Revenue Net Weekly Pay during the period. As in Phase 1 of the COVID-19: Temporary Wage Subsidy Scheme, 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 Wage Subsidy Scheme from 16 April, subject to tapering.
  • 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.
  • 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.

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.

Copyright © 2020 McAvoy & Associates, All rights reserved.