Finance minister Pascal Donohoe has tweaked the Temporary Wage Subsidy Scheme, for payrolls on or after 4 May 2020.

According to Donohoe (pictured), 43,000 employers have registered for the scheme and c.26,000 have already received a refund. Over 255,000 employees have received at least one payment under the scheme, and 84% of employees have also received a top-up payment from their employer.

Donohoe has announced changes to the scheme which apply to people earning less than €500 per week (c.€31,000 p.a.) as well as those earning in excess of €586 per week (c.€38,000).

Employees with net pay less than €586 per week (€38,000 p.a.)

For those employees with previous average net pay up to €412 per week (equivalent to almost €24,400), the subsidy will be increased from 70% to 85% of their previous net weekly pay

For those employees with previous average net pay between €412 and €500 per week (equivalent to €24,400-€31,000 p.a.), the subsidy will be up to €350 per week.

In Association with

In addition, where an employer wishes to pay a greater level of top-up - beyond the outstanding 15% of previous pay - (in respect of employees with net pay less than €412 per week) in order to bring the employee’s pay to €350 per week then tapering would not be applied to the subsidy.

There are no changes in respect of those whose previous average net pay was between €500 and €586 per week (equivalent to €31,000-€38,000 p.a.), who will continue to receive a subsidy of up to 70% of previous net income, up to a maximum of €410 per week.

Donohoe said the changes mean that more employees will now receive a subsidy of €350 per week, and those with previous net pay below €412 per week will now receive a greater level of subsidy.

Employees with net pay in excess of €586 per week (€38,000 p.a.)

For employees with previous net pay in excess of €586 per week (equivalent to €38,000 p.a.), a tiered approach will apply. The maximum subsidy payable for these remains €350 per week. The tiered approach takes into account both the amount paid by the employer and the level of reduction in pay borne by that employee as follows:

Tapering of the subsidy will apply to all cases where the gross pay paid by the employer and the subsidy exceed the previous average net weekly pay. This is calculated by subtracting the amount paid by the employer from the previous average net weekly pay. The ministers said this is to ensure that no employee would be better off under the scheme.

Minister Donohoe has also determined that the wage subsidy is now available to support employees where the average net pre-COVID-19 annual salary was greater than €76,000, and their gross post-Covid salary has fallen below €76,000. The tiered arrangement applicable to gross incomes in excess of €38,000 will apply in such circumstances.

Therefore, if an employee was earning over €76,000 gross and has now been reduced to below €960 net pay a week, and their reduction is more than 20%, then a subsidy of up to €205 would be payable. If the reduction was more than 40%, a subsidy of up to €350 would be payable.

To calculate the level of subsidy payable, current gross pay will be compared with previous average net weekly pay for January/February. This subsidy will be tapered so as to ensure that the total net income (employer contribution + wage subsidy) does not exceed €960 net per week.

Effective Date

These determinations will apply for payroll with a pay date on or after the 4 May and received by the Revenue Commissioners on or after that date. No back-dating of increased subsidy will apply, according to the department of Finance.

The minister added that Revenue are currently making the necessary changes to their systems to implement these changes and move to phase 2 of the scheme. This phase will see a personal subsidy amount paid in respect of each employee and recoupment of any amounts overpaid to employers during the introductory interim phase.

EY partner Roger Wallace said the hospitality and manufacturing industries in particular will be happy to see increased supports for workers on less than €31,000 p.a., meaning it will be easier to restart business once some form of normality returns.

“Equally, many world class technology, life sciences and financial services businesses have developed in Ireland in recent years generating many high value-add jobs. The extension of the scheme to cover people who previously earned wages above the threshold of €76,000 who have now incurred a substantial reduction is also important,” Wallace added.

“The speed at which the minister is revising the supports in place for employers and employees is very positive. It shows that the government is listening to concerns from the business community and taking action to help ease the pressures and anxieties on employees and employers, and will certainly assist business’ readiness for re-emergence.”

EY tax partner Michael Rooney added: "These new measures addressed anomalies in the original scheme where lower paid or part time employees could get more income from being in the Pandemic Unemployment Payment scheme if they were laid off rather than being kept on the payroll.

"This was at odds with the intention of the scheme to keep more employees connected to their employer. However, introducing a new tiered system for employees earning in excess of €586 net per week will likely create more complexity that will require time to be understood and therefore implemented."

Rooney added: "There are still a number of areas that require further clarification especially in terms of the taxation of the Temporary Wage Subsidy and the top up payment. In relation to the latter, it is not possible to enter the top up payment as a net figure in the payroll due to operational payroll issues. Employees will also need to know how the TWS will be taxed in due course and we anticipate further detail on this shortly."

Unprecedented Crisis

Meanwhile, retailer lobby group Retail Excellence Ireland has warned that up to 110,000 jobs could be lost permanently in the retail rector without remedial action by the state.

Chief executive David Fitsimons said: “Ireland is in a period of unprecedented crisis that requires an unprecedented official policy response. Now is the time to be brave. There will be significant costs involved, but the social and economic benefits will far outweigh the costs.”

REI is calling for:

• Establishment of a government backed commercial rent grant scheme equal to 60% of the rent and service charge cost during the emergency period. The cost of this measure to the Exchequer is estimated at €330 million for a 3-month period.

• The permanent cancellation of all Local Authority rates for all impacted businesses for a 12-month period. The cost to the Exchequer of this measure is estimated at €730 million for a 12-month cancelation.

• The implementation of liquidity supports for retail businesses and speedy and simplified implementation of these supports by the banks.

• The distribution of a gift card of €500 to all Irish households which can only be spent in bricks and mortar stores and will be zero balanced after a fixed window of time. The estimated cost to the state would be €850 million.

• The implementation of a back to work scheme such as a JobBridge type initiative to re-employ retail workers who have been temporarily laid off.