The Temporary Wage Subsidy Scheme (TWSS) closed on 31st August 2020. This has been replaced by a new subsidy scheme that has already been announced called the Employment Wage Subsidy Scheme (EWSS) which will run from 1st July 2020 to 31st March 2021.
Click on the enclosed link for the official Revenue Guidance dealing with this scheme.
Please note that we expect these guidance notes to be updated regularly. In the meantime, the following summary may be helpful.
The Rate of Subsidy
The Employment Wage Subsidy Scheme is a simple subsidy scheme which provides a flat-rate subsidy to ‘qualifying employers’ based on the number of ‘qualifying employees’ on their payroll. The scheme has another benefit for qualifying employers in that it caps the Employer’s PRSI rate at 0.5%.
The subsidy is paid monthly in arrears with the first payment being expected to happen in mid-September for the ‘sweep back’ review for July 2020 employees not covered by TWSS. The subsidy levels can be summarised as follows.
If employee’s gross weekly wage is: Subsidy payable is:
Less than €151.50 € Nil
From €151.50 to €202.99 €151.50
From €203 to €1,462 €203
More than €1,462 € Nil
Gross pay in this context includes notional pay and is before deduction of items such as pension and salary sacrifice. However it excludes any DEASP benefits redirected by the employee to the employer such as Illness Benefit or Maternity Benefit.
In simple terms, to qualify for the Employment Wage Subsidy Scheme, the employer must:
1) Meet the ‘30% Reduction Test’ (unless the business is a registered childcare business)
2) Register via ROS
3) Ensure that they have designated a bank account
4) Be fully tax compliant and hold a valid Electronic Tax Clearance Certificate
It should be noted that employers are obliged to constantly review their eligibility and to sign off of the scheme as soon as they cease to qualify. See the ‘Administration’ section below for further details.
1) 30% Reduction Test:
As you can see, most of the eligibility criteria are administrative. The core ‘qualifying condition’ is the “30% Reduction Test” – i.e. the employer must be able to demonstrate that (i) their business will experience a 30% reduction in turnover – or customer orders – for the period from 1st July 2020 to 31st December 2023 when compared to the same period in 2019, and (ii) that this disruption is caused by Covid-19. The Revenue have made is clear that employers must consider the 6 months period from July to December ‘as a whole’ rather than on a monthly basis.
All Childcare Businesses registered via S.58C Childcare Act 1991 are exempted from having to meet the 30% Reduction Test. Such businesses must of course meet the other criteria such as holding a valid eTCC.
Note that all sources of income are considered (many State-funded entities like Community Groups will not qualify as there has been no real decline in State funding in 2020). The subsidy itself is regarded as ‘taxable income’ and forms part of the employer’s trading income but is disregarded for the purposes of this 30% Test. Note however that other Covid-based assistance – like the Re-Start Grant Scheme – are regarded as ‘income’ and should be incorporated when considering the ‘30% Reduction Test”.
For most businesses this is a relatively simple concept. For large businesses involving group companies or multiple ‘business divisions’, it can get complicated. (In theory if there are different, clearly established individual divisions within one business then each division can be considered on its own merits. In practice it will be interesting to see how the Revenue approach these situations. See Appendix II of the Revenue’s Guidance for more details).
2) Register via ROS
Similar to the TWSS, employers will be required to submit a declaration via the MyEnquiries on ROS confirming their eligibility to apply for the EWSS. Registration commences from Tuesday 18th August 2020 and it cannot be back-dated so employers hoping to avail of the scheme should do so as soon as possible. Note however that Registrations will only be processed if the employer is registered for PAYE/PRSI, has a bank account linked to that registration and holds a valid eTCC – see below.
3) Designated Bank Account
The subsidy is paid directly to the employer’s bank account and therefore the EWSS is only available to employers who have a valid bank account linked to their PAYE/PRSI registration via ROS and nominated to receive refunds. This was a persistent problem for the TWSS so employers should ensure that they have a designated account or their EWSS application may be rejected.
4) Tax Clearance Certificate
Not only must the employer hold a valid Electronic Tax Clearance Certificate (eTCC) to apply for the scheme, they must also continue to hold an eTCC at all times while claiming the EWSS. Therefore going forward, it is essential that employers continue to keep their affairs in order. (Remember that connected parties can impact on an employer’s TCC, for example the company might not qualify for a TCC if one of the Directors personal income tax submissions are not in order. Therefore employers should immediately apply for a TCC as this will confirm their current status and provide a chance to rectify any problems before they interfere with the employer’s EWSS application).
Apart from the following exceptions, most employees will qualify provided that they are not relatives and their gross weekly wage is between €151.50 and €1,462 per week. In essence, the following employees are excluded from the Employment Wage Subsidy Scheme:
- An employee who earns a gross wage of < €151.50 per week.
- An employee who earns a gross wage of > €1,462 per week.
- Any employee who is also a Proprietary Director – see below.
- Any employee who is both ‘newly hired’ and a family member – see below.
- Any employee not engaged in the business (e.g. domestic roles like childminder or gardener).
- The legislation excludes Proprietary Directors from the scheme but there are plans to review this especially for the SME sector. This is a ‘policy matter’ and the Revenue are liaising with the Dept. of Finance and hope to have details shortly. It seems certain that there will be additional conditions applied to directors and there will not be a blanket extension of the EWSS to all Proprietary Directors but for now we await further details.
- Any connected party not previously included on the payroll of the business are excluded from the Employment Wage Subsidy Scheme, including brothers, sisters, nieces, nephews, aunts, uncles etc. However if the family member was already included on the payroll at any time between 1st July 2019 and 30th June 2020 then that individual can qualify for the Employment Wage Subsidy Scheme.
EWSS v TWSS
- Employees that availed of the TWSS remained on that scheme until the end of August and can be converted to the EWSS from September onwards, provided of course they qualify. In the meantime new-hires and / or seasonal workers who previously did not qualify for the TWSS can be engaged via the EWSS immediately.
There are also ‘safeguards’ in the legislation to ensure employers do not abuse the scheme which will allow the Revenue to query the bona fide basis for instances such as replacing one full-time employee earning €400pw week with two part-timers earning €200 each, and/or to monitor pay habits to ensure gross pay levels are not being manipulated by deferring bonuses or over-time etc.
- Employers can apply for the EWSS by making the relevant application/declaration via ROS5. This should be done as soon as possible.
- Employers must hold a valid eTCC to qualify for the EWSS. Therefore employers should do a regular eTCC review as part of the below ‘monthly verification’.
- Each claimant is required to undertake a monthly review to ensure that they continue to meet the relevant criteria. This review should take place on the last day of every month so that they can sign off with effect from the 1st of the following month if necessary. Note that the employer must deregister as soon as they become aware of the fact that they no longer meet the criteria and can’t wait until the end-of-month review if they know that they cease to be eligible earlier in the month. There is nothing to prevent the employer re-registering if they need to, but this cannot be back-dated.
- The EWSS is a ‘self-assessment’ scheme which means that the Revenue will not be challenging applications initially but of course the Revenue may subsequently review the basis of any claim and therefore it is important that employers keep sufficient records to support their initial basis for applying for the subsidy, as well as a record of their ‘end-of-month review’. The Revenue will expect these documents to include the initial Projections for the July-December period as well as the monthly reconciliation. In addition the employer must be able to link the reduction to Covid-19.
- For non-weekly payrolls, the weekly amount is calculated by dividing the gross pay by the number of insurable weeks in that pay period. Note however that the EWSS can only be claimed for payroll submissions of at least a monthly frequency. If payroll submissions are made quarterly, bi-yearly or annually than the claim will NOT be processed.
- There is no PRSI Class which facilitates the calculation of the 0.5% Employer’s PRSI rate payable via the EWSS so normal payroll calculations will apply initially. The Revenue will then calculate a ‘PRSI Credit’ – see Revenue Guidelines for details.
- Employers will indicate that the EWSS is being requested by including ‘EWSS’ as the payment type in the ‘Other Payments’ section on the payroll submission (and input the digit zero or €0.01 – depending on the capability of the payroll package being utilised so employers must check with their payroll software providers – as the quantum of the corresponding “other payments” made). Employers should not include the EWSS ‘Other Payment’ details on the payslip they provide to the employee.
- A list of all employers availing of the EWSS will be published in January 2021 and April 2021.
- Some employees may have multiple employments in which case each employer is entitled to make its own EWSS claim. Unlike the TWSS which was a payment to employees made via their employer, the EWSS is a payment for employers.
… any employer considering availing of the EWSS should
(i) apply for an eTCC,
(ii) prepare Projections dealing with the Turnover for July – December period, and
(iii) ensure that they are registered via ROS for PAYE/PRSI and have a designated bank account linked to that registration.
(iv) Review their payroll records to ensure that they have qualifying employees