knowledge | 27 April 2020 |

COVID-19: Emergency Act Brings Welcome News for Employers Adversely Affected by Covid-19

The Emergency Measures in the Public Interest (Covid-19) Act 2020 contains welcome measures for employers grappling with the issues of closure, reductions in turnover and decreases in work for their employees. Part 7 of the Act introduces a Temporary Wage Subsidy Scheme while Part 8 makes amendments to the Redundancy Payments Acts 1967 to 2014 relating to lay-off and short time.

Part 7 – Temporary Wage Subsidy Scheme

Part 7 of the Act introduces a Temporary Wage Subsidy Scheme for employers whose businesses have been adversely affected by Covid-19 where those employers are unable to pay normal wages to employees but firmly intend to continue to employ them and are making best efforts to continue to pay them in some form.   

To qualify for the Scheme, employers are required to make a declaration to Revenue that, based on reasonable projections, there will be, as a result of disruption to the business caused or to be caused by the Covid-19 pandemic, a decline of at least 25% in the future turnover of, or customer orders for, the business in the period 14 March to 30 June 2020 and that as a result the employer cannot pay normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.   Revenue has stated that this declaration by the employer “is not a declaration of insolvency” and that, should Revenue seek to validate employer eligibility for the Scheme, it will adopt a “reasonable, fair and pragmatic approach in considering whether the criteria have been met”.

The Wage Subsidy Scheme will run until at least the end of August, with a tapering of the Scheme expected to follow.  To be a qualifying employee, an employee i) must have been on their employer’s payroll at 29 February 2020 (although temporarily laid off employees can be brought back onto payroll to avail of the Scheme); ii) must have been included in their employer’s February payroll submissions between 1 February 2020 and 1 April 2020 (with all previous payroll submissions to have been made before 15 March 2020); and iii) must not currently be earning net weekly pay in excess of €960. Employees can also now qualify for the Scheme if they were not on payroll on 29 February 2020 because they were on either:

  1. Maternity leave;
  2. Adoptive leave;
  3. Paternity leave;
  4. Parental leave;
  5. Related unpaid leave; or
  6. Receiving Health and Safety Benefit, Parent's Benefit or Illness Benefit for the month of February.

Payment will be backdated to 26 March 2020 or to the date the employee recommenced employment, whichever is the latest.

Initially, in Phase 1 of the Scheme, employers can claim the following subsidies in respect of qualifying employees:

  • a maximum of €410 or 70% of the employee’s average net weekly pay, whichever is lesser, for qualifying employees whose previous average net weekly pay was less than or equal to €586 per week net;1
  • a maximum of €350 for qualifying employees earning in excess of €586 per week net whose previous average net weekly pay was less than or equal to €960; and
  • as of 16 April, where an employee’s previous average net weekly pay was in excess of €960 but has now fallen below this, subject to tiered arrangements and tapering to ensure that net pay does not exceed €960 per week; where the employee’s earnings have now been reduced by
    • 40% or more, a subsidy of up to €350 is payable
    • between 20% and 39%, a subsidy of €205 is payable
    • less than 20%, no subsidy is payable.

Employers should note that Revenue will make a payment of €410 per qualifying employee in the transitional Phase 1. Only the applicable subsidy in line with the limits set out above should be passed on to the employee, however; the excess should be retained by the employer and will either be offset against future subsidy payments or recouped by Revenue at a later reconciliation phase, details of which are to be published in due course. 

In Phase 2, beginning on  4 May 2020 the Scheme provides for the following subsidies:

Qualifying employees whose previous average net weekly pay was less than or equal to €586:

  • where an employee’s previous average net weekly pay was less than or equal to €412, a maximum subsidy of 85% of previous net weekly pay is payable, which can be topped up by an employer to a maximum of €350 per week even where the employee’s previous average net weekly pay was below €350;
  • where an employee’s previous average net weekly pay was above €412 and less than or equal to €500, a flat rate subsidy of €350 is payable; and
  • where an employee’s previous average net weekly pay was above €500 and less than or equal to €586, a maximum subsidy of 70% or €410, whichever is lesser, is payable.

Qualifying employees whose previous average net weekly pay was in excess of €586 but not more than €960 per week:

  • where the gross amount currently paid by the employer results in the employee earning 60% or less of their previous net weekly pay, a maximum subsidy of €350 per week is payable;
  • where the gross amount currently paid by the employer results in the employee receiving between 60% and 80% of their previous net weekly pay, a maximum subsidy of €205 per week is payable; and
  • where the gross amount paid by the employer results in the employee earning in excess of 80% of their previous average net weekly pay, no subsidy is payable.

The Scheme is available both to employers who top up employees’ wages and to those who are not in a position to do so.  The Government is encouraging employers, where possible, to top-up their employees’ wages to maintain normal levels of earnings for the subsidised period. However, employers should ensure that after any such top-up the employee is paid no more than his or her normal take home wage, as any such excess payment will result in the subsidy being tapered, subject to the exception mentioned above in respect of those employees whose previous average net weekly pay was less than or equal to €412.  Employees in receipt of payments under the Wage Subsidy Scheme may be classified in Class J9 for PRSI purposes. Income tax, PRSI and USC will not be applied to the subsidy payment. Employee PRSI will not apply to any top up payment by the employer while Employer’s PRSI will be reduced from 11.05% to 0.5% on such payments. Employers must specify details of any additional amount paid to employees on payslips provided to employees.  

Employers who wish to register for the Scheme can apply through ROS. Any employer, already registered with Revenue for the purposes of the Employer COVID-19 Refund Scheme, is not required to take any further action. Employers must not operate this scheme for any employee who is making a claim a Covid-19 related support from Department of Employment Affairs and Social Protection.

Employers should note that Part 7 of the Act provides that the names and addresses of all employers operating this Scheme will be published on Revenue’s website in due course.  The Act also makes provisions for penalties to apply to any abuse of the Wage Subsidy Scheme by self-declaring incorrectly or by not providing funds to employees.

Finally, employees should note that payments under the Scheme are liable to income tax; however, the subsidy is not taxable in real-time through the PAYE system during the period of the Scheme.  Instead, Revenue has said that employees will be liable for tax on the subsidy amount paid to them by their employer by way of review at the end of the year.  Revenue has stressed however, that when an end of the year review takes place, it may well be the case that an employee’s unused tax credits will cover any further liability that may arise. Where this is not the case, and should an income tax liability arise, Revenue says its normal practice is to collect any tax owing in manageable amounts by reducing an individual’s tax credits for a future year or years in order to minimise any hardship. 

Part 8 - Amendments to law relating to lay-off and short time

As employers may be aware, the Redundancy Payments Acts make provisions for the placement of employees on lay-off and short-time, in circumstances where there is a cessation or reduction in the work normally carried out by those employees and the employer reasonably believes that the cessation or reduction will be of a temporary nature.

In normal circumstances, an employee can serve notice on the employer of their intention to claim a redundancy payment if they have been placed on lay-off or short time for a period exceeding four consecutive weeks or six weeks in any thirteen week period. An employer can only counter that notice and refuse to make a redundancy payment if it reasonably expects that, within four weeks of the date the employee has served notice of the intention to claim redundancy, the employee will be able to return to their normal working pattern for an uninterrupted period of at least 13 weeks.

In the current circumstances, however, it may not be possible for an employer to make a determination as to when its employees will be able to return to work. In recognition of this fact, the Act provides that for the duration of a designated “emergency period” employees on lay off or short time will not be in a position to claim a redundancy payment if the lay-off or short time is due to the effects of measures required to be taken by the employer to comply with, or as a consequence of, Government policy to reduce the spread of infection of Covid-19.

The “emergency period” as originally defined began on 13 March 2020 and ended on 31 May 2020. However, this period has been extended until 10 August 2020.


The temporary cessation of an employee’s entitlement to request redundancy should provide welcome relief to employers who have been required to lay-off staff or reduce their working hours due to the current emergency measures as it will mean they do not need to consider reserving resources to enable them to make redundancy payments in the coming weeks. This measure, along with the recently announced Temporary Wage Subsidy Scheme, demonstrates the Government’s desire to keep people in employment to the greatest extent possible until the need for the current emergency measures subsides.

How can we help?

The Employment, Pensions & Incentives Group are available to answer any queries you may have in relation to the supports available to employers in the current climate and can provide guidance on the legal consequences of measures being considered by your organisation to respond to the challenges posed by Covid-19. Our Tax Team is also available to assist with any queries you may have from a tax or social insurance perspective.

Also contributed by Emma Libreri

  1. Previous average weekly net pay is calculated by reference to an employee’s earnings across January and February 2020.

This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.

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