knowledge | 1 April 2020 |
COVID-19: Emergency Act Brings Welcome News for Employers Adversely Affected by Covid-19
The recently enacted 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 will be 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 is expected to run for a period of twelve weeks from 26 March 2020, although the Act allows for this timeline to be amended by ministerial order. Initially, in Phase 1 of the Subsidy Scheme, Revenue will refund employers up to a maximum of €410 per each qualifying employee. An employee must have been included in their employer’s February payroll submissions between 1 February 2020 and 15 March 2020 to be a qualifying employee.
In Phase 2, no later than 20 April 2020, the Scheme will provide for the following subsidies:
- 70% of an employee’s take home pay up to a maximum of €410 net per week for employees whose average net weekly pay is less than or equal to €586;
- a maximum of €350 for employees whose average net weekly pay is greater than €586 and less than or equal to €960; and
- no subsidy in respect of the wages of employees whose average net weekly pay is greater than €960.
The Scheme will be 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 received from Revenue being reduced by the same amount. 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 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.
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 currently defined begins on 13 March 2020 and ends on 31 May 2020. However, if necessary, the period can be extended by order of the Minister for Employment Affairs and Social Protection, in consultation with the Ministers for Health and Public Expenditure & Reform. Any such order must be laid before the Houses of the Oireachtas and each House has the power to annul the order by passing a resolution to that effect.
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
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.