knowledge | 8 May 2020 |
COVID-19: Employment Supports and Information for Start-Ups
The economic impact of COVID-19 (Coronavirus) requires innovative solutions to unprecedented challenges for start-ups, not least from an employment perspective.
Recognising the complexity of the decision making process for start-ups that have employees on their payroll, we have created this guide to provide an overview of the primary employment supports available during this period of uncertainty and we have also provided some assistance on the key considerations for start-ups to bear in mind. Details on other, non-employment-specific, financing and other supports that are available to start-ups during this period can be found here.
1. Government Supports
In response to the current business climate, the Government has announced (and revised) a range of temporary employment remuneration supports which are available to start-ups.
Temporary Wage Subsidy Scheme
As part of the measures announced by the Government to provide financial support to workers affected by the pandemic, the Revenue Commissioners will operate a Temporary Wage Subsidy Scheme (the “Scheme”). This Scheme enables employees, whose employers are affected by the pandemic, to receive significant supports directly from their employer. Find more information here.
Key Features of the Scheme
The Scheme was introduced in March to incentivise the retention of employees on payroll, where possible. A number of gaps and inconsistencies in the Scheme have since been acknowledged by the Government, with many low-income workers arguing that they would be financially worse off being kept on payroll by their employer. This resulted in certain changes being made to the Scheme on 15 April 2020.
First phase of the scheme
Initially, the Scheme was introduced in two phases. First, in the transitional phase, employers would receive a €410 subsidy per week for each employee they made a submission for (regardless of the amount of the subsidy paid to the employee). In many cases, this €410 subsidy exceeded the weekly subsidy the employee is entitled to receive. While this remains unchanged for the transitional phase, the employer is obliged to hold the excess received, which is refundable by the employer to Revenue.
Changes to the subsidies in the operational phase
The second (operational) phase took effect from 4 May 2020 and ensures that the subsidy paid to employers is based on each individual employee’s average net weekly pay, subject to maximum weekly tax-free amounts. The subsidy is based on an employee's average net weekly pay (after tax, USC and PRSI have been deducted), and not their gross pay. Payment to employees should be made through the normal payroll process. The subsidies available will be calculated as follows:
- For employees who earn up to €412 net per week, a maximum subsidy of 85% of the employee’s net weekly wage is available (capped at €350 per week).
- For employees who earn between €412 and €500 net per week, a maximum subsidy of 70% of the employee’s net weekly wage is available (capped at €350 per week).
- For employees who earn between €500 and €586 net per week, a maximum subsidy of 70% of the employee’s net weekly wage is available (capped at a maximum of €410 per week).
- For employees who earn between €586 and €960 net per week, a maximum of €350 per week is available, however a tiered approach with different levels of subsidy payments applies, depending on the employer top up level. This tiered approach takes into account the amount normally paid by the employer and the reduced level of pay borne by the employee.
|Up to 60% of employee’s previous average net weekly pay||Up to €350 per week|
|Between 60% and 80% of employee’s previous average net weekly pay||Up to €205 per week|
|Over 80% of employee’s previous average net weekly pay||No subsidy payable|
- For employees who earn in excess of €960 net per week, generally, no subsidy is available. However, for payroll submission made on or after 16 April 2020, with a pay date on or after 16 April 2020, the subsidy is available to support employees whose average revenue net weekly pay was greater than €960, but whose current gross pay is below €960 per week, subject to tiered arrangements and tapering. If the refund received by the employer exceeds an employee's net average weekly pay for that period, Revenue will subsequently recoup the excess from the employer, unless the sum of the employer top up and available subsidy does not exceed €350.
Revenue guidance provides that the refund should be processed within two working days of receipt of the payroll submission.
The subsidy payments are liable to income tax and USC on the employee, however this is not taxable in real-time through the PAYE system – rather the employee will be taxed on the subsidy amount paid to them by their employer by review at the end of the year. Employer’s PRSI will not apply to the subsidy payment and the amount applicable to top-up payments will be reduced to 0.5%.
The Scheme is available to employers across all sectors (excluding Public Service and Non-Commercial Semi-State Sector). To qualify for the scheme employers must be experiencing significant negative economic disruption due to COVID-19 and must make a declaration to this effect. The declaration by the employer is not a declaration of insolvency. Revenue guidance suggests that employers must:
- be experiencing significant negative economic disruption due to Covid-19;
- have suffered a minimum 25% decline in turnover or customer orders received in Q2 2019;
- be unable to pay normal wages and normal outgoings fully;
- retain their employees on the payroll; and
- intend to continue to employ their employees, and make best efforts to pay the employee some of their earnings.
To qualify for the Scheme, employees must have been on the payroll on 29 February 2020, and the employer must have made payroll submission on their behalf to Revenue in the period from 1 February 2020 to 15 March 2020. These criteria were revised by Revenue on 24 April 2020 and the Scheme can now be accessed if February 2020 payroll submissions were made to Revenue before 1 April 2020 and all previous months’ payroll submissions were submitted to Revenue before 15 March (once all other qualifying criteria are met).
What other supports are available for employees?
Where an employer does not avail of the Scheme, or where a particular employee does not qualify for payments under the Scheme, it may be possible for the employee to avail of supports directly from the Government.
COVID-19 Pandemic Unemployment Payment
This is a payment of €350 per week which is available to employees who have either lost their job entirely or who have been temporarily laid off as a result of the pandemic. The payment was originally made available at a rate of €205 per week from 13 March 2020, but was increased to €350 on 24 March 2020.
The Government has acknowledged that for some lower-paid workers, the pandemic unemployment payment may be providing a higher income than the Scheme. However, this anomaly has been addressed as part of the changes to the scheme which were announced on 15 April 2020.
The pandemic unemployment payment does not appear to take account of an individuals’ dependents and the government has advised that for affected households where there are dependent adults or children, a higher benefit may be obtained via the jobseekers system.
The Department has advised employees who have one adult and one or more dependent children, that they should claim a Jobseeker's Payment instead of the COVID-19 Pandemic Payment. This is because they can claim an additional allowance for their adult dependant and child dependants, which will bring their weekly payment to in excess of the €350 weekly payment due under the emergency COVID-19 Pandemic Unemployment Payment.
Short Time Work Support
This is available to employees working 3 days per week or less, having previously been employed on a full time basis. The rate of payment will depend on the employees average weekly earnings in the governing contribution year and the change in their work pattern.
There is no provision for employers to make these payments to employees directly and to seek a refund from the Department. Employers must not operate the scheme for any employee who is making a claim for duplicate support (e.g. Pandemic Unemployment Payment) from the Department. Employers should be aware however that, in circumstances where employees who qualify for the scheme are treated differently to those who do not, particularly where this results in an appreciable difference in the level of pay received, this may give rise to the risk of grievances or future claims including claims for discrimination. The degree of risk in this respect will depend on the circumstances.
Employees who are required to claim illness benefit as a result of contracting COVID-19, or being medically required to self-isolate, will not have to wait the usual 6 days to apply for illness benefit and may begin to claim it immediately. The rate of illness benefit applicable to absences resulting from COVID-19 has increased to €350 per week.
2. What Other (Non-Government Support) Remedies are Available for the Employer?
Lay-Offs and Short Time
Where an employer cannot provide normal levels of work for some or all employees, it may consider placing those employees on lay-off or short time, provided the employer reasonably believes the measure will be temporary and provides employees with prior notice. Lay-off involves a temporary cessation of employment where the employer is unable to provide work for which the employee was engaged. Short time occurs where there is a reduction in the amount of work or hours available, resulting in a reduction of weekly earnings of more than 50%.
Payment during periods of lay-off or short time should be considered by reference to the employees’ contracts of employment, any collective agreements and/or custom and practice. While the position is not definitive and each case must be assessed on its own merits, there is some support for the proposition that custom and practice generally in Ireland is such that lay-off is without pay. Employees should be paid for any hours worked during a period of short time.
Irrespective of whether employees are paid during periods of lay-off or short time, employers may, subject to the conditions of the Scheme, avail of the government’s subsidy in respect of such employees. Where the custom and practice is generally that such periods are unpaid and to avoid creating a precedent that lay-off is with pay, employers should indicate that such payments as may be made are made exclusively in reliance on the Scheme.
Ordinarily, where employees are kept on lay-off or short time for certain minimum periods, such employees are entitled to serve notice to their employer of their intention to claim statutory redundancy. However, the Emergency Act suspends this entitlement in certain circumstances such that, for a period between 13 March 2020 and 31 May 2020, employees will not be able to claim a redundancy payment where they have been placed on lay-off or short time due to measures in order to comply with, or as a consequence of, government policy regarding COVID-19.
Reduction in Salary
Employers considering implementing pay-cuts may, in the first instance, wish to consider alternative options. These may, depending on the circumstances, include seeking to agree a pay deferral (rather than a pay cut), requiring employees to take annual leave, or encouraging employees to avail of unpaid leave such as parental leave.
While the safest course of action is to seek to reach agreement with employees regarding pay cuts, this may be impractical in the context of the current pandemic and there is a risk that not all employees will agree to the proposal. Employers may, alternatively, in some cases wish to assume the risk of claims by imposing a unilateral pay cut and in this regard transparent communication with employees regarding the rationale for such measures will be significant, both in terms of the reasonableness of the employer’s behaviour and also the employees acceptance of the measures. However, employees may challenge any pay cuts which are introduced otherwise than on the basis of agreement, including before the WRC or the civil courts.
Where employers do seek to implement pay cuts, they may, in some circumstances, rely on a variation clause within employees’ contracts of employment provided that the language of the clause is clear and unambiguous and the manner in which it is exercised does not breach the employer’s duty of trust and confidence. Whether such a clause can be successfully relied upon to impose a unilateral pay cut in the extraordinary circumstances of COVID-19 remains untested.
3. Other Employment Obligations and Considerations
Government guidelines on essential workers
Restrictions currently in place until at least 18 May 2020 limit employees’ ability to travel to work unless involved in the provision of essential services which cannot be performed remotely. Employers should therefore consult the list of essential services under these guidelines to assess whether employee services are deemed essential. Employees who are not engaged in the provision of essential services are not permitted to travel to and from work until at least 18 May 2020.
Luckily most start-ups have very flexible and digitally savvy teams, making this one of the easier challenges to deal with. We have outlined below some practical guidance for employers:
- Remind employees of their duties and obligations under their contracts of employment and applicable policies, in particular, their obligations and duties in relation to health and safety, confidentiality, data protection, and intellectual property;
- Remind employees to continue to take their rest breaks in line with the Organisation of Working Time Act 1997 (as amended);
- Request employees to turn off and remove smart devices, such as Alexa, from their home working area in order to maintain client/customer confidentiality;
- Ensure that it is possible to continue to communicate with staff during periods of home working (whether by email, text message or telephone);
- Consider having an emergency text service in place so that updates can be issued to employees as required; and
- Where organisations have agency staff or contractors who are employed by another organisation, engage with these organisations in relation to any decision to close the workplace.
What if an employee is sick?
Employees who are ill, whether suffering from COVID-19 or otherwise, should not be asked to work remotely and the organisation’s sickness absence policy (including sick pay) will apply in such instances.
Current public health guidelines provide that individuals need to self-isolate if they have symptoms of coronavirus (including cold or flu-like symptoms, such as sore throat, runny nose, blocked nose, cough or wheezing) and are waiting to be tested or for the results of a test. Individuals also need to self-isolate if they have had a positive test result for coronavirus. The restrictions mean that everyone in Ireland has been asked to restrict their movements and only leave the house for limited reasons such as food shopping. Individuals need to restrict their movements further if they live with or are a close contact of someone who has coronavirus or if they have returned from Ireland from another country.
Where an individual is working remotely, they should in most cases be able to carry out their work while restricting their movements. Where an employee who is working remotely becomes ill, the Company’s normal sick leave policy should apply. It should also be applied where an employee who is attending work to perform essential services falls ill. Employees who are absent from work due to illness may be entitled to avail of the Illness Benefit outlined above.
If an employee who performs essential services cannot attend work because they have been told to self-isolate by a doctor or the Health Service Executive due to being a possible source of infection, they can also apply for an Illness Benefit payment.
4. Revenue announcements/supports for employers
Revenue have also introduced the following changes to reporting and filing obligations to provide certainty, and to reduce economic hardship faced by employer and employees as a result of COVID-19:
- the filing deadline for all 2019 employee share scheme returns has been extended from 31 March 2020 to 30 June 2020;
- the 90 day employer filing obligation, which is a requirement for an employee to be eligible to benefit from Special Assignee Relief Programme (SARP), is extended for a further 60 days;
- if employees are required to work from home in the State due to COVID-19, days spent working at home in the State will not preclude an individual from being entitled to claim the Trans-Border Workers Relief, provided all other conditions of the relief are met;
- Revenue will not strictly enforce the 30 day notification requirement for PAYE dispensations applicable to short term business travellers from countries with which Ireland has a double taxation treaty;
- Revenue will not enforce Irish payroll obligations for foreign employers where an employee was working abroad prior to COVID-19 but relocates temporarily to the State during the COVID-19 period and performs duties for his or her foreign employer while in the State;
- where employees were working abroad for a foreign employer under an Irish contract of employment subject to a PAYE exclusion order, the exclusion order will not be adversely impacted where the employee works more than 30 days in the State due to COVID-19;
- reimbursements by an employer to an employee for holiday/flight cancellations or costs assisting employees returning to the State will not be subject to benefit-in-kind (BIK) provided the employee was required to return to deal with issues related to the COVID-19 crisis by his or her employer, the costs incurred are reasonable and the employee was not otherwise compensated; and
- a BIK will not arise where employers provide equipment to employees to enable them to work from home.
Revenue have stated that in all cases where restrictions imposed as a response to COVID-19 affect the applicability of Irish tax legislation on an employee/employer’s tax position, records should be maintained outlining the circumstances and should be available to Revenue on request.
All annual returns due to be filed by companies will be deemed to have been filed on time if all elements of the annual return are completed and filed by 30 June, 2020. This will enable businesses and their financial advisers to focus on the more pressing and immediate financial challenges.
How can we help?
McCann FitzGerald is ready and willing to assist start-ups in addressing all of their concerns in respect of employment, legal and/or taxation issues that may be faced in responding to COVID-19. Please contact any member of the McCann FitzGerald Start Strong team to assist.
Also contributed by Donncha Sexton
This document has been prepared by McCann FitzGerald LLP 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.