Phase 2 of the scheme
Phase 2, the 'operational phase', applies to Scheme submissions received by Revenue on or after 4 May 2020.
During the operational phase, the subsidy amount paid to employers will be based on each individual employee's ANWP and any additional gross payment (top-up) paid by the employer. ANWP for the purposes of the Scheme is based on January and February payroll submissions made by the employer to Revenue. Bonuses, commissions and other payments will be taken into account in the calculation of the ANWP if these were included as part of gross pay in the January and February payroll submissions.
For submissions made during the operational phase, Revenue will calculate the employee's ANWP and maximum weekly wage subsidy (MWWS) and provide this to the employer in the employer CSV file, which is available for download from Revenue Online Service (ROS). A CSV file is a Comma Separated Values file that will assist employers in inputting data on their payroll software.
During the operational phase, the following subsidy amounts will apply.
Employees with ANWP less than €586 per week (approx. €38,000 per annum):
- for employees with ANWP of up to €412 per week (approx. €24,400 per annum) - a subsidy refund of 85% of ANWP, to a maximum of €350, is applicable. If an employer wishes to 'top up' this payment by the remaining 15% to bring the employee's pay up to €350 per week, then 'tapering', or reduction, will not apply to the subsidy, provided that the combined wage subsidy plus the top-up does not exceed €350;
- for employees with ANWP between €412 and €500 per week (approx. €24,400 - €31,000 per annum) - the subsidy refund amount will be up to €350 per week;
- for employees with ANWP between €500 and €586 per week (approx. €31,000 - €38,000 per annum) - the subsidy refund amount will be up to 70% of ANWP, up to a cap of €410 per week.
Employees with ANWP over €586 per week (approx. €38,000 per annum):
The maximum subsidy refund for these employees is €350 per week. However, a tiered approach will also apply, taking into account the amount paid by the employer and the level of reduction in pay borne by the employee.
|Gross pay paid by employer
|60% or less of employee's previous ANWP
||Up to €350 per week
|Between 60% and 80% of employee's previous ANWP
||Up to €205 per week
|Over 80% of employee's previous ANWP
||No subsidy payable
'Gross pay' means total remuneration which includes emoluments and notional emoluments but without reference to any deduction for pension contributions payable by the employee, or any salary sacrifice deduction.
For example, if an employee has an ANWP of €650 and the employer opts to provide additional gross pay of €300 the MWWS that can be paid by the employer before tapering is as follows:
Taxable pay: additional gross pay = €300
MWWS: €300 (gross pay)/€650 (ANWP) x 100 = 46.15%. Therefore using the table above a subsidy of €350 is payable.
Maximum Weekly Employer Payment Before Tapering (MWEPBT): ANWP of €650 – Wage Subsidy of €350 = €300 (the maximum gross pay an employer can pay before tapering).
In this case no tapering is required as the total of additional gross pay before tax plus subsidy does not exceed the ANWP.
If the additional gross pay was, for example, €350, the subsidy amount would be tapered to €300 as the additional gross pay exceeds the MWEPBT of €300.
Employees with ANWP more than €960 per week (approx. €76,000 per annum):
The wage subsidy is also available to support employees whose ANWP was greater than €960 pre-Covid but their current pay is below €960 per week, subject to the tiered arrangements above and tapering.
The maximum additional payment an employer can make while receiving the full subsidy is the difference between the employee's ANWP and their maximum weekly wage subsidy.
Topping up and tapering
Employers are encouraged by Revenue to make best efforts to maintain the employee's net income as close as possible to normal net income for the period of the Scheme. However, if the gross pay paid by the employer and the subsidy is greater than the employee's ANWP the subsidy amount may be tapered or may not apply.
Tapering, or a reduction, of the subsidy will apply to all cases (excluding those whose ANWP does not exceed €412) where the gross pay paid by the employer and the subsidy exceed the employee's ANWP. This is to ensure that no employee would be better off under the Scheme. Where the subsidy is tapered to €0, as the subsidy is not payable, PRSI Class J9 should not be applied and the normal PRSI class applicable to the employee should be applied.
Revenue has published useful guidance documents on how the Scheme will operate including a sample calculator to demonstrate the calculation of the wage subsidy, along with information on employer eligibility and supporting proofs.
Tax implications of subsidy payments
Income tax, Universal Social Charge (USC) and Local Property Tax will not be applied to the subsidy payment through the payroll. However, the subsidy will be liable to income tax and USC on review at the end of the year. Employee PRSI will not apply to the subsidy or any top up payment by the employer. Employers PRSI will not apply to the subsidy and will be reduced from 11.5% to 0.5% on any top up payment.
Top-up payments cannot be re-grossed and are subject to income tax and USC in the usual way.
Revenue has indicated that in many cases the payment of the subsidy and any additional income paid by the employer will result in the refund of income tax or USC already paid by the employee. Any income tax and USC refunds that arise as a result of the application of tax credits and rate bands can be repaid by the employer and Revenue will also refund this amount to the employer.
Employer eligibility criteria
An employer can register for the scheme by logging onto ROS myEnquiries. To qualify, the employers' business must have been adversely affected by Covid-19 to a significant extent with the result that the employer is unable to pay their employees their usual pay; the employer must intend to continue to employ the employee (and to pay them); and the employer must have registered for the scheme with Revenue on ROS.
The employer must be able to demonstrate to the satisfaction of Revenue that, by reason of Covid-19 and the disruption that is being caused, there will occur in the period of 14 March to 30 June 2020 at least a 25% reduction either in the turnover of the employer’s business or in customer orders being received by the employer. The 25% reduction in turnover or customer orders may be applied at the level of the company or, if a company is formally structured into individual 'business divisions', at the level of the individual business division. Each business division of the company may be eligible for the subsidy; however, each business division of the company must be capable of being separately identified, or otherwise the company as a whole will be looked at. Each business division in a company must have a clearly defined and separate management structure separate to the other business divisions in the company and those structures must have been formalised and established before the outbreak of the pandemic. Revenue will examine closely the basis for entering the Scheme of certain Scheme applications that are made in respect of one or more of a company’s business divisions rather than made in respect of the overall company. Revenue has also advised that an 'alternative basis' test be applied where application of the 'turnover' and 'customer orders' tests do not adequately demonstrate a negative economic disruption.
Application for the Scheme is based on self-assessment principles and a qualifying employer will need to declare that it is significantly impacted by the crisis when applying - although Revenue has advised that this will not be considered a declaration of solvency. Revenue has advised that an employer is best placed to determine whether it meets the reduction threshold and that it may base its determination on the decline in orders in March 2020 in comparison to February 2020, or the likely turnover for the quarter compared to Q1 or, if appropriate, Q2 of 2019, or on any other basis that is reasonable.
Revenue has also advised that an employer that has been hit by a significant decline in business but that has strong cash reserves, which are not required to fund debt, will still qualify for the Scheme. However, the government would expect the employer to continue to pay a significant proportion of the employees’ wages.