Coronavirus (Covid-19): lay-off and unemployment payments in Ireland

Out-Law Guide | 26 Mar 2020 | 11:51 am | 6 min. read

The Irish government has announced new financial measures to support workers and companies affected by the Covid-19 pandemic.

In summary the following financial supports will be provided from an employment perspective to employees and employers affected by the pandemic:

  • a Temporary Covid-19 Wage Subsidy of 70% of take home pay up to a maximum weekly tax-free amount of €350/€410 per week per worker;
  • a Covid-19 Pandemic Unemployment Payment of €350 per week (an increase from the previous payment of €203); and
  • a Covid-19 Illness Benefit of €350 per week (an increase from the previous payment of €305).

The implementation of these enhancements to benefits provided by the Department of Employment Affairs and Social Protection (the Department), referred to in detail below, require legislation and require changes to the application and payment systems within the Department. The Emergency Measures in the Public Interest (Covid-19) Bill 2020, which proposes these measures, is currently passing through the Oireachtas but it is hoped that this will be passed into law by the end of the week. The Revenue Commissioners (Revenue) are also going to issue further guidance and so there is likely to be further changes which we will keep you up to date on.

Temporary Wage Subsidy Scheme

The Temporary Wage Subsidy Scheme (the Scheme) replaces the previous Covid-19 Refund Scheme and will run for 12 weeks from 26 March 2020. It is available to employers from all sectors, excluding the public service and non-commercial semi-state sector, whose business is being financially impacted by the Covid-19 pandemic. It is hoped that the Scheme will encourage employers to keep employees on the payroll and as a result, avoid employers having to dismiss employees or put them on unpaid lay-off. 

From 26 March, the subsidy scheme will refund eligible employers who are registered with Revenue, up to a maximum of €410 per week per each qualifying employee.

Jason McMenamin

Solicitor

It is hoped that the Temporary Wage Subsidy Scheme will encourage employers to keep employees on the payroll and as a result, avoid employers having to dismiss employees or put them on unpaid lay-off. 

From April, an eligible employer will receive a refund from Revenue of up to 70% of an employee’s normal net income up to a maximum weekly tax-free payment of €410 where the average net weekly pay is less than or equal to €586, or €350 where the net weekly pay is more than €586 but equal to or less than €960.The Scheme will not apply to employees who earn more than €960 per week. Revenue will be publishing further guidance on how this will operate.

The Scheme allows employers to top up employees' wages but they should pay no more than the normal take home pay of the employee. The Bill states that employers are to make best efforts to maintain a significant, or 100% income, for the period of the Scheme.

Any employer who has already registered with Revenue for the purposes of the Covid-19 Refund Scheme is not required to take any further action. The employer may make payroll submissions from 26 March 2020 on the same basis as they were doing for the Covid-19 Refund Scheme, and will be refunded in respect of each eligible employee per week.

To qualify for the Scheme, an 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 Scheme is confined to employees who were on the employer’s payroll as at 29 February 2020, and for whom a payroll submission has already been made to Revenue in the period from 1 February 2020 to 15 March 2020. The reimbursement will, in general, be made within two working days after receipt of the payroll submission.

The business of an employer shall be treated as being adversely affected where the employer can 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. Employers will need to make a declaration to this effect when applying for the Scheme.

The Scheme is available for employers who retain staff on payroll. Some of the staff may be temporarily not working or some may be on reduced hours or reduced pay. Provided the employer meets the conditions set out by Revenue and subject to the levels of pay to the employees, the employer may be eligible for the scheme for some or all of the employees. Unlike the furloughing scheme introduced in the UK, it is not a condition of the Scheme that the employee cannot do any work.

Income tax and USC 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 10.5% to 0.5% on any top up payment.

Employers must not operate this scheme for any employee who is making a claim for duplicate support from the Department - for example, Pandemic Unemployment Payment.

Interestingly, the names of all employers operating the scheme will be published on Revenue's website after the scheme has expired.

Penalties will also apply to any abuse of the Scheme such as self-declaring incorrectly, not providing funds to employee, non-adherence to Revenue, or any other relevant guidelines.

The Covid-19 Pandemic Unemployment Payment

The Covid-19 Pandemic Unemployment Payment has been increased to €350 per week. It is available to all employees and the self-employed who have lost their job due to the Covid-19 pandemic and will be in place for the duration of the crisis. The government has issued guidelines on those who can apply for the payment.

Those who are self-employed will be paid the payment of €350 through the Department rather than through the Revenue scheme. Revenue and the Department will provide details on how the self-employed are to apply for the payment shortly.

If an employee has already applied for the payment before the 24 March or is already in receipt of the Pandemic Unemployment Payment, they do not need to do anything to receive the increased payment. Their next payment will automatically be paid at the increased rate.

If an employee has one adult and one or more dependent children they have been advised to claim a Jobseeker's Payment instead of the Covid-19 Pandemic Payment. This is because the employee may claim an additional allowance for their adult dependent and child dependents, which will bring their weekly payment to in excess of the €350 weekly payment due under the emergency Covid-19 Pandemic Unemployment Payment.

How do workers apply for the Covid-19 Pandemic Unemployment Payment?

The Department has asked people to be mindful of social distancing recommendations and to avoid their local Intreo office where possible.

There are three ways workers can apply for this payment remotely:

  • downloading an application form (1-page / 234KB PDF) and returning it by post; or
  • applying for another income support from the Department through its online portal, provided the worker has a Public Services Card; or
  • calling the Department on 1890 800 024 or 01 2481398, the Department will then send the worker the relevant application form by post.

The Department has proposed other coronavirus related employment benefits such as the Covid-19 Illness Benefit, which we discuss in further detail in our coronavirus employment advice guide.

Redundancy

The 1967 Redundancy Payments Act permits an employer to lay an employee off if the employer:

  • is unable to provide work;
  • reasonably believes that it will not be permanent; and
  • gives prior notice of the lay off using the RP9 form.

Generally, where employees are laid off or placed on short time working, they can rely on the Redundancy Acts to convert lay-off or short-time working to a redundancy situation. Employees who have been laid off or placed on short-time working for four or more consecutive weeks or six weeks in any 13-week period can notify their employer of their intention to claim redundancy. Further to this, an employer can prevent this if within four weeks of this notice, the employer can guarantee the employee 13 consecutive weeks of work without lay-off or short-time working.

However, the proposed 2020 Emergency Measures Bill proposes an amendment to the Redundancy Acts by providing that persons who have been laid off or kept on short-time due to the effects of measures taken by their employer in order to comply with, or as a consequence of, Government policy to prevent, limit, minimise or slow the spread of infection of Covid-19 cannot trigger a redundancy situation during the ‘emergency period’. This emergency period means the period beginning on 13 March and ending on 31 May 2020 - the Bill provides for this to be extended. This is to prevent a situation where if a redundancy was triggered an employer may not be in a position to afford to pay redundancy due to cash-flow issues and in some cases would propel businesses into insolvency.

Specific legal advice should be sought where necessary in relation to Covid-19 and benefit entitlements, as the situation is changing daily.

Research by Jason McMenamin of Pinsent Masons, the law firm behind Out-Law.