SME Covid-19 Temporary Wage Subsidy Scheme Update May 2020

SME Covid-19 Temporary Wage Subsidy Scheme Update May 2020

 

From the 26th of March, the Temporary Covid-19 Wage Subsidy Scheme has been in operation around Ireland.

The scheme enables employees, whose employer’s have been affected by the pandemic, to receive support directly from their employer through the payroll system. This allows the link between employer and employee to remain in place, meaning they can retain a direct relationship for when business picks up after the crisis.

When operating the scheme, there has certainly been a lot of questions, uncertainty and lack of understanding when it comes to making payment to eligible employees. The calculation of the subsidy entitlements and maximum top up payments is not the simplest formula.

If you are uncertain on the entitlements, the subsidy amount received, how much of a top-up payment to make or any questions on the operation of the scheme, do please contact us on (01) 8084191 and we will be happy to help.

 

Reconciliation

We have seen in several cases, subsidy amounts received do not match the payroll records. Revenue have advised on this.

Details of both the reconciliation process and the process for employers to follow when returning excess Wage Subsidy Scheme funds to Revenue will be published in due course.

In the interim, to assist in their future reconciliation, employers should continue to retain records of subsidy payments made to employees, records of subsidy refunds and tax refunds received from Revenue and hold any excess of the subsidy payments received for offset against future subsidy payments or for future repayment to Revenue”

 

Tax refunds

Another area of concern we have seen is in relation to tax refunds that may be triggered. As the subsidy is not taxable through the payroll, employees are seeing tax refunds through their payroll. Revenue have advised that “An employee can elect for a week one basis to avoid a tax refund being made through your pay by logging into My Account and sending a request via MyEnquiries to be entered on a Week 1 basis”

Employees may look to do this to keep unused tax credits for their end of year review as the subsidy payment will be subject to income tax and USC by way of review at the end of the year.

It should be noted revenue will collect any tax owing in a “manageable way” by reducing your tax credits in future year(s), to minimise any hardship.

 

Operational changes and Updates

We are already on version V11 on revenue’s guidance on the Temporary Wage Subsidy Scheme as further changes and updates arise - https://www.revenue.ie/en/employing-people/documents/pmod-topics/guidance-on-operation-of-twss.pdf


April updates

The temporary wage subsidy scheme was updated on the 16th of April to include employees who had an average net weekly pay higher than €960 (equivalent to a €76,000 salary), based on their January and February payroll submissions. It allows employees who have taken a pay cut, or whose salary is less than €76,000 but may have been excluded from the scheme previously due to bonuses or commission on January & February 2020, to receive a subsidy payment. It should be noted the gross pay/employer top up should be less than €960 for a subsidy entitlement to be available;

Table 1

Employee’s Earnings/Gross pay

Subsidy Amount

Gross pay is more than 80% of their ARNWP

No Subsidy available

Gross pay is more than 60% but no more than 80% of their ARNWP

Subsidy maximum to €205 per week is applicable

Gross pay is not more than 60% of their ARNWP

A subsidy maximum to €350 per week is applicable

 

*ARNWP – Average Revenue Net Weekly Pay, in accordance with revenue records between January and February 2020

An example of this would be as follows;

Employee’s average Revenue Net Weekly Pay - €1,090

Employer top up/Gross pay for May - €3,306.33

This will need to be put into a weekly amount; €3,306.33 X 12 ÷ 52 = €763

Gross weekly pay now €763

Maximum Subsidy available - €763/€1,090 = 70%

As the employees wage has suffered a 30% reduction, or their gross pay is more than 60% but no more than 80% of their ARNWP, they will be entitled to a maximum subsidy amount of €205.

As the Gross pay + the subsidy amount cannot exceed €960, the subsidy in this case will be capped at €197 (€960 - €763).

 

If it is the case that you have an employee who has a net pay higher than €960 that has taken a pay cut, or who perhaps received a bonus in January or February which has led them to be excluded, please contact us and we can outline to you the eligible amount they will be entitled to as per the updates in the Temporary Wage Subsidy Scheme.

 

May Updates

The May updates are quite similar to the April updates, however focusing on the Average net weekly earners who would not exceed €960 per week.

For the eligible employees who have an average revenue net weekly pay of less than €586, a breakdown of their subsidy entitlements is as follows;

Table 2

Average Net Weekly Pay

Subsidy Amount

Up to €412

85% of their Average net Weekly Pay

Between €413 - €500

€350

Between €501 - €586

€70% of their Average net Weekly Pay, max of €410

 

For the bracket of employees who have an average net weekly pay greater than €586, but not greater than €960, the subsidy amount will be a maximum of €350 and will be calculated by reference to the top up payment/gross pay as per the calculation methods in Table 1.

 

As advised above, please do not hesitate to contact us with any queries or service requirements with the operation of the Temporary Wage Subsidy Scheme.

info@kalcaccounting.ie

(01) 8084191