Employment Wage Subsidy Scheme: What it means for businesses

The government announced a new Employment Wage Subsidy Scheme (EWSS) on 23 July 2020 to replace its previous Temporary Wage Subsidy Scheme (TWSS). The new scheme, signed into law on 1 August 2020, is part of the July Jobs Stimulus Package.

Under the scheme, employers that meet specific criteria can get a subsidy for eligible employees.

The flat-rate subsidy is based on the number of qualifying employees and their earnings. The EWSS will run concurrently with the TWSS until 31 August 2020, when the TWSS will end.

Read this article to learn about the Employment Wage Subsidy Scheme and what it means for your business.

Here are the topics that this article covers:

What is the Employment Wage Subsidy Scheme?

Which businesses are eligible for the scheme?

How does the scheme work?

When does the Employment Wage Subsidy Scheme end?

Employment Wage Subsidy Scheme vs Temporary Wage Subsidy Scheme

What does the new scheme mean for the Temporary Wage Subsidy Scheme?

Conclusion on the Employment Wage Subsidy Scheme

What is the Employment Wage Subsidy Scheme?

The Employment Wage Subsidy Scheme has been set up to support employers whose businesses have been adversely affected by coronavirus (COVID-19).

It consists of two elements: a subsidy per qualifying employee for employers directly affected by coronavirus and a reduced rate of employers’ pay related social insurance (PRSI) for qualifying employments.

The subsidy to qualifying employers is based on the number of eligible employees on the employer’s payroll. Employees with gross weekly earnings of between €151.50 and €1,462 may qualify for one of two flat-rate payments:

• A rate of €151.50 for wages between €151.50 and €202.99.
• A rate of €203 for wages from €203 to €1,462.

Employers will not receive a subsidy for employees earning below or above these weekly amounts.

Employments eligible for the subsidy also qualify for a reduced rate of employer PRSI of 0.5% (instead of 8.8% on earnings up to €395 and 11.05% on earnings above €395).

The reduction is given in the form of a PAYE credit to the employer.

Which businesses are eligible for the scheme?

The Employment Wage Subsidy Scheme is open to employers who file their payroll returns through the Revenue Online System (ROS).

Employers must meet the following two criteria to qualify for the scheme:

• You must have a valid Tax Clearance Certificate and continue to maintain tax clearance status for the duration of the scheme.
• Your business must be expected to experience a 30% fall in turnover or orders for the second half of 2020 as a direct result of coronavirus.

To determine if your business meets the criteria, you must compare your projected turnover from 1 July 2020 to 31 December 2020 to the same period in 2019.

In the case of new business owners, the relevant comparable period is from the date of commencement to 31 December 2019.

If your business began operating after 1 November 2019, you can use a projected turnover figure.

Employees of registered childcare businesses are also eligible for the scheme but these businesses are exempt from the 30% reduction in turnover test.

How does the scheme work?

Registering for the scheme

You or your payroll provider or agent can register for the Employment Wage Subsidy Scheme through Revenue’s Online Service (ROS).

You’ll need to make a self-declaration that you met the eligibility criteria at this point.

When submitting an application, make sure you’re registered for employers’ PAYE and PRSI (PREM) and have a bank account linked to your PREM registration.

Have your tax clearance certificate to hand. You can check your tax clearance status through the ROS system.

With the introduction of the scheme, employers are obliged to recommence deductions on payroll payments, including income tax, universal social charge and employee PRSI.

To determine which rate applies to an employment, use gross wages before deductions such as pension contributions and exclude payments from the Department of Employment Affairs and Social Protection, for example, illness or maternity benefit.

Combining the subsidy with the credit can bring you significant savings, so it’s worthwhile investigating if your business qualifies for this scheme.

Here are two examples, taken from the Revenue EWSS Guidelines:

• One of your employees works part time and earns a gross weekly income of €250. Under the scheme, as long as your business meets the tax clearance and reduction in turnover criteria, you can avail of a €203 subsidy towards that employee’s wages. You will also get a PRSI credit of €21 towards €22 paid.
• Likewise, you can receive €203 for an employee earning €1,000 and a PRSI credit of €106 towards €111 paid.

For employers who meet the criteria, the new scheme also allows for backdated payments to 1 July 2020 for new hires or seasonal workers and employments that were ineligible for TWSS.

Backdated payments for July and August will be made after 14 September 2020, and subsequent payments made monthly in arrears.

Employees with more than one employer can receive a subsidy for each employment provided it meets the criteria.

Certain employees are excluded from the scheme including proprietary directors and “connected parties” – described in the Revenue guidelines as related individual(s) who can take majority control of the company and who were not on your payroll between July 2019 and June 2020.

However, if you are a proprietary director, you may be eligible to claim for a subsidy for yourself as long as you have other “ordinary” employees on the payroll. Revenue will provide more details on this shortly.

Review your eligibility

If you’re eligible to receive subsidies under the Employment Wage Subsidy Scheme, you’re obliged to complete a monthly review on the last day of each month to ensure you still meet the scheme’s criteria.

If you find you no longer qualify, you must cancel your claim through ROS with effect from the first day of the following month.

The first month – July 2020 – and the final month of the scheme are exempt from review requirements.

As applications are self-assessed, you don’t have to show proof of eligibility when registering for the scheme. However, you should retain supporting documentation that proves eligibility as Revenue will be carrying out future compliance checks.

When does the Employment Wage Subsidy Scheme end?

The scheme is expected to continue until 31 March 2021.

However, it’s subject to amendments. You’re advised to keep up to date with changes to the scheme to ensure you are still eligible by regularly checking the Revenue website.

Employment Wage Subsidy Scheme vs Temporary Wage Subsidy Scheme

The Employment Wage Subsidy Scheme is intended to be more straightforward for employers to operate than the Temporary Wage Subsidy Scheme.

The TWSS was announced on 24 March 2020 as part of emergency measures to support businesses affected by the coronavirus pandemic and to allow employers to keep employees on the payroll by reimbursing them for up to 70% of wages.

The TWSS, which was initially expected to last 12 weeks from 26 March 2020, was extended on 5 June until 31 August 2020.

At the start of the scheme until 4 May 2020, a subsidy of €410 was payable for each employee who qualified.

After that date, the payment received by employees was based on the net weekly pay per employee.

Employee PRSI is not payable on the subsidy payment or additional payment from the employer. In addition, a reduced rate of 0.5% of employer’s PRSI is payable only on the top-up amount.

While the TWSS subsidy is not subject to tax through the PAYE system, employees may be liable for income and USC in an end of year review.

The main differences between the two schemes are:

• To qualify for the EWSS, employers expect a 30% projected reduction in turnover or orders from 1 July to 31 December 2020. Under the terms of the Temporary Wage Subsidy Scheme, this decline is 25% between 14 March and 30 June 2020.
• Under the terms of the TWSS, employers didn’t require a valid tax clearance certificate to qualify. Employers that qualify for the EWSS must have tax clearance status and maintain it for the duration of the scheme.
• Two flat-rates apply under the EWSS, whereas the TWSS provides for a maximum subsidy amount of €410 depending on an employee’s average net weekly pay.
• Proprietary directors with employees can avail of the EWSS, whereas they were excluded from the previous scheme.

What does the new scheme mean for the Temporary Wage Subsidy Scheme?

The new scheme (Employment Wage Subsidy Scheme) will completely replace the Temporary Wage Subsidy Scheme, which is being phased out.

The two schemes will run concurrently until 31 August 2020, when the TWSS will end on that date. Businesses that were availing of the TWSS may be eligible for the new EWSS.

Conclusion on the Employment Wage Subsidy Scheme

The Employment Wage Subsidy Scheme is expected to run until 31 March 2021. However, it will be reviewed during this period and it’s advisable to keep up to date with the latest guidance on the scheme.

If you are unsure if your business qualifies for the subsidy, or you require further information on how the scheme works, you can find out more on the Revenue website.