On 23 July 2020, the Government announced that the Employer Wage Subsidy Scheme (EWSS) will replace the Temporary Wage Subsidy Scheme (TWSS) from 1 September 2020 and is expected to continue until 31 March 2021.
In addition to having tax clearance for the duration of the scheme, an employer must be able to demonstrate that:
- their business is expected to experience a 30% reduction in turnover or orders between 1 July and 31 December 2020 looking at the period as whole rather than on a monthly basis; and
- this disruption is caused by COVID-19.
As registration cannot be backdated, it’s imperative that registration is submitted prior to the first pay date of claiming EWSS.
The EWSS is also available for employees that did not qualify for the TWSS in July and August (e.g. newly employed individuals), and the Employer satisfies the criteria for EWSS. Revenue will issue a template by end of August which needs to be submitted by the Employer and returned to Revenue by 5 September.
To be eligible to participate in the EWSS, the employer must be able to demonstrate that their business has been significantly disrupted due to Covid-19.
The employer must be in a position to demonstrate at least a 30% decline in turnover or customer orders in the period 01 July -31 December 2020, as compared to the same period in 2019. When assessing the level of turnover in the business, it is important to note that grants, donations and state funding will all be regarded as turnover. However, the subsidies received as part of the EWSS, albeit taxable income for the company, will not be regarded as turnover.
In cases where the business was not in operation for the full corresponding period in 2019, the following will apply:
- Where the business operations commenced before 01 November 2019, the decline in turnover test must be determined in 2020 by reference to the same period the business was in operation in 2019, and
- Where the business operations commenced after 01 November 2019, the employer must be able to demonstrate that there was a 30% decline in turnover or customer orders in comparison to financial projections.
If it is not possible to apply the turnover test or customer order test to the business in question, an alternative reasonable basis may be applied.
Under the EWSS, there is no requirement for the employer to demonstrate an inability to pay the employees wages. Furthermore, childcare businesses registered in accordance with the Child Care Act 1991 are not required to meet the turnover or customer order tests.
Any employee that was regarded as an eligible employee under the TWSS should still be regarded as eligible under EWSS. In addition, the EWSS may also be claimed for newly employed individuals that are on the employer’s payroll in the qualifying period (i.e. 01 July 2020-31 March 2021).
Albeit, originally excluded from the scheme, the EWSS may now be claimed in respect of certain proprietary directors. Additional guidance on the exact eligibility criteria will be published in due course. However, specifically excluded from the EWSS are connected parties that were not on the employer’s payroll between 01 July 2019 and 30 June 2020.
Revenue have also clarified that employees otherwise employed as part of a business (e.g. domestic employees such as childminders, gardeners) will not qualify for the scheme.
Effective since 18 August 2020, eligible employers, or their payroll or financial agents, can register for EWSS through ROS. Similar to the TWSS, the employer will be required to declare that the eligibility criteria is met as part of the registration process. Where an employer files an EWSS payment submission without having first registered for the scheme, the payroll submission will be rejected. Revenue have confirmed that they will be undertaking verification checks in due course.
Employers will be required to undertake a review at the end of every month to ensure they continue to meet the eligibility criteria. If the employer no longer qualifies, they are obliged to unregister from the scheme. Subsidies correctly claimed by the employer prior to the unregistration will not be repayable. If the employer unregisters from the scheme, but subsequently meet the qualifying criteria at a later date, they can reapply for the scheme. However, it will not be possible to backdate the claim to include the period of unregistration.
Rate of Subsidy
The EWSS rates are based on the employee’s gross weekly wage. The exact rates are as follows:
|Employees Gross Weekly Wage||Subsidy Payable|
|Less than €151.50||€0|
|From €151.50 to €202.99||€151.20|
|From €203 to €1,462||€203|
|More than €1,462||€0|
The definition of gross wages includes notional pay but is before any deductions for employee pension contributions or salary sacrifice.
EWSS can only be claimed in respect of payroll submissions of a least a monthly pay frequency. Where the pay frequency is quarterly, annual, bi-annual or other, the payroll submissions will not be processed.
While some employees may have more than one employment with more than one eligible employer, each employer must make its own claim for each employee, ignoring any additional subsidy payments the employee may be receiving from a separate employer.
Revenue has introduced specific anti-avoidance measures to ensure the scheme is not abused. For example, an employer cannot lay off one employee to replace them with more than one employee earning a lower salary which will qualify for the scheme. Furthermore, the gross salary of any employee cannot be deferred, suspended, increased or decreased with a viewing to securing a subsidy.
Employers must possess a valid tax clearance certificate both at the date of registration and for the duration of the scheme. Tax clearance will be granted if the tax affairs of the employer and its connected parties are up to date.
Where an employer files a payroll submission but there is not a valid tax clearance in place, the subsidy will not be paid for that month, unless the employer’s tax affairs are brought up to date before the 14th day of the following month.
Operation of the Scheme
Under the EWSS, the subsidy payment to the employer is more akin to a grant. Employers will process the payroll as normal and the gross wages advanced will be subject to income tax, USC and PRSI. Following the submission of the payroll the employer will receive a subsidy payment in respect of each eligible employee.
When processing the payroll submission an employer, or their payroll agent, must include “EWSS” as the payment type in the Other payment section and input 0 or zero as the value of the payment. On the employee’s payslip, there will be no reference to the EWSS. Following the submission of the payroll the subsidy will transfer from Revenue to the employer after the filing deadline (i.e. 14th day of the following month) has passed. The period of time paying the salary and receiving the subsidy may create cash-flow difficulties for certain employers, particularly employers that are processing payroll on a weekly basis.
Tax and PRSI
All eligible employees will be subject to income tax, USC and PRSI as normal through the PAYE system. In the payroll submission Employers PRSI will be computed at the standard rate, not the reduced rate of 0.5% available as part of the EWSS. Following the submission of the payroll return, Revenue will make an adjustment to the ER PRSI liability, reducing the amount that becomes due and payable for the relevant period.