The Covid-19 crisis has certainly placed us all in uncharted waters – while we adjust to a new way of living and working, the majority of businesses are now navigating employment law scenarios with which they have never dealt with previously.
Having spoken to HR professionals and business owners over the past few weeks a huge proportion are still trying to come to terms with the vast amount of change to employment legislation and issues around safe work practices due to COVID-19. With this in mind, Collins McNicholas would like to help address some of the most common questions that have arisen. To ensure that we are providing the most accurate and practical advice, our resident Employment Law expert, Alastair Purdy, has kindly agreed to share some key answers to your queries.
After spending a number of years working at HR Director level in the industry, Alastair started his own solicitors practice in 2006 with the purpose of providing advice to employers. Today Alastair Purdy & Co. Solicitors have offices in Dublin and Galway providing expert advice to employers nationwide. Alastair is widely published in the area of employment law and is recognised as one of Ireland’s leading practitioners in this area.
Wage Subsidy Scheme
Question 1: Who does the Scheme apply to?
Answer: It applies to those employers whose businesses are experiencing “significant negative economic disruption” due to the COVID-19 crisis to the extent that the employer is unable to pay its employees their normal salary. If your business was in crisis before this, you may not be entitled to avail of the scheme.
The Scheme is available for employers who retain staff on payroll, including staff on full-time and reduced hours, rehired staff who were temporarily laid off but still on the payroll. This is important as the main aim of the Scheme is to maintain staff on payroll.
The employer must have the firm intention of continuing to employ the relevant employee and continuing to pay them, and they must also be making their best effort to pay the employee in order for it to be eligible. This again and to reiterate is important, in that if it is not your intention to continue long term you need to be very careful and be mindful that if you make employees redundant at the end of this the Revenue may well query this.
Question 2: What is the definition of “significant negative economic disruption”?
Answer: Employers must be able to demonstrate to the Revenue that, in the period of 14thof March to the 30thof June 2020, there will be at least a 25% reduction in either: a) the turnover of the employer’s business; or b) customer orders received or c) that the reduction is as a result of the COVID-19 crisis.
Eligibility is determined based on self-assessment and a self-declaration to the Revenue by the employer. An employer does not have to guarantee that the turnover will decrease by 25%. Rather, there must be a likely reduction in expected turnover. The employer can base this judgement on: a) a decline in orders in March 2020 as compared to February 2020; b) the likely turnover for Q2, 2020 as compared to Q1, 2020; or c) the likely turnover for Q2, 2020 as compared to Q2, 2019; or d) any other basis that is reasonable.
Question 3: Does the employer have to be insolvent to avail of the Scheme?
Answer: Employers need to satisfy Revenue that they were unable to pay the wages and “normal outgoings”. Employers then have to log on to the Revenue website and submit the declaration which is set out.
Employers are being advised to retain evidence which demonstrates their basis for entering the Scheme. Revenue has provided a non-exhaustive list of relevant evidence which includes:
Copies of documents submitted to financial institutions as part of the negotiation of forbearance measures;
Where the decline in turnover was less than 25%, documentation which supports the business rationale for believing it would suffer such a decline;
Copies of communications to employees or trade unions regarding salary cuts implemented as a direct result of COVID-19; and/or
Documentation evidencing reliance on the Government Credit Guarantee Scheme or overdraft facilities or other borrowings for capital purposes.
Question 4: What amounts are payable under the Scheme?
Answer: New changes to the Temporary Wage Subsidy Scheme was announced on Wednesday the 1st of April and will take effect from May 4th, 2020.
1. Employees with net pay of less than €412 per week (equivalent to a gross salary of less than €24,400 approx. per annum) – Employees at this income level under the revisions to the Scheme will see their wage subsidy increase from 70% to 85% of net weekly pay. This means that these employees will be eligible for up to €350 per week under the Scheme.
2. Employees with net pay of between €412 and €500 per week (equivalent to a gross salary of between €24,400 and €31,000 approx. per annum) – The amount for employees in this category is €350 per week
3. Employees with net pay of over €586 per week (approximate equivalent to a gross salary of over €38,000) – A tiered approach will be applied for employees in this salary bracket. The maximum subsidy payable for these employees will remain at €350 per week. However, the amount of the subsidy available will depend on the amount of pay paid by the employer to the employee and the reduction applied to the employee’s pay. If an employer pays less than 60% of the employee’s previous average net weekly pay, the subsidy available will be up to €350 per week. If the employer pays between 60% and 80% of the employee’s previous average net weekly pay, the subsidy amount available will be up to €205 per week. If the employer pays over 80% of the employee’s previous average net weekly pay, no subsidy will be payable.
4. Employees whose net pay has been reduced to less than €960 per week (approximate equivalent to a gross salary of less than €76,000) – Employees with an average net weekly pay of over €960 are not eligible for the Scheme. If an employee had been earning over €76,000 gross but their weekly earnings have reduced to below €960 per week, a wage subsidy will be payable as follows: • The employee has had a pay reduction of over 20%: A subsidy of up to €205 would be payable. • The employee has had a pay reduction of over 20%: A subsidy of up to €350 would be payable.
5. Excessive top-up to be permitted to allow take-home pay of €350 – Employers will be able to pay a top-up payment to bring the employee’s pay up to €350 and consequently the normal tapering of the subsidy (i.e. reduction in the subsidy amount) will not apply.
Question 5: Are employers required to top-up the refund amount?
Answer: Employers are obliged to make their “best efforts” to maintain the employees’ net income as close as possible to normal net income for the duration of the Scheme. The purpose is to ensure that employees are no worse or better off and thus employees should not receive more than their normal net weekly pay. Such additional top-up payments are regarded as gross income and liable to Income Tax and USC.
Question 6: Will the subsidy payment be taxed?
Answer: The top-up payments are liable to income tax. However, the subsidy is not taxable in real-time through the PAYE system during the period of the Scheme. Instead, the employee will be taxed on the subsidy amount paid to them by their employer by review at the end of the year.
Question 7: Can employers operate the Scheme for employees who have already been laid off?
Answer: Yes, if an eligible employer has laid off employees as a result of Covid-19, they can be taken back onto the payroll and will qualify for the subsidy if they meet the criteria and were on payroll at the end of February and details were returned through to Revenue by 15 February.
Lay Off/Short Time Working
Question 8: What notice do we have to give for Lay Off/Short Time?
Answer: None is required but bear in mind there must be a contractual entitlement to lay off and it must be done fairly – non-discriminatory.
Question 9: What happens to Fixed Term Workers, can we lay them off first? And what happens to those on Maternity Leave if everyone is laid off?
Answer: Fixed Term Workers contracts need to be examined. You cannot treat them differently from Full Time Workers. If everyone is laid off, that would include those on Maternity.
Question 10: Does the wage subsidy scheme change any entitlements to public holidays whilst on layoff or short-time working or on the wage subsidy scheme?
Answer: It has always been the case that if an employee is absent, authorised by the employer, which would include a lay-off that they retain the public holiday entitlement for the first 13 weeks of absence. Bear in mind this is a lay-off. This note is for guidance purposes only and does not constitute legal advice, nor should it be considered as a substitute for legal advice. If employers are using the Wage Subsidy Scheme the purpose of that scheme is to keep people employed during COVID-19, therefore employers should treat employees as fully employed – whether they are working or not – therefore they would be entitled to Public Holidays.
Please be advised that this material is for guidance purposes only and does not constitute legal advice, nor should it be considered as a substitute for legal advice.
If you have any questions or issues, do not hesitate to reach out to us or Alastair Purdy & Co. Solicitors.
We would like to remind you that Collins McNicholas is here to support your business throughout these uncertain times. If you have any questions or issues, please do not hesitate to reach out to us.