The COVID-19 Temporary Wage Subsidy Scheme in practice

The scheme is based on the average net weekly pay for January and February 2020. If a bonus was paid in January or February this is included in the average net weekly pay calculation and may preclude an employee being eligible for the wage subsidy scheme.

Under phase 1 (to 20 April 2020) of the scheme a flat rate of €410 will be paid for each employee irrespective of the average net pay. This will lead to higher subsidy refunds than employers would be expecting. This is not an error and any excess paid to employers during this phase will be refundable or may be clawed back from future payments.

Any excess payment by the employer that increases the “gross pay” figure beyond 30% of the average net pay will reduce the subsidy on a euro-for-euro basis.

Employees will be required to pay tax on the subsidy at some point in the future, so employers should advise employees to set aside any tax refunds received from unused tax credits now to cover this tax.

The scheme can apply to employees including those working full-time, working reduced hours, rehired staff who were temporarily laid off, or staff temporarily laid off but retained on the payroll.

Wage reductions cannot bring an employee into the scheme as the average net weekly pay calculation is based on January and February salary.

Employee/employer pension contributions and retirement schemes are not to be processed where there is no employer top-up amount. Pension contributions are only in respect of the employer's gross top-up amount.

Tax refunds to employees must be disregarded when the employer is calculating employees' top-up amount of 30%.

The amount of the subsidy must be shown separately on an employee's payslip and employees must be aware that you are operating the scheme.

The processing of BIK can be suspended during the period of the scheme; however, it is a deferral and not a cancellation. Salary sacrifices/LPT cannot be deducted from the wage subsidy amount, but can be deducted from the top-up amount paid by the employer. Any deductions or deferrals should only be done with the agreement of the employee.