The Temporary Wage Subsidy Scheme (TWSS) is designed to help employers keep their staff on the payroll during the COVID-19 crisis. Introduced on 26 March 2020, the scheme was initially due to conclude in June 2020, and then August 2020.
Following the publication of the Government's July 2020 Stimulus Package the scheme has been effectively extended until April 2021, but from September 2020 will be known as the Employment Wage Subsidy Scheme (EWSS).
Employers must self-declare to Revenue that they have experienced significant negative economic disruption due to Covid-19.
There must be a minimum of 25% decline in turnover for Q2 2020 and an inability to pay normal wages and other outgoings, in accordance with Revenue guidance.
Employers must retain their employees on payroll (regardless of whether the employee is working full-time, part-time, reduced hours or not working at all).
The scheme applies both to employers who top-up employees’ wages and to those who are not in a position to do so.
The scheme applies only to employees on payroll from 29 February 2020, and for whom a payroll submission has already been made to Revenue in the period 1 February 2020 to 15 March 2020.
It is important to note that for employees to be applicable to enter the scheme, they must have been on the payroll submission in January and February 2020 for payment. The amount of TWSS that an employer can claim will be based on their average weekly net pay from this period of nine insurable weeks.
Benefit in kind, pensions, and notional pay
For the duration an employee is placed on the TWSS, any pension contributions, benefit in kind, or notional pay will default to nil. Employers will need to confirm with the employee if they wish to keep their benefits and any deductions from their payroll. Employers must have in place a sufficient ‘top up’ to cover the benefits, as they cannot be processed only on the TWSS amount on the payroll. The payments are only deferred not cancelled and will need to be later reconciled on the payroll if processed as nil during the inclusion on the scheme.
Phases of the TWSS
Transitional phase: Operational between 26 March and 3 May.
Employers received €410 per employee regardless of the correct figures the employer submitted to Revenue on the payroll submission under PRSI class J9.
In many cases the payment exceeded the entitled subsidy amount the employee was to receive from the employer. Revenue will perform a reconciliation for the employer to repay the overpaid amount that had been paid for the employees.
Operational phase: Operational from 4 May to 31 August; this is expected to be the final phase of the TWSS.
The operational phase operates based on the exact figures payable to each employee, based on their income from Jan/Feb 2020; Revenue's calculations may produce a lower than expected figure.
The calculated figures are produced on the employer's Revenue account on a csv file, which can be downloaded and imported to the employer's payroll. The payment for each employee is based on a tiered approach.
For employees with an average weekly net pay below €412.00 the TWSS is equal to 85% of wages. The employer can top-up by 15% of the average weekly net pay.
For employees with an average weekly net pay between €412 and €500 the TWSS is €350 per week.
For employees with an average weekly net pay between €500 and €586 the TWSS is equal to 70% of wages. The employer can top-up the difference.
For employees with an average weekly net pay between €586 and €960 the subsidy must not exceed €350 a week.
A tiered system was introduced on 16 April for employees with an average weekly net pay greater than €960, or where their annual gross salary exceeds €76,000, who have now taken a reduced salary. Terms and conditions of salary percentage decrease applies to qualify for the €350 and €205 weekly subsidies. There is no subsidy applicable to an employee if their net pay remains over €960 per week.
The new rates applicable from 4 May will not be backdated.
Employers may not be in a financial position to top-up their employees' pay while in receipt of the TWSS due to insufficient income. Employers are not required to pay top-ups in order to qualify for the TWSS. They will need to enter at least €0.01 to run payroll correctly to Revenue.
Revenue compliance checks
Revenue will contact every employer that has availed of the Covid-19 TWSS to check compliance and ensure the scheme has not been misused. Revenue will issue a letter to each employer individually and the employer will have five working days to submit the necessary documents.
The information required is:
An outline of the nature of the business and principal activities.
A summary of the impact of the Covid-19 restrictions on the turnover of the business (the information that would have been considered when determining eligibility for the scheme). The summary should include details such as:
whether the business closed and date of closure;
the date disruption impacted the business;
details of the basis used to meet the 25% reduction in turnover test, i.e. 25% reduction in turnover, customer orders or another basis;
the number of employees retained/not retained on payroll and the reason for non-retention;
an outline of adjustments in directors' salaries since start of the year, if any.
Details of who runs the company's payroll.
Confirmation that payslips were issued to all employees/directors for the pay periods for which subsidy payments were received from Revenue, and that the payslips displayed the TWSS subsidy amount.
Copies of payslips for the employees/directors for pay periods set out below.
Copy of gross to net reconciliation and confirmation of EFT for net pay from the business bank account for the pay dates below.
If the company has not used the CSV file provided by Revenue, the computations used to support the calculations of the TWSS must be provided.
Taxing the TWSS
Employees are not liable to pay tax on the TWSS payment in real time; upon payment it is treated as a non-taxable payment. However Revenue will reconcile employee taxes at the end of the 2020 tax year and will provide employees with a statement of their tax liability.
The employer PRSI rate is reduced to 0.5% of the employer top-up amount – which is in result of the employee PRSI class J9 in operation for the scheme.
The employer top-up under the TWSS is gross pay; this is a taxable payment. However, tax refunds (PAYE, USC) may occur due to the gross pay top-up being lower than usual. This is because employee tax allowances may be greater than the gross pay by the employer. No employee PRSI is paid on gross pay while J9 PRSI is applied to their payroll.
Employers are advised to communicate this with their employees to ensure they set aside tax refunds to cover any liable amounts due at the end of the tax year.
Employees at the end of the year may have the option to pay liable taxes in full or offset their tax liability to claimed health expenses or from future tax allowances in the next tax year to minimise hardship. Revenue will confirm at a later date how the liability will be returned to them.
Maternity, adoptive, and related unpaid leave
As announced on 8 June, employees who have returned to work following maternity, adoptive or related unpaid leave will be eligible under the TWSS. The employer must notify Revenue that the relevant employee will return to work and provide certain details also through 'My Enquiries' before processing the employee's payroll.
Further information is available on Revenue's website.