31 March 2020: Clarified that only submissions made on or after the 26th March 2020, with a Pay Date on or after the 26th March 2020 will qualify for this scheme.
27 March 2020: Included a note that the subsidy amount is reckonable income that may be taxed at a later stage by Revenue.
On Tuesday, 24 March the Government announced a new Temporary COVID-19 Wage Subsidy Scheme which is aimed at providing financial support to employees affected by the COVID-19 pandemic. This new scheme comes into effect for any submissions made from, and with a Pay Date from, the 26 March 2020. This new scheme builds on the previous Employer COVID-19 Refund Scheme, mentioned in our recent blogs:
Employers, who have applied on ROS to operate under the Temporary COVID-19 Wage Subsidy Scheme, will be able to make a non-taxable subsidy payment to employees along with a taxable top-up contribution through payroll. The subsidy payment will be refunded by Revenue to the employer after the submission is made to Revenue.
The Temporary COVID-19 Wage Subsidy Scheme will be available for employers who keep employees on their payroll throughout the COVID-19 pandemic and is not limited to employees who are temporarily laid-off as per the previous scheme.
How to Add the Temporary COVID-19 Wage Subsidy Scheme item on SimplePay
We have revised the scheme item we previously blogged about and have introduced a new Temporary COVID-19 Wage Subsidy Scheme item. This item can be added as follows:
- Go to Employees
- Select an employee
- Select Add next to Payslip Inputs
- Select the Temporary COVID-19 Wage Subsidy Scheme item
- Enter the Subsidy amount
- Enter the Top-up amount
In an effort to allow employers to continue to pay their employees the amount they would normally be paid, Revenue have allowed for a maximum amount of 70% of the employee’s Average Net Weekly Pay to be subsidised by the Department of Employment Affairs and Social Protection (DEASP) and a maximum amount of 30% of the employee’s Average Net Weekly Pay to be topped up by employers. More information on this is provided below.
The Subsidy amount entered should be equal to 70% of the employee’s net weekly pay, with:
- A maximum of €410 per week where the Average Net Weekly Pay is less than or equal to €586; or
- A maximum of €350 per week where the Average Net Weekly Pay is greater than €586 and less than or equal to €960
The Subsidy amount will not be subject to Income Tax, USC or PRSI.
Please note: the Subsidy amount is reckonable income, which may be taxed at a later stage by Revenue. Revenue will be providing information on this on their website.
If an employer wants to make a taxable payment to their employee, they can capture an amount less than or equal to 30% of the employee’s Average Net Weekly Pay in the Top-up amount field. This amount will be included in Gross Pay and will be subject to Income Tax, USC and PRSI as calculated by the RPN. However, there will be no employee PRSI applied and the employer PRSI will be reduced to 0.5% of the top-up payment.
Note that if the employer captures more than 30% in the Top-up amount field (i.e. the employee receives more than their Average Net Weekly Pay), Revenue may reduce the Subsidy amount refunded to the employer.
Calculating the Average Net Weekly Pay
For now, employers are required to calculate the employee’s Average Net Weekly Pay when capturing these amounts. To calculate the Average Net Weekly Pay, employers must use the values in the payroll submission for each pay date in Jan and Feb 2020:
- Take the employee’s “Gross pay” and from it subtract the “Income Tax Paid”, the “USC Paid” and the “Employee PRSI Paid“.
- Total this figure for each pay date in Jan and Feb 2020 and divide this by the number of insurable weeks (capped at 9) for the period.
- This gives you the employee’s average pay that is to be used for the Subsidy amount field.
Revenue has published guidance in the form of Frequently Asked Questions, which provide a worked example for the calculation of the employee’s Average Net Weekly Pay. This can be found here.
PRSI Class J9
Finalised payslips with the Temporary COVID-19 Wage Subsidy Scheme item added will generate a submission, with the J9 PRSI class included. This PRSI class lets Revenue know that the employee has been paid under the Temporary COVID-19 Wage Subsidy Scheme. You will not need to make any changes to the employee’s PRSI class or PRSI exemption status, this is done automatically when the Temporary COVID-19 Wage Subsidy Scheme item is added.
Gross Pay of €0.01
Revenue have stated that a pay amount of €0.01 should be included in Gross Pay if no Top-up amount is captured. The reason for this is that some payroll systems require a sum submitted under salary in order to function. Luckily for you, with SimplePay no amount is needed under Basic Salary for you to run your payroll, meaning the payslips’ basic salary will read zero. Revenue has communicated directly with us that the €0.01 is not required and employers will still receive a refund when submitting €0.00.
How to Apply to the Scheme:
Employers, and their agents, will need to apply to Revenue to operate the Temporary COVID-19 Wage Subsidy Scheme. To do this, please follow the steps outlined by Revenue in the “Registering for the Temporary Wage Subsidy Scheme” section. Employers, already registered with Revenue for the purposes of the Employer COVID-19 Refund Scheme, are not required to take any further action.
Employers must not operate this scheme for any employee who is making a claim for duplicate support (e.g. Pandemic Unemployment Payment) from the DEASP.
More information on the scheme can be found on Revenue’s website here.
As always, we’re here to help where we can. Please feel free to get in touch if you need help with any of the above on SimplePay.