The Temporary Wage Subsidy Scheme has been in operation as part of its Transitional Phase since 26 March, with details of our full commentary and analysis on the Scheme available here.

The Operational Phase was initially due to commence from 20 April, however this has now been delayed to 4 May at the earliest, in order to coincide with the effective date of the majority of the changes introduced by the Minister on 15 April. On a practical level, this means employers will continue to receive a payment of €410 per employee (regardless of entitlement), with the future reconciliation exercise now pushed out to a later date.

The purpose of this article is to focus of the details of these changes and how they may impact on future claims by employers under the Temporary Wage Subsidy Scheme. 

The changes announced were largely to address two key cohorts of employee:

1. Employees who heretofore were outside the remit of the Scheme by reason of the €960 Average Net Weekly Pay (‘ANWP’) limit but have since taken a pay cut as a result of the Covid-19 Pandemic. Revenue have indicated that such employees can benefit with effect from 16 April, earlier that the date announced by the Minister of 4 May
2. Lower paid workers in cases where the level of pay may have fallen below the level of the Pandemic Unemployment Payment of €350 per week, by adjusting the level of subsidy payable at certain levels of salary.

It also includes details of a new tapering of the subsidy for those on ANWP of over €586 but not more than €960. These changes will only become effective for pay dates on or after 4 May.

We have set out below our initial commentary on the key changes, focusing firstly on the position for ‘high earners’ given its immediate application. It should be noted that as of today the latest version of Revenue’s FAQ document (Version 6) issued on 16 April, does not address the above changes. We do expect that a Version 7 of Revenue’s FAQ document will issue shortly, to include their guidance as to how these changes will operate and indeed any further relevant commentary on the Operational Phase of the scheme. These guidelines will be important to consider in due course as these will be the key published commentary as to how the scheme will operate.

New Provisions for ‘Higher Earners’

The changes, as announced and effective from 16 April, state that a tiered level of subsidy may now apply to employees if their ANWP has fallen below €960 as a result of a reduction in pay. The extent of the subsidy available will be dependent on the overall level of reduction in pay (must be a minimum of 20%) and subject to tapering of the subsidy so that any revised net pay for the employee (including the subsidy) will not exceed €960 per week. The amount of the subsidy available will be capped at either €350 or €205 depending on the level of reduction in salary.

The commentary released to date still remains open to interpretation given the use of language around gross and net pay reductions, and hence we are retaining an ongoing review at present. In the interim, we would advise that anyone who may be impacted based on the outline parameters above should contact us for further guidance on the circumstances in their case.

Changes to Rates of Subsidy

There have also been changes announced to the rate of subsidy for all other earners up to €960 ANWP who were within the remit of the Transitional Phase of the Scheme. These changes will not be effective until pay dates on or after 4 May, and hence whilst not of immediate relevance to any pay runs over the remaining weeks in April, they will be important to bear in mind in determining current pay decisions:

• Employees with ANWP of up to €412 – a subsidy equal to 85% of their ANWP will be available up to a maximum of €350. In addition, if the level of subsidy falls below €350, there is now provision for the employer to pay an additional top-up to bring pay up to €350 without affecting their subsidy entitlement
• Employees with ANWP of between €412 and €500 – no changes in their position i.e. subsidy remains at 70% of ANWP up to a maximum of €350
• Employees with ANWP of between €500 and €586 – no changes in their position i.e. subsidy remains at 70% of ANWP up to a maximum of €410
• Employees with ANWP of between €586 and €960 – the rate of the subsidy will vary between anything from €0 to €350 using a tiered approach, which is linked to the extent to which the employer is paying additional gross salary as an additional top-up payment as follows:
  • Equating up to 60% of the employee’s previous ANWP, the amount of the subsidy will be €350 
  • Equating to more than 60% but not more than 80% of the employee’s previous ANWP, the amount of the subsidy will be €205 
  • Equating to an amount that is more than 80% of the employee’s previous ANWP, no subsidy will be payable

If you need any further assistance in terms of reviewing the impact of the changes or indeed considering availing of the Temporary Wage Subsidy Scheme, please contact your usual RBK contact in confidence or:

Mairead O'Grady, Tax Partner

Patrick Fannon, Senior Tax Manager