The Temporary COVID-19 Wage Subsidy Scheme is aimed at providing financial support to employees affected by the COVID-19 pandemic. This new scheme came into effect on 26 March 2020. This scheme also serves to allow the relationship between employers and their employees to continue. Employers can apply to operate under the Temporary COVID-19 Wage Subsidy Scheme by applying on ROS under myEnquiries. The steps to apply can be found here.
Under this scheme, employers are able to pay a weekly subsidy payment of up to €410 to their existing employees affected by COVID-19. Employers will be refunded this pay, plus the amount of any tax and USC refunded to each employee, after the payroll submission is made to Revenue.
Only submissions made on or after the 26th March 2020, with a Pay Date on or after the 26th March 2020, will be eligible under the Temporary COVID-19 Wage Subsidy Scheme.
SimplePay has a built-in item to accommodate the subsidy payment, top-up payment and submission requirements for employees that are catered for under the Temporary COVID-19 Wage Subsidy Scheme.
Adding the COVID-19 Employer Refund Scheme Item
The Temporary COVID-19 Wage Subsidy Scheme item can be added on SimplePay 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
Revenue allow 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.
For situations where the Average Net Weekly Pay is between €586 and €960, the maximum of €350 per week may be less than 70% of the employee’s Average Net Weekly Pay. In such cases, employers may pay a top-up of more than 30% to cater for this difference.
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
Revenue requires that the payroll submission contains a PRSI class of J9. This PRSI class lets Revenue know that the employee has been paid under the COVID-19 Employer Refund Scheme. Revenue will refund the employer the day after the payroll submission is made.
Note: You do not need to make any changes to the employee’s PRSI class or PRSI exemption status, this is done automatically when the COVID-19 Employer Refund Scheme item is added.
Application of Revenue’s Recommended €0.01 Pay Amount
Revenue have stated that a pay amount of €0.01 should be included in Gross Pay if no Top-up amount is captured, this is not the case when using 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 SimplePay to confirm 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.
Employees on the Scheme for a Partial Period
Employees that are paid monthly or fortnightly, and are covered under this scheme for a partial period, will need to have their pay frequency changed to weekly. This will allow employers to correctly pay their employees for the period they worked whilst not under the scheme, with the correct Income Tax, USC and PRSI being calculated and submitted to Revenue. You can add the Temporary COVID-19 Wage Subsidy Scheme item for those weeks worked.