Q&A: How does the Covid-19 income support scheme work and who qualifies?
State subsidy aims to prop up employee incomes during the coronavirus pandemic
What about those taking home over €76,000? No subsidy is available for these earners.
How will it work?
The income support scheme is designed to help companies to retain employees on their books through the duration of the pandemic by paying a subsidy equal to up to 70 per cent of their take-home pay, to a maximum of €410 a week.
Employers are encouraged to top this up if they can. If they top up the payment, employers should pay no more than their normal take-home pay. Payments are made through the normal payroll process.
How do you qualify?
The scheme is available to employers in all sectors – excluding the public service and non-commercial semi-state sector – whose business activities are affected adversely by the coronavirus pandemic. The employer must show they have lost at least 25 per cent of turnover. An assessment will also be made of the company’s liquidity however companies with cash reserves can still qualify. They will be expected to pay a significant portion of the wages, according to Revenue guidance.
Further details will be outlined in guidance notes due after the legislation is passed. It is available to employers who retain staff on payrolls and for workers who may be temporarily not working or on reduced hours or pay. Employers must be unable to pay normal wages and normal outgoings fully.
reimbursed by the State?
Employers will be recompensed for paying employees through the Revenue Commissioners as operators of the scheme. Reimbursements will be made within two working days.
For how long will it run?
The scheme, which has yet to be approved by the Dáil, will run initially for 12 weeks from March 26th. The scheme is designed so that it will allow employers to retain links to their workers for when business picks up after the crisis.
What happens to income tax,
USC and PRSI?
Income tax and the Universal Social Charge will not be applied to the subsidy payment through the payroll. Employee PRSI [Pay Related Social Insurance] will not apply to the subsidy or any top-up payments by the employer. Employers’ PRSI will not apply to the subsidy and will be reduced from 11.5 per cent to 0.5 per cent on the top-up.
How does this work for earnings up to €38,000 a year?
The scheme is specifically designed to help this group, which includes many working in the worst-affected sectors, such as pubs, hotels and retail. Based on a subsidy of up to 70 per cent of take-home pay, a single person on €30,000 a year with after-tax pay of €489 a week will have their earnings subsidised by the Government to the tune of €342 a week. Their employer can top it up as far as possible to their previous salary if they have the cash.
For someone on €35,000, their current take-home pay is €558 a week. They would receive €391 from their employer, who will then be refunded. The maximum subsidy is €410 a week for someone on €38,000.
Officials are still finalising exactly how this will work for middle-income earners. They are not seen as quite as vulnerable to lay-off as the lower-paid group, though many businesses will inevitably be looking at pay cuts and lay-offs in this group also.
The information released to date says that an income subsidy of up to €350 a week would be available, through employers, for people in this earnings bracket. How exactly this will work is still to be outlined and under the legislation is a matter for the Minister for Finance to decide. The Revenue Commissioners say they do not expect the payment to be graduated for different income levels. Initially it had been thought this might happen.
What about earnings
No subsidy is available for these earners. The scheme is designed to help lower- and middle-income employees.
How will it
be operational so quickly?
For the first few weeks, once firms register for the scheme, they will receive the full €410 a week for all qualifying employees – even for the €38,000 to €76,000 group who will receive a maximum of €350 a week when the scheme is fully operational. This is designed to get the scheme up and running immediately.
The Revenue has not outlined in detail what arrangement will be put in place to recoup overpayments as the majority will not qualify for the full €410 subsidy when the scheme is fully operational in mid-April.
What are the complications?
It is reasonably straightforward for those earning up to €38,000, though some part-time employees might end up better off on the Covid-19 unemployment payment. Some way may be found to address this.
It is more complicated for the €38,000 to €76,000 group as tax and PRSI become much bigger complications on the amount of top-ups paid by employers. The hope is to work out the details to have it fully operational by April 20th.
For now, companies must apply by saying they meet the criteria and give details of their employees in various bands. The cash will start to flow and the full details will be worked out later.
What about the self-employed or unemployed?
Self-employed people who are out of work because of the pandemic or employees who are made redundant will be eligible for the State’s Covid-19 Pandemic Unemployment Payment of €350 rather than the income subsidy scheme run by the Revenue. They will be eligible on a similar basis as the Revenue scheme applies to employees.Further details are expected in the coming days. However proprietary directors do look set to qualify for the main income support scheme outlined above, provided they take a salary from their company.
Anyone who was unemployed before this crisis will continue to receive the jobseeker’s allowance of €203 a week.
*This article was updated to take account of new guidance from the Revenue Commissioners on Thursday 26th March. Further details can be found on the Revenue website.