The Emergency Measures in the Public Interest (COVID-19) Act 2020 was passed on 27 March 2020 (the Act) and Part 7 of the Act establishes the Temporary Wages Subsidy Scheme (the Scheme) and provides for Guidelines to be provided by the Revenue Commissioners in relation to the operation of and eligibility for the Scheme.
Two sets of Guidelines issued before the Act was signed into law.
The first set of guidelines deals with the operation of the Scheme (Revenue Guidelines Operation of Wages Subsidy Scheme) and the second and more recent set deals with employer eligibility (Revenue Guidelines on Employer Eligibility: Wages Subsidy Scheme). The eligibility requirements are not prescriptive and it is clear that Revenue want to work with organisations, recognising the significant negative economic disruption and focussing on protecting jobs and businesses.
According to Minister Donohue during the debate in the Seanad on 27 March, 11,000 companies have enrolled in the Scheme which he says "is an indication of the degree of challenge that is approaching".
There has been some criticism of the Scheme and a degree of confusion about how it is going to operate. Minister Donohue has acknowledged that as the Scheme was conceived at great speed there will be anomalies that will require to be worked through and he has urged employers to engage with Revenue directly on any issues or queries that they have. He has acknowledged that there are many risks with the Scheme but the overall objective is to prevent the loss of thousands of jobs and avoid insolvencies.
Key points to be noted from the Guidelines are:
- Self-assessment – the employer declares that it is significantly impacted. The declaration by the employer is not a declaration of insolvency but a statement based on reasonable projections, that there will be, as a result of disruption to the business caused or to be caused by the COVID-19 pandemic, a decline of at least 25% in the future turnover of, or customer orders for, the business for the duration of the pandemic and that as a result the employer cannot pay normal wages and outgoings fully but nonetheless wants to retain its employees on the payroll.
- An employer that has been hit by a significant decline in business but has strong cash reserves, that are not required to fund debt, will still qualify for the Scheme but the Government expects the employer to continue to pay a significant proportion of the employees’ wages.
- Turnover likely to decrease by 25% for Q2 2020 - the employer is best placed to determine that and may base this judgement on the decline in orders in March 2020, in comparison to February 2020, or the likely turnover for the quarter compared to Q1 or if appropriate Q2, 2019, or on any other basis that is reasonable. In Revenue’s administration of this scheme, the key focus will be on the fact of significant negative economic disruption on the employer due to COVID-19.
- The Scheme is confined to employees who were on the employer’s payroll at 29 February 2020, and for whom a payroll submission has already been made to Revenue in the period from 1 February 2020 to 15 March 2020.
- There are two phases to the Scheme - Phase 1 is a short, transitional phase that builds on the current emergency Employer Refund Scheme that has been operational since 15 March 2020 and Phase 2 will be effective from 20 April 2020, with further information expected from Revenue on that phase shortly.
- Some examples of eligibility supporting proofs are set out in the Guidelines – the bar is not that high and the Revenue is open to considering other evidence as a reasonable demonstration of eligibility.
- The names and addresses of all employers to whom a temporary wage subsidy has been paid by the Revenue will be published on the website of the Revenue Commissioners (this according to Minister Donoghue, during the Dail debate, is to comply with State Aid rules).
The phrase "speed trumps perfection" used by Dr Mike Ryan of the WHO was used during the Oireachtas debates to describe the urgency in getting this piece of legislation through. The reasons for the urgency are twofold: firstly the COVID-19 pandemic has caused a public health emergency and a possible collapse of economic activity and secondly, as the Seanad general election is taking place in the coming days, no new legislation will be possible until a new government is formed.
In the coming days and weeks, as the Scheme becomes operational, there will undoubtedly be issues to be ironed out but as an emergency measure to mitigate adverse economic consequences, the provisions of the Scheme have been welcomed at all levels.
To discuss any other COVID-19 related issues impacting your business, please get in touch with Barry Cahir (Litigation and Insolvency), Thomas O'Dwyer (Litigation), Sharon Delaney (Litigation), Dorit McCann (EU, Competition & Procurement), Damian Maloney (Corporate and Commercial), Aidan Marsh (Commercial Property), Gerry Gallen (Commercial Property), Sandra Masterson Power (Employment), Paul Gough (Employment), Edward Evans (Corporate & Commerical), Fidelma McManus (Housing) or your usual Beauchamps contact.