COVID-19: Income Support Scheme FAQs

Our tax department answer some of the frequently asked questions about the Income Support Scheme.

This document is prepared based on draft legislation as published on 24 March 2020. Until enacted by the Oireachtas this legislation, and by extension the analysis below, is potentially subject to change.

Question: I am a business owner financially challenged by the current crisis and struggling to pay wages. In the interests of my business I would ideally rather not lay off my employees, even temporarily. Are there any government supports that I could avail of?

Answer: On 24 March 2020, the government announced an update to their Income Support Scheme to assist employers in your position. This scheme will see the government reimburse employers for up to 70% of their employee’s net, or take-home, pay.

It is capped at €410 for an employee earning up to €38,000 and at €350 for employees earning between €38,000 and €76,000. It is not however available for those earning more than €76,000.

This payment, being a replacement for after-tax income, is not itself taxable.

Question: What are the conditions?
Answer: The Revenue Commissioners will administer this scheme and you will be required to make a self-declaration to them that you meet the following qualifying conditions:

You must be experiencing significant economic disruption due to COVID-19
You must be able to demonstrate that you have suffered a decline of at least 25% in your turnover
You must have an inability to pay normal wages and normal outgoings fully
You must retain your employees on the payroll

The Revenue Commissioners are to provide further information on how these conditions may be met and there will be severe penalties for any abuse of the scheme.

The scheme only applies to employees who were on your payroll as at 29 February 2020, and for whom a payroll submission was already made for them in the period 1 February 2020 to 15 March 2020.

Question: Will I be required to pay the remainder of their salary?
Answer: This is not a condition of the scheme but the government strongly encourages employers to make top-up payments to ensure that their employees are no worse off financially as a result of the current crisis.

Employers should not however pay any more than the normal take-home pay of the employee. This top-up payment will not be subject to Employee PRSI while Employer's PRSI will be reduced to 0.5%, which should further reduce the cost to the employer.

Question: So, if I have an employee who earns €25,000 per annum, how does this work?
Answer: An employee on a gross salary of €25,000 would normally have a net weekly salary of approximately €420. Assuming they qualify for the scheme, the government will pay 70% of this, or €294. You as employer are encouraged to pay them an additional amount that will take their net weekly salary back to €420.

Question: And if I have an employee who earns €45,000?
Answer: This individual would normally have a take-home salary of €658 and, as 70% of this amount exceeds the cap, the amount paid by the government will be a maximum €350. You are encouraged to pay the balance to leave their net weekly salary unchanged.

Question: How long is this scheme due to last for?
Answer: Initially, the scheme is to run for a 12-week period from 26 March 2020.

Question: How do I register for the Income Support Scheme?
Answer: If you have already registered with Revenue for the previous Employer COVID-19 Refund Scheme, you do not need to take any further action. You may make payroll submissions from 26 March 2020 under this new scheme as you were doing for the Employer Refund Scheme, and the reimbursement will be made to you in respect of each eligible employee per week.

If you have not already registered for the Employer Refund Scheme, you may register for the Income Support Scheme by logging onto ROS myEnquiries and selecting the category "COVID-19: Temporary Wage Subsidy". You must read the self-declaration and press the submit button.

Question: How will I receive this payment?
Answer: This payment, and any additional top-up payment, is made to the employees through the normal payroll process. Revenue will be notified of the amount of the payment which is eligible for the Income Support Scheme once the payroll submission has been made. The reimbursement will be made into your bank account within two working days of the payroll submission.

Question: How do I process the payroll for my employees?
Answer: You should run the payroll as normal, however you must enter the following details for each relevant employee under the scheme:

PRSI Class should be set to J9
For employees whose annual salary is €38,000 or less, enter a non-taxable amount equal to the employee’s net take home pay or €410, whichever is lesser
For employees whose salary is between €38,000 and €76,000, the non-taxable amount should be capped at €350
If you are not making any additional top-up payment to the employee, you should include a pay amount of €0.01 in Gross Pay
If you are making an additional top up payment to the employee, you should include this amount in Gross Pay
Do not include the Temporary Wage Subsidy payment in Gross Pay
Include pay frequency (e.g. weekly) and period number

Income tax, USC, LPT, if applicable, and PRSI are not deducted from the Temporary Wage Subsidy.

Question: Does the employee or employer pay any tax on the subsidy amount?
Answer: The subsidy payment will not be liable to Income tax or USC. Employee PRSI will not apply to the subsidy amount or to any top up payment that may be made by you. Employer's PRSI will also not apply to the subsidy amount and will be reduced from 10.5% to 0.5% on the top-up payment.

Question: Employees must have been on the payroll in February 2020. So, if I have just hired or am about to hire new employees they won’t qualify?
Answer: As things stand, unfortunately not. They must instead make an application to the Department of Employment Affairs and Social Protection for the COVID-19 Pandemic Unemployment Payment (COVID-PUP) or other social welfare payments.

Question: What if I engage contractors for a project – can they qualify for this scheme?
Answer: It depends on their employment status. If they are employees of yours, then provided the other conditions of the scheme are met, they should. They must however have been on the payroll during February 2020 to qualify.

If on the other hand they are self-employed contractors they will not qualify, and will have to make a claim themselves for the COVID-PUP. This is a payment of €350 per week which is paid directly to the individual by the Department of Employment Affairs and Social Protection.

Question: I temporarily laid off a number of employees last week. Are they now precluded from availing of this new scheme?
Answer: Not necessarily. By re-engaging them at this stage, their break in service should be sufficiently short to render it a continuing employment and, provided the other conditions (including that they were on the payroll during February 2020) are met, this scheme should apply.

Question: Does this scheme apply to an employee who has already applied for the Pandemic Unemployment Payment?
Answer: No, employers must not operate this scheme for any employee who is making a claim for a duplicate support, such as the Pandemic Employment Payment, from the DEASP.

Question: What if, despite these supports, I end up having to temporarily lay off some employees?
Answer: These employees should be entitled to COVID-PUP, as described above. Also, individuals who are temporarily put on short working weeks, after which they work for three days or less per week, may be entitled to a pro-rata social welfare payment, as may employees who are temporarily put on short time, provided their working hours or salary are reduced by more than 50%.

Question: Does the Income Support Scheme apply to self-employed workers?
Answer: No, self-employed workers can apply to be paid the COVID-19 Pandemic Unemployment Payment of €350 per week rather than availing of the Income Support Scheme.