Advice for agribusiness sector with changes to wage scheme

Advice for agribusiness sector with changes to wage scheme

Declan McEvoy, Head of Tax at ifac.

OPERATIONAL changes to the Government’s Temporary Wage Subsidy Scheme (TWSS) were announced by Minister Paschal Donohoe and come into effect for payroll submissions to Revenue on or after May 4.

Introduced in March 2020 and operated by Revenue, the purpose of the TWSS is to encourage employers to keep employees on the payroll throughout the COVID-19 pandemic, retaining links for when business picks up after the crisis.

What is changing?

Briefly, the changes announced by Minister Donohoe are:

An increased subsidy (from 70% to 85%) for employees with a previous average net weekly pay of up to €412.

An extension of the TWSS to some previously excluded high earners.

A reduction in the subsidy for employees earning more than €586 per week where their employer pays 60% or more of their average net weekly pay. This is calculated using a tiered approach.

There are no changes in the subsidy rates for employees whose previous average net pay was between €500 and €586 per week. These employees will continue to receive a subsidy of up to 70% of previous net income, up to a maximum of €410 per week.

Up to May 4, the TWSS will refund employers €410 for each qualifying employee.

Previously, employees whose average net weekly pay exceeded €960 did not qualify for the TWSS scheme. However, from April 16 onwards, where an employee’s pre-COVID average net weekly pay was greater than €960, and their post-COVID net weekly pay has fallen below €960, the Temporary Wage Subsidy Scheme will be available for these individuals.

Updated TWSS rates from May 4:

From 4th May 2020, the TWSS will move to a system based on the employee’s average net weekly pay. This is calculated as average net weekly pay in January and February 2020 as per the employer’s payroll submissions to Revenue. No backdating will apply.

An 85% subsidy (previously a 70% subsidy) will be payable for employees whose previous average net weekly pay did not exceed €412

A flat rate subsidy of €350 will be payable for employees whose previous average net weekly pay was more than €412 but no more than €500

A 70% subsidy will be payable for employees whose previous average net weekly pay was more than €500 but no more than €586, subject to a maximum subsidy cap of €410.

A maximum subsidy of €350 will be payable to employees whose previous average net weekly pay was in excess of €586 but no more than €960. The subsidy will be calculated based on the number of additional payments made by the employer if any.

The Minister’s update states that tapering of the subsidy will apply in all instances where the gross pay paid by the employer plus the subsidy amount exceeds the employee’s previous net weekly pay.

This is to ensure that no employee would be better off under the scheme. The only exception where tapering will not apply is where an employer pays an additional payment which when added to the subsidy does not exceed €350.

There are no changes to the previously announced qualifying conditions for employers. Briefly, these are that employers must be significantly adversely impacted by the COVID-19 crisis with at least a 25% decline in turnover. Employers must be unable to pay normal wages and normal outgoings fully and must retain their employees on the payroll.

As with all self-assessment processes, it is vital that employers keep supporting documentation on file as this may be required by Revenue at a later date. For further information and/or advice, contact your financial advisor or ifac’s payroll team.

Where appropriate, the ‘Week One Basis’ for Income Tax could help alleviate employees’ concerns. Also known as the ‘non-cumulative basis’, the ‘Week One Basis’ calculates an employee’s Income Tax and USC week-to-week.

The employer treats each payroll submission as a standalone event and the employee receives the tax credits for that particular period only.

This contrasts with the usual system where PAYE and USC are calculated a cumulative basis from 1 January each year to the date on which the payment is being made and any unused tax credits can be carried forward to the next period.

For further information and/or advice, contact your financial advisor or ifac’s payroll team.

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