This week our focus is on the Employee Wage Subsidy Scheme [EWSS] and the 10 main things to know about this scheme. In our last blog we focused on tax tips to put more money in your pocket. In case you missed it See here
What is the Employee Wage Subsidy Scheme (EWSS)?
It is a scheme that pays a wage subsidy to eligible employers for each of their qualifying employees. It also charges a reduced rate of employer’s PRSI of 0.5% on wages paid that are eligible for the subsidy payment. The scheme runs from the 1st of September 2020 until the 31st of March 2021.
What is an eligible employer?
For 2021 the employer must have a reduction in turnover or customer orders of 30% or more. This is in the period from 1 January to the 30th of June 2021. You have to compare the turnover figure for this period to the same period in 2019.
| Projected Turnover January to June 2021 | €120,000 | |
| Actual Turnover January to June 2019 | €180,000 | |
| Reduction in turnover | 33.33% |
This employer would qualify as there is more than a 30% reduction. There are other conditions on the employer which are around having their taxes up to date. Employers must have up to date tax clearance on entering and during the scheme. You will get tax clearance if your tax affairs are up to date. If you are in a partnership or a company, the partners and directors need to have their tax affairs in order.
For further guidance on the reduction in turnover or customer orders see Appendix I.
What is an eligible employee?
A qualifying employer can claim a subsidy for employees on the payroll. The employees must be in receipt of gross wages of between €151.50 and €1,462 per week during the period of the scheme. No restrictions apply to taking on new employees. There is no issue with the movement of employees from one entity to another. It must be for genuine business reasons and not for the purposes of maximising the subsidy.
Proprietary Directors [Directors who own 15% or more of the shares of the company] qualify once,
- the employer meets the eligibility criteria,
- the proprietary director is on the payroll of the eligible employer,
- the proprietary director earned wages reported to Revenue on the payroll from 1 July 2019 to 30th June 2020.
A proprietary director can apply for the scheme if he/she is the only employee of the entity.
Connected persons not on the payroll and paid between 1 July 2019 and 30th June 2020 do not qualify. See page 16 of the guidelines.
What is the subsidy rate?
| Employee Gross Weekly Wage | Subsidy Payable | |
| Less than €151.50 | Nil | |
| From €151.50 to €202.99 | €203 | |
| From €203 to €299.99 | €250 | |
| From €300 to €399.99 | €300 | |
| From €400 to €1,462 | €350 | |
| More than €1,462 | Nil |
For monthly pay periods you multiply the gross monthly pay by 12 and divide by 52 to get the gross weekly wage. Pat Murphy has a gross monthly wage of €3,000 x 12 = €36,000/52 = €692 weekly. Therefore, the subsidy would be €350 per week. For further details on gross wages and pay period see page 18 of the guidelines
How do I register for the Employee Wage Subsidy Scheme?
Once you are happy that you qualify for the scheme you can register on ROS. For detailed and easy to follow steps see Appendix IV on page 36 of the guidelines
- Check that tax clearance is in place.
- If not, then you will need to apply for tax clearance – steps 1 to steps 6
- Register for the Employment Wages Subsidy Scheme – steps 1 to 10 pages 43 to 47 of the guidelines
You will need to have a bank account linked to the EWSS for Revenue to transfer the subsidy payments.
Before you register you need to make a declaration to confirm the following;
- You have read the eligibility criteria and that the business qualifies
- You will abide by the terms and conditions of the scheme
- Failure to follow the rules can lead to repayment of the subsidy with interest and penalties
- You will hold all the paperwork for the scheme to confirm eligibility and more for review by Revenue
How do I include the subsidy on our payroll?
Employers will continue to operate payroll as normal. You report employer and employee PRSI deductions based on the existing PRSI classes. So, no changes would appear on the payslip. The only change will be on the actual payroll submission. You must
- include “EWSS” as the payment type in the “Other Payments” section and
- input 0.00 or €1.00 as the amount of the other payments made [this depends on the payroll package that you are using]. See page 21 of the guidelines.
When will I get the subsidy payment?
You will get the subsidy payment within 2 working days after receipt of a correct submission.
If you don’t have tax clearance on the processing date you won’t get a payment. Once you get tax clearance you will need to contact Revenue via My Enquiries to request the payment.
How does the PRSI of 0.5% work?
You will return normal employer PRSI on the payroll submission. This will be at a higher rate than the 0.5%. As a result of this a change to the liability has to happen. Revenue will make this change by calculating a PRSI credit due to the employer. Revenue use the scheme rate of 0.5% and subtract the difference from the employer PRSI due on the submission.
| Employers PRSI on payroll submission | 11.05% | €700 |
| EWSS PRSI Rate | 0.5% | €31.67 |
| Employer PRSI Credit | €668.33 |
On the 5th of the following month, Revenue will post the PRSI credit due for that month. This will reduce the payroll taxes balance due for that month. To avoid any delay in applying the employers PRSI credit, you must submit the payroll by the 5th of the next month. January pay dates need to be submitted by the 5th of February to ensure you get the credit for January as soon as you can.
What if my turnover is higher than I thought at the start?
As part of the rules, the employer has to review their figures on the last date of every month. This review is to ensure they continue to meet the eligibility criteria. The review is to check the actual performance of the business with the projections. See page 9 of the guidelines for pay dates in 2021. For example, at the end of January 2021, you are looking at the actual figures for January. You are adding those numbers to projections for February to June 2021. That total must be 30% or less compared to the 6 months period from January to June 2019.
If you are no longer eligible for the scheme you must deregister for EWSS through ROS. Go to “Manage Tax Registrations”
Revenue confirmed that you won’t have to repay subsidies claimed before you deregister. This is on the basis that you met the terms and conditions of the scheme when you were in receipt of those payments.
Are the Employee Wage Subsidy Scheme payments part of my turnover?
No subsidy payments are not taken into account as part of the 30% reduction in turnover test. But subsidies received are part of the employer’s trading income.
Summary
This is a much more straightforward scheme than the Temporary Wage Subsidy Scheme. Beware of the declaration that you are making. Revenue will be back to you to review the documentation that you have to check that you were eligible. They will also check that you have reviewed your numbers so that you can stay in the scheme. It is a vital scheme for businesses that continue trading but suffer a reduction in turnover. The reduction in employers’ PRSI is also a huge help.
If you need help with this contact your accountant. Interested in talking to us? Contact Deirdre on 051396703 or contact us
