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01 April 2020
The government has introduced the Temporary COVID-19 Wage Subsidy Scheme to incentivise employers to retain employees on the payroll where possible (replacing the emergency COVID-19 Employer Refund Scheme). This article outlines the implications for employers.
With COVID-19 becoming increasingly widespread in Ireland, the government has introduced various emergency measures as part of its response to the pandemic and drafted emergency legislation outlining these measures: the Emergency Measures in the Public Interest (COVID-19) Bill 2020. Taoiseach Leo Varadkar announced restrictions regarding the closure of non-essential retail businesses and facilities, which were effective from midnight on 24 March 2020.
Hotels will be required to limit occupancy and cafes and restaurants will be permitted to offer only takeaway or delivery services. Essential retail outlets are permitted to remain open but will have to implement measures to ensure physical distancing, both inside their business and outside, where people are expected to queue and wait for entry.
As a consequence of the COVID-19 pandemic, many employers have had to already close their businesses. Others have found that there is a reduction in their workforce requirements. In both instances, employers have been unable to provide work and have had to lay off employees and cease pay. In the wake of these latest measures, more businesses are facing a similar prospect with the inevitable risk of further job losses. Already, 118,000 people have applied for the COVID-19 Pandemic Unemployment Payment and it is estimated that up to 500,000 jobs could be lost as a result of the pandemic.
In an effort to reduce job losses, the government has now introduced the Temporary COVID-19 Wage Subsidy Scheme. It will replace the COVID-19 Employer Refund Scheme, which was introduced previously by the Department of Employment Affairs and Social Protection (DEASP) as an emergency measure. Like the previous scheme, the Temporary COVID-19 Wage Subsidy Scheme is being rolled out in partnership with the Revenue Commissioners.
The government has been encouraging employers to retain employees on the payroll where possible and the purpose of the new scheme is to incentivise them to do so. It will be available to employers that keep their employees on payroll throughout the COVID-19 pandemic – effectively, the scheme will avoid employers dismissing employees as redundant or putting them on unpaid layoff. Importantly, the scheme will enable employees to receive financial support directly from their employer and will be available in respect of employees retained on payroll who may be temporarily not working (ie, laid off) or working under reduced hours or pay.
One of the main benefits of the scheme is that employers that retain employees on their payroll will be ready to bring those employees back to work as soon as possible, since they will have maintained a link with them. This is assuming that businesses will begin to operate as normal prior to the end of the scheme. The scheme will also reduce the administrative burden on the DEASP, which is dealing with and administering other emergency unemployment benefits directly to affected employees.
The Temporary COVID-19 Wage Subsidy Scheme is due to run for 12 weeks from 26 March 2020 and draft legislation governing it is expected shortly. Here are some of the key features:
Revenue is expected to publish further details on how this scheme will work in the coming days.
The scheme will be available to all Irish employers, of any size and in any sector, whose business activities are being adversely affected by the COVID-19 pandemic. (The public service and non-commercial semi-state sector bodies are excluded.) Unlike the furloughing scheme introduced in the United Kingdom, it is not a condition of the scheme that the employee cannot do any work. It is available for employers that retain employees on payroll, some of whom may be temporarily not working (laid off) or working under reduced hours or pay.
The scheme is targeted at employers hit by a collapse in economic activity triggered by COVID-19. Where employers meet the conditions for participation, a subsidy will be available for some or all employees. To be eligible, employers must:
To participate in the scheme, eligible employers must ensure that they:
Employees who come within the scheme are those who have been working with the employer and included on a payroll submission made by the employer from 1 February 2020 to 15 March 2020.
Interestingly, the names of all employers operating the scheme will be published on Revenue's website after the scheme has expired. The government has also stated that there will be severe penalties for any abuse of the scheme.
Where employees are laid off or placed on short-time working, there is a specific statutory provision in Irish employment legislation which provides a right for them to convert layoff or short-time working to redundancy. Employees who have been laid off or placed on short-time working for four or more consecutive weeks or six weeks in any 13-week period can notify their employer of their intention to claim redundancy. Employers can prevent this if within four weeks of this notice, they can guarantee the employee 13 consecutive weeks' work without layoff or short-time working.
With the current economic climate in the wake of the COVID-19 pandemic, employers may be unable to provide this guarantee. Thus, if an employer must lay off employees or place them on short-time working, there may be a fear that it would be unable to afford to pay redundancy due to cash-flow difficulties. In some cases, this could propel businesses into insolvency.
The Temporary COVID-19 Wage Subsidy Scheme is designed to prevent this outcome, but only time will tell whether it is enough. The Emergency Measures in the Public Interest (COVID-19) Bill also proposes to suspend the operation of the redundancy provision mentioned above in the case of employees who have been laid off or placed on short-time working by their employer due to the effects of measures required to be taken by the employer in order to comply with (or because of) government policy to prevent, limit, minimise or slow the spread of COVID-19. The suspension will last for the duration of the emergency period – 12 March 2020 to 31 May 2020 in the current draft – but the bill provides for this to be extended.
Both the wage subsidy scheme and the proposed suspension of the redundancy provision are welcome news for businesses struggling in the face of the COVID-19 pandemic crisis. Operationally, many employers and employees are likely to see value in retaining employment links. Employers will want to avoid having to engage in a recruitment drive when business picks up after the crisis has passed, while employees are likely to favour job security once they can return to work.
For further information on this topic please contact Declan Groarke at Lewis Silkin Ireland by telephone (+353 1566 9876) or email (firstname.lastname@example.org). The Lewis Silkin Ireland website can be accessed at www.lewissilkin.com/en/ireland.
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