The Emergency Measures in the Public Interest (COVID-19) Act was signed into law by President Higgins on Friday, 27 March 2020, having passed through both houses of the Oireachtas the previous day.

From an employment context, the most important aspects of this Act concern the introduction of the National COVID-19 Income Support Scheme and the removal of the right on the part of employees who are laid off or placed on short-time working to seek redundancy during this health crisis.

1. National COVID-19 Income Support Scheme

Significantly, this legislation underpins the National COVID-19 Income Support Scheme (“the Scheme”) which is being administered by the Revenue Commissioners and replaces the Employer Refund Scheme previously run by the Department of Employment Affairs and Social Protection. In summary, this Scheme is designed to allow employers to pay their employees during the current pandemic and is available across all sectors of the economy (excluding the public service and the non-commercial semi-state sector).

During “Phase 1”, which is to operate from 26 March 2020 until no later than 20 April 2020, the Government have committed to refunding a maximum weekly salary ceiling of €410 for eligible employees. However, in order to avail of this Scheme, it is important that employers do not pay employees in excess of their normal weekly net pay.

In practice, the Revenue Commissioners have advised that the Scheme:

• Increases the maximum non-taxable refundable payment to €410 or 70% of the employee’s average net weekly pay, whichever is lesser, for employees earning less than or equal to €586 per week net;
• Increases the maximum non-taxable refundable payment to €350 or 70% of the employee’s average next weekly pay, whichever is lesser, for those earning over €586 per week net and less than or equal to €960 per week net; and
• Permits employers to make additional payments to employees, which are subject to income tax and the Universal Social Charge in the normal way.

From 20 April 2020, “Phase 2” of the Scheme will pay employers a subsidy based on each employee’s average net weekly pay, subject to the maximum weekly tax-free amounts. However, further information in relation to the workings of the Scheme from April 2020 will be released shortly.

Eligible employers under the Scheme

In order to qualify for this Scheme, employers must be able to show they have lost a minimum of 25% of their trade and must ensure they continue to make best efforts to obtain as near to 100% of their normal income as possible.

Concerns have been expressed that such a declaration would effectively amount to declaration of insolvency. However, the Revenue Commissioners have since advised that this is not the case. Rather, “it is a declaration which states that, based on reasonable projections, 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.”

Income tax

The Revenue have said that the payments under the Scheme are liable to income tax and the Universal Social Charge at the end of the year. However, the subsidies available are not taxable in real-time through the PAYE system during the period of the Scheme. Income tax, the Universal Social Charge, Local Property Tax and PRSI are not deducted from the subsidy.

Instead, the employee will be liable for tax on the subsidy amount paid to them by their employer by way of review at the end of the year. When an end of the year review takes place, it may be the case that an employee’s unused tax credits will cover any further liability that may arise. Where this is not the case, and should an income tax liability arise, Revenue say it is their normal practice to collect any tax owing in manageable amounts by reducing an individual’s tax credits for a future year(s) in order to minimise any hardship.

Additional Key Points

Some additional key points of the Scheme include:

• Employers who wish to participate in this Scheme should register through the Revenue Online Service (www.ros.ie).
• The timeframe for this Scheme is from 14 March 2020 to 30 June 2020.
  This Scheme is available to both employers who are topping up their employees’ wages and to those employers not in a position to do so.
• Where employers are already successfully obtaining refunds under the Department of Employment Affairs and Social Protection’s Employer Refund Scheme, there is no need to reapply to this new Scheme.
• Employees must have been on the employer’s payroll as at 29 February 2020 and a payroll submission must have been made to the Revenue Commissioner in respect of this employee from 1 February 2020 to 15 March 2020.
• Employers must not avail of this Scheme for any employees who are currently receiving a Covid-19 related support from the Department of Employment Affairs and Social Protection.

Interestingly the names and addresses of all employers who receive subsidies under this Scheme will be published on the Revenue Commissioners’ website.

One important point to note is that it is an offence to knowingly submit an incorrect return, statement or information to the Revenue Commissioners and for failing to provide the Scheme’s funds to the employees.

2. Redundancies

The Irish Redundancy Payments legislation entitles employers to place employees on temporary lay-off or to impose short-time working where it is necessary to do so and the employer must reasonably believe that such a measure will be temporary.

Ordinarily, after 13 weeks of lay-off or short-time working, if the employer cannot reinstate the employee to full time working, then the employee is entitled to require the employer to make him or her redundant and to pay redundancy by serving a notice of intention to claim redundancy. The legislation currently allows for this notice to be served after 4 weeks of lay off or short time working. It is also possible for an employer to counter such a redundancy notice and refuse to make a redundancy payment but only if the employer reasonably believes that, within four weeks of the date the employee has served the notice, the employee will be able to return to their normal role for a continuous period of at least 13 weeks. The Act recognises that in the current uncertain situation employers could be faced with potentially unmanageable costs if employees placed on temporary lay-off were to be entitled to claim redundancy pay after the first four weeks of continuous lay off.

However, this Act contains provisions which ensure that employees who are placed on lay-off or short-time working as a result of this health crisis cannot make redundancy claims regardless of the length of any such lay off or short time between the period of 13 March 2020 and 31 May 2020 (and this period may be extended).