Query on application of Covid Temporary Wage Subsidy Scheme

Infoseeker1975 · 26-05-2020 5:10pm #1

My weekly net pay in 2020 is €475 and my employer availed of the Temporary Wage Subsidy Scheme [TWSS].

The agreement was that the employer would top up the pay so in my case I was entitled to €350 under the scheme & the employer would top it up by €125.

I understand that the €350 is not subject to tax so only the €125 is.

I am the only employee in the company so payroll is contracted out to an accountant that my boss uses.

Looking at the pay slips in April my gross pay was 1 cent and the subsidy used was €321, the other €154 was made up of a refund of income tax & USC.

In May, the payslips have a gross pay of €96 but again there are a refund of income tax & USC to make up the difference so my net pay remains at €475.

My question is whether this is being handled correctly as my agreement was to get the subsidy of €350, the employer would pay €125 & I was aware that my net pay then would be a little less.

I looked into this a little bit & based on section 4.12 of the guidance article provided by Revenue, I believe the accountant should not be using any possible refund of income tax & USC that might be due to me.

Hoping that someone might be able to help me with this, below is the link I was referring to - as a new user I cannot post urls so removed part of the link.

/en/employing-people/documents/pmod-topics/guidance-on-operation-of-temporary-covid-wage-subsidy-scheme.pdf

4.12 What if my employee is due a refund of tax in the payroll?

Where an employee is due a refund of Income Tax or USC based on the payroll being processed, this should be paid
by the employer and Revenue will refund this to the employer along with the associated wage subsidy.

This refund of Income tax and USC is made to the employee, in addition to the subsidy payment and any additional
payment, and should not be included in the employer’s calculation of the allowable additional payment.

Stratvs · 26-05-2020 5:17pm

There was another thread on this recently. You are correct. Tax/USC refunds due should not be used to make up the original net. This is very clear in the FAQ V12 ( and every version from V1 up to now ) to the scheme.

The €125 should be treated as gross taxable pay and then your tax credits etc applied to that. Usually that would result in a refund of some tax/usc. You can request Revenue to put you on W1 basis to stop that so you don't end up with an underpayment at year end. Remember the TWSS subsidy is not currently taxed in payroll but is taxable at year end.

Infoseeker1975 · 26-05-2020 5:19pm

Thanks for such a quick response, much appreciated.

I will contact the accountant tomorrow in relation to this - can this be resolved via payroll given he has applied it incorrectly for 8/9 weeks?

Just trying to get my ducks in a row so I am well informed for his reply to this.

Infoseeker1975 · 27-05-2020 10:56pm

Just an update on this in case others encounter similar issues; accountant who handles the payroll basically said he will review this when my employer decides to come off the Covid subsidy scheme.

The explanation given was that Revenue have advised not to amend payslips in the case of Covid 19 as their system is not set up to handle this and results in a second refund to the employer for the amended payslip rather than correcting the initial submission.

For now I am going to park this and once I am no longer on the Covid scheme, I will work out what my gross pay should be up to that point, i.e. 13 weeks of normal pay & an unknown number of weeks on this scheme where in my case the gross pay should be 125 per week.

tina1040 · 27-05-2020 11:05pm

I'm amazed that an accountant has not studied the instructions on the operation of the scheme and ensured they understand it correctly. It was not easy to keep up with the changes but the instructions from Revenue and from the payroll software providers was clear.

Infoseeker1975 · 27-05-2020 11:15pm

I agree as there was a Q&A in the guidance document Revenue provided that dealt specifically with non usage of any refund of the employee's tax. I am not an accountant and after 30 minutes it was clear to me this was being handled incorrectly.

As I am the only employee, it is hard when the accountant is telling the employer that all is ok and it will be resolved when the employer comes off the scheme. As he is the qualified person, his reply has more weight though it is very frustrating.

I will be careful to review this when the employer comes off the scheme to see how it can be rectified.

He even said that this will likely impact my tax situation at year end most likely in my favour rather then my employer.

I would have thought this is a great scheme for the employer as my weekly cost was 700 and is now 125. Also, even though I get the same net pay of 475, the reality is that 350 of this is yet to be taxed.

Stratvs · 28-05-2020 11:06am

Infoseeker1975 wrote: »

Just an update on this in case others encounter similar issues; accountant who handles the payroll basically said he will review this when my employer decides to come off the Covid subsidy scheme.

The explanation given was that Revenue have advised not to amend payslips in the case of Covid 19 as their system is not set up to handle this and results in a second refund to the employer for the amended payslip rather than correcting the initial submission.

For now I am going to park this and once I am no longer on the Covid scheme, I will work out what my gross pay should be up to that point, i.e. 13 weeks of normal pay & an unknown number of weeks on this scheme where in my case the gross pay should be 125 per week.

Revenue mean historic ones i.e. those already submitted on ROS. So they shouldn't amend last weeks but there is nothing to stop them doing it correctly for this week on.

Stratvs · 28-05-2020 11:14am

tina1040 wrote: »

I'm amazed that an accountant has not studied the instructions on the operation of the scheme and ensured they understand it correctly. It was not easy to keep up with the changes but the instructions from Revenue and from the payroll software providers was clear.

Yes, there have been 12 versions (so far) of the FAQ but I've done I think 3 or 4 webinars also from my Institute and the payroll provider I use. Yet the issue the OP has had continues to come up on threads here where the ER is incorrectly operating the scheme.

CrabRevolution · 29-05-2020 1:52pm

Even if it wasn't explicitly stated in the rules, I find it strange that employers/payroll providers would think it appropriate to effectively pay an employee out of that employee's own pocket.

minisue · 29-05-2020 3:27pm

Infoseeker1975 wrote: »

My weekly net pay in 2020 is €475 and my employer availed of the Temporary Wage Subsidy Scheme [TWSS].

The agreement was that the employer would top up the pay so in my case I was entitled to €350 under the scheme & the employer would top it up by €125.

I understand that the €350 is not subject to tax so only the €125 is.

I am the only employee in the company so payroll is contracted out to an accountant that my boss uses.

Looking at the pay slips in April my gross pay was 1 cent and the subsidy used was €321, the other €154 was made up of a refund of income tax & USC.

In May, the payslips have a gross pay of €96 but again there are a refund of income tax & USC to make up the difference so my net pay remains at €475.

My question is whether this is being handled correctly as my agreement was to get the subsidy of €350, the employer would pay €125 & I was aware that my net pay then would be a little less.

I looked into this a little bit & based on section 4.12 of the guidance article provided by Revenue, I believe the accountant should not be using any possible refund of income tax & USC that might be due to me.

Hoping that someone might be able to help me with this, below is the link I was referring to - as a new user I cannot post urls so removed part of the link.

/en/employing-people/documents/pmod-topics/guidance-on-operation-of-temporary-covid-wage-subsidy-scheme.pdf

4.12 What if my employee is due a refund of tax in the payroll?

Where an employee is due a refund of Income Tax or USC based on the payroll being processed, this should be paid
by the employer and Revenue will refund this to the employer along with the associated wage subsidy.

This refund of Income tax and USC is made to the employee, in addition to the subsidy payment and any additional
payment, and should not be included in the employer’s calculation of the allowable additional payment.

I am totally lost with my own. I never received my pay slip last month so only noticed now.

Did your gross pay change from non covid payment months? Mine did, it is 200euro less than I normally get. Even through with refunds it works out more money.

I am still essentially down money because we all know that I will end up paying back thge refunds in my credits when this is over. But how can I end up with less Gross pay - that surely isn't right? Is it?

Infoseeker1975 · 29-05-2020 5:50pm

In the approx 9 weeks that I have been on the TWSS, my gross pay has been several different values and also there have been different values for the subsidy.

For the first 3 weeks, the gross pay was one cent as he was using my tax due back to make up the difference. Now as there is less tax left to use, the gross pay has been €96 for a few weeks and he using €29 in my refunded tax to get to €125.

I logged a query with revenue on this last night as it is a mess & I would guess most employers will keep availing of this scheme until it ends. For example I was costing my employer €700 a week if you include employers PRSI and now it should only cost her slightly over €125 a week if this was processed correctly.

It is frustrating that the accountant is taking the approach he has but I have mentioned to revenue if I should just be placed on a week 1/month 1 basis going forward so at least if it runs for x more weeks, it will be ok for those x weeks.

I get the same net pay as my employer has a direct debit so that part is ok, it is working out the underpayment of the gross pay by the employer and getting the tax refund that I should be due based on the system thinking I am earning €125 to offset against the tax that will be due on the Covid payment of €350 per week for as yet an unknown number of weeks.

Infoseeker1975 · 29-05-2020 5:54pm

minisue wrote: »

But how can I end up with less Gross pay - that surely isn't right? Is it?

The scheme is based on your net earnings in Jan & Feb so depending on that value, your employer is entitled to a specific figure which is not part of your gross pay.

For example, you get €475 per week, under the scheme the employer can get €350.

The employer if they want to top you up can only give a maximum of the difference between the €350 and what you were getting net, i.e. €475 so that is €125.

Therefore, you should see €125 as your gross pay. If the employer gave more then they would not be entitled to use this scheme.

Synode · 29-05-2020 6:11pm

I run a lot of payroll and I can say that this scheme has been the biggest pain in the ass to operate. There's a lot of issues caused by it being a net pay subsidy rather than a gross pay one. However, it was thrown together very quickly and was always going to cause issues. I tell anyone asking me that it's a net pay subsidy, so you'll be coming out with the same net pay (or thereabouts) as you were before the subsidy. To achieve this though is problematic, and in all cases results in a reduced Gross pay. If you're not working and still getting paid the same net pay then I don't see what the issue is. The company is doing its best to survive and needs the support (in most cases).

The main gripe I'm seeing though is people that are still working the same hours but the company is claiming the subsidy. This is a valid concern and the employees have to balance kicking up a fuss with keeping their job.

From the employers point of view, the main issue is when there's a max subsidy, max top up basis (or close to it) then some employees are coming out with more net pay than they would normally. Which is not good in any of their opinions.

I think overall it was a scheme that was needed but some people's situations are going to have to be looked at towards the end of the year or early next year to see how it has affected them and if anything can be done. That's dependent of course on the companies surviving that long!

Not messing when I say payroll use to be about 10% of my time. Since COVID-19 hit it's been closer to 50%. Complete pain.

Infoseeker1975 · 29-05-2020 7:27pm

Obviously therefore there was little time to test out numerous practical scenarios given the nature of what we face.

I am working the same hours, the only change is from home until June 8th.

I have no issues in doing this, no issues in getting slightly less than my net pay if in my case the €125 is taxed.

I think it could lead to delayed job losses as again in my case, my weekly cost to the employer is €700, for the last 9 weeks it should be €125 per week.

Once the scheme ends then my employer will have 5 times the cost per week re my wage, if an employer has multiple employees this might not be viable for them to continue, hopefully it will:)

OpenYourEyes · 25-11-2020 4:06pm

Apologies for dragging up a thread that's several months old, but my question is almost identical so it didn't seem appropriate to start a new one... I'm looking back on my payslips from over the summer, when my employer was using the Temporary Wage Subsidy Scheme, and am a little confused, so any help appreciated.

Before the pandemic, my salary was €530/week, minus €75 deductions, leaving net pay of €455.

During the Temporary Wage Subsidy Scheme, my salary was dropped to €105, to which €350 was added from the TWSS, and little/no deductions were removed (€<1 in USC), leaving me with roughly what I was taking home pre-pandemic (€455 or therabouts).

My question is, will I be taxed in the future on that €455 I was taking home during TWSS? And if that's the case, should my net pay during that period not have been something more similar to my Gross Pay at the start of the year, and that the tax that's recouped from me over the next year or two brings it down to what my net pay was over time? I.e. should my payslip not have been €350 TWSS + €180 'Salary'.

tina1040 · 03-12-2020 9:15am

OpenYourEyes wrote: »

Apologies for dragging up a thread that's several months old, but my question is almost identical so it didn't seem appropriate to start a new one... I'm looking back on my payslips from over the summer, when my employer was using the Temporary Wage Subsidy Scheme, and am a little confused, so any help appreciated.

Before the pandemic, my salary was €530/week, minus €75 deductions, leaving net pay of €455.

During the Temporary Wage Subsidy Scheme, my salary was dropped to €105, to which €350 was added from the TWSS, and little/no deductions were removed (€<1 in USC), leaving me with roughly what I was taking home pre-pandemic (€455 or therabouts).

My question is, will I be taxed in the future on that €455 I was taking home during TWSS? And if that's the case, should my net pay during that period not have been something more similar to my Gross Pay at the start of the year, and that the tax that's recouped from me over the next year or two brings it down to what my net pay was over time? I.e. should my payslip not have been €350 TWSS + €180 'Salary'.

Your payslip is correct but you are correct in your thinking. Revenue worked out the easiest fastest way to get this subsidy arranged and it doesn't quite make sense. It would have been fine if it was only for a short period as originally hoped but it went on for 5 months.

In January, log on to MyAccount and there should be a reconciliation of your 2020 pay which will show how much tax is owed. It can be offset against tax over the next few years so Revenue won't be looking for a full payment straight away.

Query on application of Covid Temporary Wage Subsidy Scheme

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