Covid-19 wage subsidy increased to 85% of wages for lower paid

The Government is increasing the amount it will pay under the coronavirus wage subsidy scheme in a bid to keep more part-time workers on the payroll.

The subsidy, introduced as an emergency measure last month, will be increased from 70 per cent to 85 per cent for employees who earn less than €24,400 per year.

Under the changes, the scheme will also be extended to higher-paid workers – those earning over €76,000 – in a bid to reduce the number of people being laid off, which the Minister for Finance, Paschal Donohoe, said could reach a million without a major State intervention.

The move comes after employers said that some of their part-time and low-paid staff were not working because they could earn more from the Covid-19 Pandemic Unemployment Payment.

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This was introduced at the same time as the wage subsidy scheme, paying €350 per week to all workers made redundant as a result of the virus, regardless of how many hours they worked.

So, for example, a worker with a take-home pay of €500 per week, which under the 70 per cent wage subsidy scheme equates to a net pay of less than €350 a week, was financially better off being made redundant.

To correct the anomaly, the Government increased the wage replacement level for workers earning less than €24,400 per year from 70 per cent to 85 per cent. The employer top-up for this income cohort can now also be greater than 15 per cent to allow them earn at least €350 a week.

Workers earning €24,400-€31,000 are also to be guaranteed a minimum subsidy of €350 a week.

There were no changes for those earning between €31,000-€38,000 a year, who will continue to receive a subsidy of up to 70 per cent, up to a maximum of €410 per week, and a tiered approach will continue to apply to those on salaries above €38,000 to a maximum of €350 a week.

Mr Donohoe has, however, extended the scheme to higher-income earners who had a pre-Covid salary greater than €76,000, also on a tiered basis to a maximum of €350 a week.

The Revenue Commissioners said more than 255,000 employees have already received at least one payment under the scheme, and that about 84 per cent of employees have also received a top-up payment from their employer.

“Without an intervention by the State of this scale, we could have in the region of one million citizens either on the Live Register or accessing the Pandemic Unemployment Payment,” Mr Donohoe said.

Figures published earlier this month showed that more than 700,000 people were claiming a form of unemployment benefit.

The subsidy is payable to employees who are kept on the employer’s books even if they are working reduced hours or even temporarily furloughed.

However, unions have argued that, for workers on low pay or fewer hours and where an employer was not topping up the amount paid under the scheme, it could be more financially beneficial for them to be laid off and receive the Government’s €350 per week Covid-19 unemployment payment.

Anomalies

Mr Donohoe said the scheme was designed and introduced at great speed “to ensure the greatest number of employees maintained the link with their employee during this difficult time”.

“It stood to reason that there were anomalies that needed to be ironed out to ensure greater fairness and implementation of the scheme,” he said.

Mr Donohoe said the State was likely to see a decline in economic activity this year that is comparable to or potentially greater “than what we experienced a decade ago”.

“We are in uncharted waters, facing a new kind of challenge, facing new economic difficulties,” he said. “If we can protect the income of employees who otherwise would not be working, it gives us a fighting chance of saving the businesses for which they work,” he said.