Covid-19 Wages Subsidy Scheme

Does my business qualify for the wages subsidiy sceme and how can I avail it?

Does my business qualify for the Wages Subsidy Scheme?

The Emergency Measures in the Public Interest (COVID-19) Bill 2020 was passed into legislation by Dail Eireann on 26th March 2020.

There has been some criticism of the terms of the scheme from employment law specialists and employers representative groups. The Revenue Commissioners subsequently issued further guidance entitled “Employer Eligibility and Supporting Proofs” to clarify some of the issues.

The Legislation

The key sections of the relevant legislation are as follows;

(2)  This section shall apply where—

(a) the business of an employer has been adversely affected by COVID-19 to a significant extent with the result that the employer to pay to a specified employee the emoluments the employer would otherwise have normally paid to him or her,

(3)The business of an employer shall be treated as being adversely affected to the extent referred to in subsection (2)(a) where, in accordance with guidelines published  by the Revenue Commissioners under subsection (19), the employer demonstrates to the satisfaction of the Revenue Commissioners that, by reason of COVID-19 and the  disruption that is being caused thereby to commerce, there will occur in the period of 14 March 2020 to 30 June 2020 at least a 25 percent reduction either in the turnover of the employer’s business or in customer orders being received by the employer

The Declaration

The scheme requires the employer to make a declaration to the Revenue Commissioners that;

‘In accordance with the legislation governing the Scheme, I declare to the Revenue Commissioners that the business intends to operate the COVID-19: Temporary Wage Subsidy Scheme and I confirm that the business experiencing significant negative economic disruption due to COVID-19, and can demonstrate, to the satisfaction of Revenue, that the negative disruption is leading to a minimum of 25% decline in actual or predicted turnover, an inability to pay normal wages and outgoings and, to other circumstances as set out in the published Revenue Guidelines.’


The key difficulties that were pointed out by legal experts and employers representative groups were;

  • that the main declaration was one that indicated that the business was insolvent

  • that details of employers participating in the scheme would be published, and;

  • that detailed rules concerning the scheme were yet to be published by the Revenue.

The problem with declaring that a business is insolvent (even temporarily) is that in company law directors may be held personally liable for some or all of the debts of a company if they knowingly continue to trade whilst insolvent. 

The Guidance Notes

Revenue has clarified the position by stating that;

“The declaration by the employer is not a declaration of insolvency. The declaration is simply 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.”

The issue with the publication of the names of employers who participate in the scheme has not been resolved but it has been suggested that a test case may be taken to challenge this aspect of the legislation. Most employers will accept the publication on the basis that there will be very many other businesses availing of the scheme and that these are exceptional times. However, some businesses concerned with credit rating and reputational damage may avoid the scheme for this reason.

The Confusion

Clients should be advised that there are three different wordings for the critical phrase concerning eligibility;

  1. The legislation says “unable” to pay wages as a result of adverse economic circumstances

  2. The Revenue declaration requires an employer to demonstrate “an inability to pay…”

  3. The guidance note provided by Revenue states “as a result the employer cannot pay…”

It is most unfortunate that Revenue has chosen to use two different wordings to that used in the legislation. This is unhelpful and leads to further confusion and suspicion that Revenue may seek to “move the goalposts”.

Clients are advised that in a dispute or question of doubt the legislation is the final word on the matter.

In their guidance note Revenue did not rule out a firm that has surplus cash reserves qualifying for the scheme.

“An employer that has been hit by a significant decline in business but has strong cash reserves, that are not required to fund debt, will still qualify for the Scheme but the Government would expect the employer to continue to pay a significant proportion of the employees’ wages.”

What does “unable to pay the wages” mean?

The decline in business is described in the legislation as a decline in turnover or customer orders of 25% or more in the period 14th March 2020 and 30th June 2020.

Firstly, employers must look at the trading outlook for the next 12 weeks. Has your business been asked to close with a total loss of turnover or almost total loss of turnover? How badly affected are you? Is the decline close to the 25% threshold? What if business returns earlier than expected in June?

Are you unable to pay your employees because you have no work for them and Government travel restriction prohibits them from coming to their place of work to even carry out maintenance or cleaning duties?

Are you unable to pay your employees their full or even partial wages because to do so in the face of a major decline in turnover or customer orders would be reckless and threaten future solvency of the business?

Any rational employer cannot continue to pay employees their full wages in the face of a crisis of unknown severity and duration, even if they have cash reserves.

Company Directors owe their first duty of care to the shareholders of the Company. Where there are cash reserves the use of these to continue to pay wages in the face of a catastrophic decline in turnover would be a breach of Director's duties.

In the absence of the COVID 19 Wages Subsidy Scheme most if not all employers who meet the criteria for the serious negative economic impact (i.e. 25% decline or more) would choose to place their staff on either short-time working or temporary layoff. Government ministers have specifically asked employers not to choose this route, but to instead apply for the COVID 19 Wage Subsidy Scheme. Are you following Government advice?

If not for this Scheme would you have put staff on short-time working or temporary layoff?


If you choose to apply for the Scheme there are a number of steps that we recommend that you take in order to document your decision and protect the business against Revenue scrutiny after the crisis has abated.

  • Establish that you fully meet the adverse economic consequences criteria. i.e. turnover drop.

  • Prepare a six-month cash flow assuming full wages are maintained and turnover remains depressed. Does this indicate insolvency?

  • Have you already temporarily laid off staff or put them on short-time working?

  • Have you applied to the banks or other major creditors for forbearance?

  • Minute a board meeting or management meeting where all of these issues are formally considered and record your conclusions.

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