There is something simmering under the surface with regard to the #WageSubsidyScheme #Covid19, that many employers in the country are availing of, and it’s going to explode when Revenue comes looking for their debt from the employees.
In the wage subsidy scheme, Revenue calculates 70% of your average net pay from Jan/Feb 2020 and gives it to your employer to give to you. Cash in hand so to speak, doesn’t go through the tax part of the payroll system, just gets added to the amount that lands in your bank.
Your employer is allowed to give you a top up, to a maximum of 30% of your Jan/Feb net pay. That bit does go through payroll and has tax calculated on it but because it’s such a small portion of your overall wage, the tax is little or nothing so your net pay feels the same.
Many employees are working away full-time in jobs at the minute, getting the same net as they always did, and unaware that they have in fact taken a pay cut.
Yes, a pay cut. Revenue have been very clear that while their part of the #WageSubsidyScheme payment is not being taxed now, it absolutely is taxable and they’ll be looking for the tax on it in the future.
So let’s say you were on something like €600 gross before all this and coming out with about €500 net after tax and PRSI. Under this scheme you are, ultimately, when the sums get done at the end of the year, being paid that €500 as your gross every week.
You have lost €100 per week of gross income that you had before. The only reason you don’t notice is because Revenue aren’t looking for the tax on their portion now.
But they intend to come looking, and Paschal intends on you paying, and no one has that tax put aside for you. So to be clear, under this #WageSubsidyScheme they are LOANING you the tax now so you don’t realise you’ve had a pay cut.
So pay attention: at the pay level in the eg above, if you were on the scheme Apr-Dec 2020 & have standard tax credits, you’d owe Revenue almost €1,300 by end of year. At the same time your employer has saved over €17,000 on the gross that they would have been paying to you.
It makes no sense to do it this way. Employers are getting their employees at bargain rates, approx 25% of the gross they previously paid. Even if they wanted to pay employees more, they can’t under the rules of the scheme because the subsidy starts to taper off.
Many employers will not even be aware of the financial implications for their staff. And to be fair, some employees will be working lesser hours during the pandemic anyway and the #WageSubsidyScheme works out the same or better than being unemployed.
However if employees have been working their NORMAL hours, and the employer is availing of the #WageSubsidyScheme the employee should not be financially penalised for this. It really should be their employers who are asked to cover the gross shortfall when Revenue comes knocking.
Or, if the government thinks that’s too tough for businesses to manage in the crisis, then they need to direct Revenue to waive the employee tax bill under this #WageSubsidyScheme
The most awfully unfair option is the one that we are currently steamrollering towards, which is having more than 400,000 employees working away all year, unaware that they have taken a pay cut, until Revenue calls in the loan.
But the government thinks it’s fairer if the workers pay. Colour me shocked. How very #NeoLiberal of them.
#WageSubsidyScheme #Covid19
#WageSubsidyScheme #Covid19
