New wage subsidy scheme to put businesses under 'severe pressure'

The Employment Wage Subsidy Scheme goes live on September 1 and is expected to cost the exchequer €2.3bn by the time it comes to a conclusion on March 31.

Employers claim the Government’s new wage subsidy scheme, which comes into force on Tuesday, will place “severe pressure” on already struggling businesses and hit those on low incomes hardest.

The Employment Wage Subsidy Scheme, successor to the temporary subsidy scheme which has supported more than 62,000 employers and 600,000 employees, will go live from September 1.

Finance Minister Paschal Donohoe claims it will be a “simpler” offering than what went before. He said the scheme is being launched now, after its initial announcement as part of the July Stimulus Plan, so that it can be bedded in well in advance of any possible Brexit shocks at the end of the year.

The new scheme is expected to cost the exchequer €2.3 billion by the time it comes to a conclusion on March 31. One of its benefits will be the fact that tax due on the subsidies will be processed at source, meaning that employees will not face a lump-sum liability at a later date, as was the case with the temporary scheme, a fact acknowledged by the minister as having proved problematic.

However, employers' bodies have criticised the new scheme.

“Time is marching on and everyone is under pressure. The Government has had a month since this thing was announced to get it right. They’ve had the time,” said Ross McCarthy, chair of the Irish Small and Medium Enterprises Association.

He said three areas will be particularly affected by the new scheme and the lack of detail as to how it will function: Proprietary directors, such as pub owners, whose entitlement to the subsidy has not been clarified; businesses that need the subsidies but will struggle to prove the criteria needed to qualify; and workers earning less than €152 per week, who are not entitled to receive any subsidy under the new measures.

A lack of detail as to how or why businesses are expected to manage a six-week wait for subsidies to be paid has also come in for criticism.

“It will place already struggling businesses under severe pressure in terms of payroll and liquidity,” said Sven Spollen-Behrens, director of the Small Firms Association.

The reason for the six-week wait is unclear, as subsidies on the initial temporary scheme were typically delivered within 48 hours.

Mr Spollen-Behrens said he “doesn’t know” if the new scheme was designed by a different team at Revenue compared with its predecessor, but said that the “strengths” of what went before have been lost.

“With the temporary scheme there was frequently updated guidance. It was put in place quickly and they learned as they went along,” he said.

“The new scheme is well meaning, and it’s a very good thing that support is continuing into next year, but it’s also hugely confusing. Clarity is badly needed.”

Mr McCarthy said: “I can’t understand why they’ve launched it now, but yet more guidance is to issue next week. It makes little sense.

“It’s the people on the margins, on low incomes, that this will hurt hardest. In industries like tourism or retail that are experiencing such low intensity of activity, when those jobs go it can take decades to replace them. We need more use of scalpels than sledgehammers at this stage.”

The new scheme’s subsidies will be paid at two different levels, €151.50 and €203, both per week, on a sliding scale depending upon a worker’s wage in non-Covid times.