The Temporary Wage Subsidy Scheme (TWSS for short) is a scheme put in place by Revenue to help employers keep their employees on the payroll during the Covid19 Pandemic. Employers who can avail of this scheme are those who have been negatively effected by the Covid19 Pandemic and may struggle to keep their staff employed (and paid) without assistance from the government.
The (very) basics of this scheme are that Revenue will pay your employer about 70% of your normal take home pay and your employer can choose to 'top up' your wages anywhere between 0% and 30% of the remainder. At the end of the day, you still get paid from your employer but in the background they have received some help in paying you this.
So you could still get 100% of your normal pay if your employer is topping up the remaining 30%? Yes...but also no.
Lets take Leo for example, Leo used to take home €500 a week pre-Covid, before tax he probably earned about €600 a week. If Leo's employer is availing of the TWSS his employer will receive a subsidy of 70% of his average take home wage, which is €350 and the employer can only pay Leo a maximum of €150 to bring him back up to €500.
But Leo is now only earning €500 a week. He still has to pay tax on the €150 his employer is paying him, this is taxed through the payroll every week like normal. But he is also liable for tax on €350 at a later stage (we'll come back to this).
As Leo has gone from being taxed on €600 a week to now being taxed on only €150 a week he probably doesn't get taxed much as his 'earnings' have gone way down, but he still takes home about €500 or perhaps a small bit less.
So how do you know if your employer has you on this TWSS?
Your employer doesn't have to directly tell you that they are availing of the scheme but they must clearly show on your payslip if you are on the scheme, (it's the law!). Your payslip will show what your employer is actually paying you (the €150 in Leo's case), which is usually called 'Basic Pay' or something similar and then another payment of the TWSS which will be called 'GovCov19 WageSub'.
How will Revenue tax the subsidy?
The tax on the subsidy will be calculated early next year in your P21 Balancing Statement. This balancing statement looks at your total earnings (normal pay & TWSS) and tax credits for the year. Revenue then calculates how much tax you owe on everything as a whole and reduces that tax liability by your tax credits and tax already paid through your normal wages. How much tax you pay is shown on your Tax Credit Certificate, which you can access online through 'MyAccount' on Revenue.ie.
Without getting too much into complicated tax lingo, most people who are on the TWSS will have unused tax credits which can offset some of the tax owed on the subsidy. Further ways to reduce a possible tax bill are by claiming tax back on medical expenses and the newly announced staycation rebate.
Without getting too much into complicated tax lingo, most people who are on the TWSS will have unused tax credits which can offset some of the tax owed on the subsidy. Further ways to reduce a possible tax bill are by claiming tax back on medical expenses and the newly announced staycation rebate.
Also it's worth noting that any tax that does arise from this subsidy will most likely not be sent to you in the form of a bill that has to be paid straight away. Revenue have not confirmed this but it's a likely scenario that if you do owe tax to Revenue, your future tax credits will be reduced by that much. This simply means that for the next few years you will have to pay a bit more tax than normal.
Lastly, as it's name suggests this scheme was meant to be 'temporary'. It was originally only scheduled to run until mid June 2020 and now it has been extended to December 2020. If you end up receiving a subsidy of €350 a week for most of the year this could leave you facing a tax bill on approx €14,000! I'd like to think the government will put something in place to reduce this looming tax bill for us individuals, perhaps disregarding a certain amount of the subsidy or increasing tax credits.
There is constant changes and updates to the scheme, so all of the above is subject to change! Keep an eye on my Instagram @thelifeanstyleofjen for more info!
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There is constant changes and updates to the scheme, so all of the above is subject to change! Keep an eye on my Instagram @thelifeanstyleofjen for more info!
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