Payment of Wages

Employment Wage Subsidy Scheme (EWSS) Replaces Temporary Wage Subsidy Scheme (TWSS)

The Temporary Wage Subsidy Scheme (TWSS) introduced by the government on 26th March 2020 is now coming to an end on 31st of August 2020. It will be replaced by the Employment Wage Subsidy Scheme (EWSS) which will run until 31st March 2021.

Under the EWSS employers will be able to seek wage subsidies for a broader range of workers, including seasonal and new hires. Under the new system (EWSS) the maximum subsidy available per worker will fall from €410 to €203 per week. 

Additionally, instead of being a percentage of the employee’s net pay, there will be two fixed rates of pay for workers: €151.50 or €203.

Minimum and maximum earning requirements have also been set in place. A person who earns between €151.50 and €1,462 per week will be eligible for EWSS.

Employee gross wagesSubsidy
Less than €151.50Nil
From € 151.50 to € 202.99€151.50
From € 203 to € 1,462€203
More than € 1,462Nil

Initially, under TWSS (the old scheme) to be a qualifying business, the business had to forecast a loss of at least 25% of their turnover, under EWSS this loss of turnover required has been increased to 30%.

Employers will also have to hold a valid Tax Clearance Certificate showing the tax affairs of the business are in order.

Under the TWSS the employer receives the subsidy sum within 48 hours of lodging payroll information with the Revenue. Under EWSS, the timeframe for receiving the same sum could be as long as 6 weeks.

There is no subsidy for workers earning below that €151.50.

The biggest issue for employers will be obtaining a Tax Clearance Certificate if they do not already have one because the employer will be ineligible for the scheme without a tax clearance certificate.

There are 2 elements to the EWSS:

  • a flat rate subsidy to qualifying employers and
  • a reduced rate of employer PRSI of 0.5% on wages paid which are eligible for the subsidy payment.

Employer eligibility

The two main criteria for eligibility are that the employer has a tax clearance certificate and their business is expected to experience a 30% drop in turnover between 1st July 2020 and 31st December 2020 and the cause of the drop is the effects of Covid 19.

Childcare businesses registered in accordance with section 58 C of the Child Care Act 1991 do not have to show the turnover drop.

Employers must carry out a monthly review to check they are still eligible for the scheme.

Change in employment contracts/terms and conditions

The EWSS has no impact on the existing terms and conditions of the employee’s employment. These can only be changed with the consent of the employee.


The normal operation of the paye and prsi system will be restored with Revenue applying the reduced rate of 0.5% employer prsi. This will occasion the calculation of a prsi credit due to the employer creating a reduction in the monthly tax balance due.

You will find more information about the EWSS on this page of the Revenue Commissioners website.

Payment of Wages

€65,000 Termination Payment to Employee Not Exempt from Tax-Tax Appeals Commission Decides

Imagine this.

You receive €65,000 on the termination of your employment, and you believe it is tax free. Then, the Revenue Commissioners come calling and they claim the payment is taxable.

And they decide that, yes, it is taxable and raise an estimate for the taxation.

Lately, I have a lot of employees coming to me with settlement or termination of employment agreements. These agreements do a number of things, the most important of which is the termination of the employment.

The employee is looking to have the agreement “looked over” and to be advised that all is in order. From my perspective this is unproblematic.

However, one of the trickiest parts of these agreements, and a potential landmine for the employee, is the tax situation and the tax treatment of the settlement payment.

Invariably the employee will be getting holiday pay and notice pay, and by reason of the fact that this is pay it is fully taxable.

Any statutory redundancy payment is tax free but it gets more complicated when there is an ex gratia (discretionary) payment involved. This is taxable but there may be an exemption for the employee.

Please note I am a lawyer, not a tax expert. In fact, if truth be told, my knowledge of taxation is limited and basic.

But I know enough to warn the employee to get taxation advice if there is a significant payment involved. A recent Tax Appeals Commission decision in December 2019 proves the wisdom of this approach.


The employee received a termination payment of €65,000 and the severance agreement provided, under section 4 “Taxation Indemnity” for the employer as follows:

“The Company gives no warranty as to the amount of tax or pay related social insurance contributions that may be chargeable by reason of the Termination Payment and other arrangements set out in this Agreement.”

The agreement also provided for a contribution to the employee’s legal costs in the sum of €10,000.00.

The Revenue Commissioners claimed the termination payment was taxable and the dispute ended up with the Tax Appeals Commission.

The Law

Section 192A of the Taxes Consolidation Act, 1997 provides:

“192A Exemption in respect of certain payments under employment law (1) In this section “relevant Act” means an enactment which contains provisions for the protection of employees’ rights and entitlements or for the obligations of employers towards their employees;

“relevant authority” means any of the following –

(a) a rights commissioner,

(b) the Director of the Equality Tribunal,

(ba) an adjudication officer of the Workplace Relations Commission,

(bb) the Workplace Relations Commission,

(bc) the District Court,

(c) the Employment Appeals Tribunal,

(d) the Labour Court,

(e) the Circuit Court, or

(f) the High Court.

(2) Subject to subsections (3) and (5), this section applies to a payment under a relevant Act, to an employee or former employee by his or her employer or former employer, as the case may be, which is made, on or after 4 February 2004, in accordance with a recommendation, decision or a determination by a relevant authority in accordance with the provisions of that Act.

(3) A payment made in accordance with a settlement arrived at under a mediation process provided for in a relevant Act shall be treated as if it had been made in accordance with a recommendation, decision or determination under that Act of a relevant authority.

(4) (a) Subject to subsection (5) and without prejudice to any of the terms or conditions of an agreement referred to in this subsection, this section shall apply to a payment –

(i) made, on or after 4 February 2004, under an agreement evidenced in writing, being an agreement between persons who are not connected with each other (within the meaning of section 10), in settlement of a claim which–

(I) had it been made to a relevant authority, would have been a bona fide claim made under the provisions of a relevant Act,

(II) is evidenced in writing, and

(III) had the claim not been settled by agreement, is likely to have been the subject of a recommendation, decision or determination under that Act by a relevant authority that a payment be made to the person making the claim,

(ii) the amount of which does not exceed the maximum payment which, in accordance with a decision or determination by a relevant authority (other than the Circuit Court or the High Court) under the relevant Act, could have been made under that Act in relation to the claim, had the claim not been settled by agreement, and

(iii) where –

(I) copies of the agreement and the statement of claim are kept and retained by the employer, by or on behalf of whom the payment was made, for a period of six years from the day on which the payment was made, and

(II) the employer has made copies of the agreement and the statement of claim available to an officer of the Revenue Commissioners where the officer has requested the employer to make those copies available to him or her.

(b) (i) On being so requested by an officer of the Revenue Commissioners, an employer shall make available to the officer all copies of –

(I) such agreements as are referred to in paragraph (a) entered into by or on behalf of the employer, and

(II) the statements of claim related to those agreements kept and retained by the employer in accordance with subparagraph (iii) of that paragraph.

(ii) The officer may examine and take extracts from or copies of any documents made available to him or her under this subsection.

(5) This section shall not apply to so much of a payment under a relevant Act or an agreement referred to in subsection (4) as is–

(a) a payment, however described, in respect of remuneration including arrears of remuneration, or

(b) a payment referred to in section 123(1) or 480(2)(a).

(5A) This section shall not apply to payments made pursuant to an order under section 2B of the Employment Permits Act 2003.

(6) Payments to which this section applies shall be exempt from income tax and shall not be reckoned in computing total income from the purposes of the Income Tax Acts.”

Section 123 of the Taxes Consolidation Act, 1997 provides:

“123 General tax treatment of payments on retirements or removal from office or employment

(1) This section shall apply to any payment (not otherwise chargeable to income tax) which is made, whether in pursuance of any legal obligation or not, either directly or indirectly in consideration or in consequence of, or otherwise in connection with, the termination of the holding of an office or employment or any change in its functions or emoluments, including any payment in commutation of annual or periodic payments (whether chargeable to tax or not) which would otherwise have been so made.

(2) Subject to section 201, income tax shall be charged under Schedule E in respect of any payment to which this section applies made to the holder or past holder of any office or employment, or to his or her executors or administrators, whether made by the person under whom he or she holds or held the office or employment or by any other person.

(3) For the purposes of this section and section 201, any payment made to the spouse, civil partner, or any relative or dependant of a person who holds or has held an office or employment, or made on behalf of or to the order of that person, shall be treated as made to that person, and any valuable consideration other than money shall be treated as a payment of money equal to the value of that consideration at the date when it is given.

(4) Any payment chargeable to tax by virtue of this section shall be treated as income received on the following date –

(a) in the case of a payment in commutation of annual or other periodical payments, the date on which the commutation is effected,


(b) in the case of any other payment, the date of the termination or change in respect of which the payment is made, and shall be treated as emoluments of the holder or past holder of the office or employment assessable to income tax under Schedule E.

(5) In the case of the death of any person who if he or she had not died would have been chargeable to tax in respect of any such payment, the tax which would have been so chargeable shall be assessed and charged on his or her executors or administrators, and shall be a debt due from and payable out of his or her estate.

(6) Where any payment chargeable to tax under this section is made to any person in any year of assessment, it shall be the duty of the person by whom that payment is made to deliver particulars of the payment in writing to the inspector not later than 14 days after the end of that year.”

The Arguments

The employee claimed the termination payment was not taxable because he had made an allegation of bullying in the workplace, an investigation had been carried out by an external investigator who did not uphold the allegation, mediation was then availed of to resolve the dispute, but the employee saw during the mediation that there was no future for him in the workplace. In consequence of this his solicitor contacted the employer and the settlement agreement was agreed between the parties.

The Revenue Commissioners argued that this mediation was not sufficient to allow the tax exemption as such mediation did not meet the requirements of Section 192A of the Taxes Consolidation Act, 1997 as it was not a mediation process provided for in a relevant act.

Revenue also argued that it could not come within the “out of court” settlement because it was not presented to any court for a decision and therefore did not qualify.

Revenue also argued that the fact that the agreement was described as a “severance agreement” indicated it was not a payment which could avail of the tax exemption.

The Decision

The Tax Appeals Commissioner decided that the first place to look when determining a case like this was the agreement itself.

“The Severance Agreement expresses in clear terms that the Appellant was being given notice of the termination of his employment and that his employer agreed to make a termination payment to the Appellant. The payment of €65,000 is described as a termination payment. The Appellant agreed to accept the payment without any admission of a breach of statute or law by either party or a breach of any duty or obligation by the employer to the Appellant, and in full and final settlement of any claims arising out of the Appellant’s employment with the employer.”

The Commissioner went on to hold that the agreement confirmed there was no reference to the payment being made by the employer for a breach of the employment rights of the employee arising from the bullying compliant.

The employee accepted the payment without any admission of liability on behalf of the employer and this was expressly acknowledge in the agreement.

Moreover, of the payment was made in consequence of mediation pursuant to a “relevant act” it may be exempt. But that was not the case here as the mediation was voluntary and agreed between the parties.

Furthermore, an exemption would be possible if the payment was to settle a claim under a relevant act and the claim was likely to have been subject of a determination by a relevant authority. This means it must be advanced to a point where there is a “real prospect that the matter will be present to a court for decision”. This was not the case here.

For all these reasons the Appeal Commissioner, Fiona McLafferty, determined that the payment paid under the Severance Agreement was not exempt from tax.

Read the full decision here.

Payment of Wages

COVID-19/Coronavirus-7 Employment Law Pay Scenarios

Will you be paid if public transport is shut down due to Coronavirus/Covid-19? 

Will you be paid if the schools close and you have to mind children at home? 

Will you be paid if you have to self isolate?

These are some of the questions touching upon employment law which are causing workers a great deal of concern and anxiety.

Let’s take a look at some possible scenarios.

  1. The employee contracts Covid-19

The employee’s sick pay entitlements, if any, will be those set out in the contract of employment and/or staff handbook. There is no legal or statutory entitlement, however, to sick pay. The employee may be entitled to illness benefit from the Department of Employment Affairs and Social Protection.

2. The employer closes down but the employee can work from home

The employee is entitled to be paid, assuming she is working.

3. The employer closes down but the employee cannot work from home

There is no entitlement to be paid and a temporary lay off situation may arise. An alternative is for the employee to take any accrued but untaken annual leave, in which case he would be paid.

4. The employee cannot come to work because she is caring for a person who has Covid-19

Force majeure leave may be applicable in this situation. However, the maximum amount of force majeure leave is 3 days in a 12 month period and the care must be for a close family member with the employee’s presence indispensable in the circumstance.

5. Public transport closes down and the employee cannot get to work

Unless there is provision in the staff handbook for pay it is extremely unlikely that the employee is entitled to be paid.

6. School has closed and the employee must mind a child

If the employee can continue working she would be entitled to pay. If she cannot work parental leave or annual leave or unpaid leave may be a possibility. Unpaid leave will need the agreement of the employer, however.

7. The employee returns from an infected area and the employer tells him to self-isolate

There is no entitled to be paid, unless the employee can work from home. However, if the employee was required to travel to the infected area at the request or direction of the employer, or in fulfilling his contract of employment, he would have a strong argument to be paid whilst self isolating on his return.

If the employee was returning from a holiday to an infected area he would have no entitlement to sick pay if required to self isolate but he may be entitled to illness benefit from the Department of Employment Affairs and Social Protection.

Illness benefit and Covid-19 (Coronavirus)

New measures have now come into effect regarding illness benefit. Three big changes include

  • The 6 day waiting period for illness benefit will not apply to any person who has Covid-19 or is in medically-required self-isolation
  • Illness benefit will increase to €305 per week for a maximum of two weeks for anyone in medically required self-isolation or for the full absence from work on account of a diagnosis of Covid-19
  • the normal social insurance requirements for Illness Benefit will be changed or the means test for Supplementary Welfare Allowance will be removed

You will find useful links about illness benefit, pay, and information for employers and employees on this Department of Employment Affairs and Social Protection page.


The best advice during this whole situation is to closely follow the advice of the Department of Health and the HSE experts, especially regarding social distancing and good hand hygiene. 

Hopefully, we will be looking back on this period as a peculiar, once in a lifetime event in the not too distant future.

Payment of Wages

Year End Bonuses in the Workplace-the Essentials

Disputes and rows often flare up around bonuses at the end of the year.

Disappointment and a sense of  betrayal are sentiments felt by employees when they discover they are not going to receive the expected bonus.

Not only is the bonus expected but there is a feeling, quite rightly, that it may well have become a contractual entitlement by reason of its payment over a number of years.

What is the legal position? Let’s take a look, shall we?

An employee will have a strong argument, in my view, that she has a contractual entitlement to a bonus if

  1. It has been paid regularly and consistently over a number of years with no regard to the bonus being contingent on a particular standard of performance, or any other targets and
  2. The contract of employment does not state it is discretionary.

If the contract or staff handbook states the bonus is discretionary the argument will swing towards the employer who will rely on the contract and adopt the position that the bonus is entirely at the employer’s discretion and there is no guarantee in that regard.

Departing employee

A further issue that can arise is whether an employee who is leaving is entitled to a bonus if he is no longer employed, or he has handed in his notice.

The Labour Court in Bord Gais Energy Limited v Thomas (PWD1729) held that he employee was not entitled to a bonus because the company rules said the employee must still be in employment with the company. Would the decision have been different, however, if this rule was not set out in a staff handbook or contract of employment?

If the employee had reached the targets for a bonus and was entitled to it when the targets and performance were assessed you would have to think the employee would still have a strong claim for that bonus even if she then handed in her notice and the bonus was not to be paid until the employee had left the job.

That assumes, of course, that there is no stipulation in the contract or staff handbook that the employee must be in employment at the time of payment of the bonus to be eligible for payment.


From an employer’s perspective it is advisable that it is made crystal clear in the contract or staff handbook that any bonus payment is at the sole discretion of the employer an will depend on the performance of the business and the performance of the individual employee.

It is worth noting what the High Court had to say in a bonus dispute case involving B&Q workers:

Cleary & Others v B&Q Ireland Limited (High Court, 8 January 2016) IEHC 119 which was a judicial review against the decision of the Employment Appeals Tribunal to uphold the employer’s right to withhold a summer bonus from the B and Q employees. The High Court held in favour of the employees because it noted the right of the employer to have discretion regarding bonus payments but also held that the discretion must be exercised reasonably.

The High Court also referred to a 2007 case Finnegan v J&E Davy [2007] IEHC 18 in which it was held:

The plaintiff could reasonably expect as a matter of principle built up from a number of years of consistent conduct in the payment of bonuses and the matter of discretion never having been mentioned to him at any stage that some bonus would be payable – the amount only dependent on the trading activities of the firm and his own performance

Payment of Wages Working Time/Rest Periods

The Sunday Premium Rate of Pay-How Much Should Be Paid for Working on Sunday?

If you work on Sunday you are entitled to be paid a premium pursuant to section 14 of the Organisation of Working Time Act 1997,

14.— (1) An employee who is required to work on a Sunday (and the fact of his or her having to work on that day has not otherwise been taken account of in the determination of his or her pay) shall be compensated by his or her employer for being required so to work by the following means, namely—

( a) by the payment to the employee of an allowance of such an amount as is reasonable having regard to all the circumstances, or

( b) by otherwise increasing the employee’s rate of pay by such an amount as is reasonable having regard to all the circumstances, or

( c) by granting the employee such paid time off from work as is reasonable having regard to all the circumstances, or

( d) by a combination of two or more of the means referred to in the preceding paragraphs.

Paid time off or an allowance

You will note from section 14 of the Organisation of Working Time Act 1997 above that the Sunday Premium can be in the form of paid time off or the payment of an allowance of such amount as is reasonable in the circumstances.

Increased rate of pay

You will see that no specific amount is set out in the act for the rate of pay, it refers to ‘what is reasonable having regard to all the circumstances’. This leaves the Sunday Premium rate of pay open to negotiation between the parties and if agreement cannot be reached there may be a dispute referred to the WRC or Labour Court.

Labour Court guidance

It is to the Labour Court that we turn for guidance as to what is considered to be ‘reasonable’.  And from the decided cases we note a pattern emerging of the Labour Court finding that time and a third is considered to be ‘reasonable’ when it comes to the rate of pay.

Cases to be reviewed on this point include:

  • Chicken and Chips Limited t/a Chicken Hut and David Malinowski [DWT159]
  • Viking Security Limited and Valent [DWT1489]

However, the 33% premium is not a hard and fast rule and all the circumstances will be considered which led to a 25% premium being accepted as reasonable and even a 14% premium being accepted in Cadbury Ireland Limited v SIPTU [DWTO0720].

If you are an employer, therefore, you would have to be considering a Sunday Premium of at least 25% to have a good, stateable case that it is a ‘reasonable’ rate as envisaged by the Organisation of Working Time Act 1997.

Benefit in Kind not acceptable

The Labour Court has held that a premium must be paid and a benefit in kind-for example a free meal-is not acceptable and is not what was envisaged by the legislators when framing the act.

Composite rate of pay

If the contract of employment includes a rate of pay which claims to incorporate a Sunday Premium then the Sunday Premium must be identifiable; it is not good enough to simply state your rate of pay includes a Sunday Premium.

This is an easy mistake for an employer to make.

Update October 2019

An important decision was handed down from the High Court in this connection in October 2019, you can read about it here.

In essence, if a contract of employment contains a provision stating that the rate of pay has been calculated to take into account the requirement to work on Sunday this will almost certainly be sufficient and the employer will not have to provide evidence as to how much is being paid for working on Sunday. But you need to read the full decision of the case to fully understand the implications of this decision.