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Q&A: How the extended pandemic payment schemes will work

The schemes will last throughout the summer into August. Here’s what it all means.

Ministers Regina Doherty and Paschal Donohoe at a press conference yesterday.
Ministers Regina Doherty and Paschal Donohoe at a press conference yesterday.
Image: Photocall Ireland

AT A PRESS conference yesterday afternoon, Ministers Paschal Donohoe and Regina Doherty announced the extension of two key government schemes rolled out during the pandemic – the temporary wage subsidy scheme and the pandemic unemployment payment.

As the country largely closed down from mid-March, the two schemes were aimed at supporting those who suddenly found themselves without a job due to Covid-19 and at companies experiencing a loss of revenue so they could continue paying their workers. 

The original deadline for them to expire was mid-June.

But it has been clear for many weeks that individuals and businesses will need greater support as the country only now begins to re-open gradually following the lockdown. 

Over 514,000 people have received at least one payment on the temporary wage subsidy scheme while over 600,000 people have received at least one pandemic unemployment payment. 

Now we know they’re set to last until August. Here’s what you need to know.

What is the temporary wage subsidy scheme, and is anything changing with that?

The temporary wage subsidy scheme is aimed at employers affected by the pandemic and provides direct financial support to pay workers during the crisis.

It means that companies experiencing a sharp fall in revenue may not have to necessarily let workers go during the crisis, and instead pay a portion of their wages while the government makes up the shortfall. 

It also means that when that company can go back to work and trading as normal, these employees will be able to get back to work quickly. More details on how much is available for each employee can be found here

So far, 58,300 employers have registered with this scheme with 514,700 employees receiving at least one payment. 

It was originally set up to last 12 weeks from 26 March. However, it has become clear that businesses require further support as many are still unable to open given the current public health restrictions.

Yesterday, Minister Paschal Donohoe said it was important to avoid the risk of forcing otherwise viable firms to close down. 

The government had therefore decided to extend the scheme to the end of August. Employers still on the scheme now have clarity over the summer months regarding the scheme. 

What is the pandemic unemployment payment, and is anything changing with that?

This is the payment for those people who were made unemployed due to the pandemic. Certain sectors were hit particularly hard by the crisis and had to shut their doors completely. 

Many have yet to reopen. Many workers who are self-employed also took a hit to their incomes due to Covid-19. The rate of the payment is €350 a week.

The government announced yesterday that this scheme was also being extended to until Phase Five of the roadmap for re-opening Ireland. That had been scheduled to begin on 10 August.

However, while the Taoiseach later announced that there will only be four phases of Ireland re-opening, it is still expected the pandemic unemployment payment will continue into August.

However, from 29 June, there will be some changes to the scheme when it becomes a two-tier payment. 

It means that for people who became unemployed through Covid-19 whose prior employment earnings were €200 per week or higher, they will stay on the €350 a week. The government said that 75% of recipients up to now would qualify for this. 

For those who were on less than €199.99 a week prior to the crisis, they will  be given €203 a week - the same rate of payment on jobseekers’ allowance. 

Minister Regina Doherty said no person who will receive the reduced pandemic unemployment payment will be paid less on this scheme than they were getting from their job pre-Covid. 

I was receiving the pandemic unemployment payment, but am due to go back to work soon. What should I do?

The pandemic unemployment payment had originally been due to expire on 8 June. 

With the extension, those still out of work due to Covid-19 will remain on the scheme for now. 

However, it may well be the case that many people on the scheme – of which there are currently 545,000 – will be returning to work in the coming days and weeks. 

According to government guidance, you must stop your payment on your first day back to work. 

So, for instance, you’re due to return to work on 22 June. You can continue to receive the pandemic unemployment payment until that date but must take steps to stop your payment on that date.

Details on how to do so can be found here

What about those on maternity leave? Have they sorted that out yet?

Yes, that has been sorted. 

There had been an anomaly in the system whereby to qualify to be paid under the wage subsidy scheme, payslips needed to be submitted from January and February. 

This meant women who were on unpaid maternity leave were not be eligible for the scheme. Those who were having their maternity leave topped up by their employer were only entitled to a fraction of their former salary.

The Taoiseach said around 2,000 women were affected by the anomaly, but the provision to allow those on maternity leave access the scheme has begun now and is being backdated to 26 March. 

The extension of the wage subsidy scheme yesterday does not affect this. 

Where’s the money coming for all this?

It is clear that funding these schemes is costing a huge amount to the Exchequer.

The wage subsidy scheme alone has cost the State €1.37 billion so far and costs around €500 million a month. 

The most recent week of pandemic unemployment payments cost €190 million. Its costs are also expected to run into the billions.

The hit on the public finances was outlined earlier this week, when Minister Donohoe said the State’s Budget deficit hit €6.1 billion in May.

On the two schemes, the minister for finance described them as a “hugely significant intervention in our economy”.

To meet the shortfall, the government is borrowing and borrowing heavily. 

While corporation tax was higher than expected in the Exchequer returns earlier this week, Donohoe said that can’t be relied upon in future.

He said: “As such, excess [corporation tax] returns should be used to reduce the extraordinary amount of borrowing the State is taking on to fight this crisis.”

The Taoiseach also said that while borrowing to meet costs now is important, that cannot be relied upon into the future.

He told the Dáil two weeks ago: “I think we all agree that substantial borrowing by the State will be necessary to cushion the blow to our economy and society.  We will have a very substantial budget deficit this year and a deficit and exchequer borrowing requirement for several years to come leading to increased national debt.

We should continue to borrow until the economy returns to sustained growth.  From then on, we should seek to reduce borrowing and our deficit and seek to achieve a broadly balanced budget again within a few years. 

Could either of these schemes last beyond August?

That’s the multi-billion euro question.

On numerous occasions, ministers have said these payments – while important in sustaining jobs and supporting incomes now – cannot last indefinitely.

We don’t yet know what will happen as the economy re-opens, but businesses have warned that supports may be needed longer into the future. 

On the other hand, as people return to work, the government is expecting the number of people on both schemes to reduce substantially. 

Even in announcing the extension of both schemes yesterday, ministers sounded caution.

Doherty said: “Finally, with regard to the future of PUP and our supports in the longer term, I have tasked my officials to start working on options for any future changes to the scheme – taking into account progress in the re-opening of society and the developing health situation.”

In a statement, the Department of Finance said the wage subsidy scheme will continue to be “monitored closely” in the coming weeks and months.

Minister Donohoe added: “As the public health restrictions are eased in the coming weeks, I will expect to see a continued decline in reliance on the scheme throughout the summer as the economy continues to re-open and people are able to return to work.

This economic recovery will be monitored and will inform a decision later in the summer on the need for further extension or tapering beyond August.

Sinn Féin’s Pearse Doherty said yesterday his party would like to see the pandemic unemployment payment continued in some form until the end of the year and whatever form the next government takes will play a key role in the future of the scheme. 

While the current Fine Gael government is saying it will “wait and see” whether these schemes should be extended, it is likely a government involving Fine Gael, Fianna Fáil and the Greens will be the one making this crucial decision in a few months’ time. 

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Sean Murray

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