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That pot Kenny show on Newstalk. Now, with the economy opening up significantly in the last couple of months, the government has taken the decision to significantly change the current wage subsidy scheme. So what has changed? Is everybody happy about it? Is it straightforward? Well, to talk about this, we are joined by the minister of state at the Department of Finance funeral at TD, Sean Fleming, and in a few moments time will be joined by Sinn Fein spokesman on Pierce Darity.
But John Fleming, first of all, good morning to you. Good morning, Pat. Why has the scheme been changed? The scheme was introduced last March as an emergency measure when Colvert hit Ireland in a big way and the economy and society was upside down and we had to take short term emergency measures and we did for a 12 week period and extended a little bit further. Now that the economy over the months has started to reopen and there are more people back at work now than they were last March, and there are some people not back at work.
So it's important that the scheme from today onwards, for until now to the end of next March, reflect the actual current employment situation over the next six or seven months rather than the situation in the last six or seven months.
OK, now let's compare the two schemes. Yeah, but let's compare the two schemes under and we'll shorten them. T.W., as we call the first one, the temporary wage subsidy scheme and the new one is ECOWAS. So we'll refer to them in that way.
Under the T SS, the maximum subsidy per worker was 410 euro. That falls to 203. Now that's got to be a negative.
Well, it's important that you actually look at what has happened in Ireland in the last six months. If you look at those figures and ignore the fact of what's happened in Ireland in the last six months, that might be a fair comparison. When we brought into TWC first year up to 600000 people, it 600000 people that had almost halved now is down to approximately 350000 people. And that is a significant change. And even though some people could get the maximum, the average payment over recent weeks under the old scheme was 283.
So the difference between the old rate and the new rate coming in today is much less than you would have said if you paid the maximum 400.
OK, but fundamentally, is it that the government is saying, listen, our businesses are getting back on track, we're prepared to pay up to 250 euro per worker if you qualify? And we'll talk about the the qualifying follow off in your business to qualify. And really, we're expecting you to pay the balance. But 203 you're maintaining is still generous.
Yeah, actually, that's only half the picture part. The other half of what the government is paying and the Irish taxpayer is paying is that we're going to allow them to only pay zero point five percent PRSA. So that's a saving of 11 percent of PRSA. Not they will not have to pay for their employees and their employees will get the full benefit and credit of the full year PRSA contribution and will also pay the two hundred and three. You're a team player directly as well, which results across the board about a subsidy of 25 percent of the payroll costs for everybody involved.
So the PRSA element to the entire is a big help to the employers, bringing people back to work and keeping them on the payroll for the next six months at least.
Okay, so the other changes, the other changes that there are two rates. One is 151, euro 50 and the other is to 203.
The bigger complaint, I suppose maybe we'll hear this from starting now is about when you get paid this money because you've got to wait several weeks and you've got to be tax compliant. In other words, your business is in bits because you're turnover has gone down by at least 30 percent. That's one of the criteria. Your business isn't bits, and yet you've got to be up to date with your taxes, which might be a stretch when you're 30 percent down and turnover.
Yeah, again, I one to say, and I think all employers and people who deal with the revenue commissioners will know. It's not exactly as you just pointed out, you don't have to be up to date with paying your tax affairs. Many businesses are in tax arrears at the moment. Yes, I am that. And once you have an arrangement with the revenue for a repayment schedule, even though you're owed the money, you can still come in under this.
This is designed and the Irish people would not be happy to give a subsidy to employers who were in arrears in tax even before covid started from last year and are unwilling to even enter into a payment arrangement with the revenue. The revenue are very flexible in terms of people paying their taxes over a year or two. If there are arrears for all you have to do is enter into an arrangement which have been named. I refuse to even talk to the revenue about repaying his old tax and expects to get a 25 percent income subsidy from the Irish taxpayer on top of refusing even to acknowledge his arrears.
I think people would not be happy with that. So it's very important. You don't have to be up to date in the payment of your tax. You just have to have an arrangement in place to pay out any outstanding tax debts to. And again, there is an arrangement here with the revenue commissioners that people who have difficulties with paying their tax can get a title and takes. And where housing can be held to one side at a very, very the lowest interest rates you get in the country of less than three percent, which are very, very minimal.
And for those companies that have cash flow difficulties, the second issue you mentioned is and there is a bit of an issue there when we brought in this emergency basis entirely to pay to payroll. They could get the refund from the revenue very, very quickly once they submitted their returns to the revenue. A lot of the complaints I had at the beginning was people were finding a lot of work getting in these figures. Every week we're getting it back to normal business activity where people would pay there and payroll returns and do the payroll returns on a monthly basis.
So if a person sends in their monthly return at the end of the month, they will have their payment within 16 days. There will be some cases depending on the date employers send in the returns, they could have to wait up to six weeks for anywhere from 16 days upwards.
And if we find are you saying if the employers are on the ball and put their returns in when they should put them in, that it'll be a 16 day delay, but then they'll get their cash? I give you the example.
If somebody paid the last 18 months, a lot of people were paid the last Friday in a month. And if the employer gets in his returns immediately at the month end, he gets the money back. He gets this refund from the revenue for PRSA benefit and and knew it was within 16 days. If you pays his employees on a weekly basis over the month, but only puts in his return at the end of the month. Yes, he will have to wait until the monthly return closes in.
And if employers are in a situation and make the case that maybe they don't want some mechanism with the revenue to see, can that be speeded up. All these new schemes, you know, can be looked at from a practical point of view and not making any commitment.
But if what you're saying approach saying is that this blanket assertion that it's a six week delay potentially is down to whether or not you pay your employees by the week because you pay them at the end of the first week of the month. But your return doesn't begin until the end of the month and it's 16 days after that.
So when you're paying weekly, it means that you could be six weeks waiting for the cash. But that is down to the way you pay your employees at the moment and whether or not you could change that. Exactly.
And if if employers are finding a difficulty in this over a period of time, I'm saying, like everything we've introduced, yes, it can be looked at from a practical point of view. That's not a commitment that will happen because the revenue have a lot on their hands and it might suit some entires not to have to do these returns on a weekly basis if people are remote working and might have the ability only to get it in once a month. But definitely there is a longer period, but is not half as long as many people are there picking the worst case scenario and they say the six weeks.
Now, the other aspect of this is that there's no subsidy at all for workers who earn a gross pay of less than 151 Euro 50. Why not?
Yeah, and the figure had to come in somewhere. And the first one I will say on that is if an employer has somebody under minimum wage ten year, a 10 cent an hour and they work 10 hours a week, you know, whatever, two mornings or something like that, we would expect an entire Iftah back in operation to at least be able to pay a worker, an employee, 100 euro without having to come to the taxpayer to subsidize that.
Secondly, if we had reduced a lower figure, this is very important that nobody's highlighted. If we had brought that figure in at 100 euro, there would be a temptation for some employers to reduce the people's wages in our below 100 to 200 euro so they could qualify for this. So we feel we feel that the 10 hours or so are we 10 or 15 hours a week at the minimum wage does represent a reasonable figure to pay. And here is the important point that hasn't been said yet.
If somebody is doing two mornings a week or three mornings a week under this scheme, under current arrangements, they can sign on for social welfare payments, for the Jobseeker's Allowance for the days that don't work. So the employee, the employee is getting these 150 euro from his employer. If he does a couple of days a week and he can get a social welfare or she can get a social welfare payment for the other days of the week. That's very, very important that the two of these now can work hand in hand for the low paid workers.
How does this intersect with the covert payment?
Well, the social protection is a covert payment. So what will happen? You could have somebody on this scheme and the partner or the spouse could be on the call that payment. And the question then is, if the person is only working part time, there's a means assessment then based on the call, the payment and their income. And it would be up to social welfare to decide if there is a double payment due, especially if the situation if there is a.
Dependent children in the house, there's an allowance on the social welfare payments for that, and secondly, if you're a low paid worker and in this category, even though somebody is uncool, but you may well qualify for a day what has historically known as the family payment, which you be that, you know, family income, supplement payment as well, some social welfare. So for the low paid workers here, they can interact with the social protection payments as well and get additional payment from social protection if they're on a low wage to this scheme.
Some of the comments coming in, I assume the government is borrowing from the markets to fund all of these income supports. At the moment, interest rates are very low, almost zero. But what if the interest rates increase in coming years? Will we be left with a huge debt and significant interest payments? That's from Patrick. I mean, this is still the fire brigade, I presume we're talking about here.
But essentially this scheme, when the fire is out, you have to rebuild.
Yeah, this scheme and the essence of this scheme is to get people back into work. And the best way of paying back the national debt is the more people we have working. And that's really what this scheme is designed to assist employers and supporting employment with a 25 percent subsidy on average for employees under this scheme. But the person is right, this scheme will cost 2.5 billion between now and the end of March. And yes, we will have to pay some interest and that an interest rate go up.
And that's why I think the Irish taxpayer who ultimately will be paying for this in terms of interest and loan repayments over many years ahead would want to ensure that we are managing the scheme carefully. And that's why he said we want employers who will at least acknowledge to have a debt come into a payment schedule. So you understand the reason we have all those situations in place, and that's why we have a minimum figure of one hundred and fifty one euro fifty as the threshold to qualify for this payment, because we expect employers, if they have employees and lower wages than that, to at least do the decent thing and pay that themselves.
Now, here's the rub.
This text here. What about businesses like local travel agencies who still have absolutely no income coming in? They can't afford to pay the staff at the lower rates, like you're saying. So they might have a couple of people working part time and paying less to each of them. About 150. 150 what them? Yeah, and that person is right.
And some of the jobs that would be in the same category as well, businesses that are effectively closed almost entirely and maybe for a period ahead. So what I did mention is the entire can get that figure directly up to 203 euro. And the employee, if there is no work for the next six or seven months, can certainly go to the Department of Social Protection in terms of if the family income support payments are due to be known, are also if there are children in the house to the child dependent allowance to make sure they can get that from social protection.
This is important. This is just from the revenue side. People will have rights to claim payments if they're not working from the Department of Social Welfare, subject to the normal means test as well.
Now, as says here on this text, both schemes do not help sole traders personally, as sole traders cannot claim for themselves. But at the same time, directors of limited companies can get it include proprietary directors, and it allows for situations.
You take a coffee shop and you might have a husband and wife, may have one family member, and there are directors of the company very important. They are now included in this scheme and this is introduced to the dole and six weeks ago and that provision wasn't just here, but that was terrified by Minister Donaghue.
Who and what about sole traders?
That and all Vaders traders then if they were on the payroll? That's the issue. This is a payroll payment. So the issue with all traders, if you had a sole trader who maybe every few months, you know, took out the equivalent of their net pay and out of the business and didn't have a regular payroll payment, that might be an issue. But the important issue with this is people, new entrants can enter this system. So people who were seasonal workers knew people who were being hired into a business can come in under this scheme.
The old scheme, you had to be working on the set last February and actually excluded a lot of people in the tourism industry who weren't able to get in until the scheme with this new scheme allows more people into it than the old scheme did, which expired last night.
OK, starting. So some of our conversation is on the line now. Pierce, good morning. Good morning to you.
You have reservations about this scheme. Sian Fleming has kind of explained the rationale behind it. And what are your reservations?
Well, first of all, I think it's good that we have a scheme and that there will be support there for employers over the next period of months. And that's something that since they had called for. Look, we've four major concerns and our four concerns in relation to the scheme and some more. More. More serious than others and you talked about, for example, the tax clearance cert and were concerned in relation to the timeline and the like, that may be there for these companies to get the tax clearance cert.
And that's something we're engaged with the revenue in the department in relation to. I understand there's been a quite a large amount of applications in the last while being processed, I presume, to to to gain eligibility to the scheme. So we need to see flexibility. There is some flexibility in the guidelines, but it is vague in relation to what what what that means. So we need maximum flexibility to allow people to get to get those those clearance certificates there.
Probably the other the concerns that we have is the fact that so many of the lower paid workers are excluded from the scheme. So there's one hundred and fifty one thousand employees across the state who earn below one hundred and fifty one euro and fifty cents. So therefore, the employer will get no support whatsoever to continue and to keep those people within employment. And crucially, what we know part is that sixty three thousand of those employees, their employers were getting support through the old temporary wage subsidy scheme, which came to an end as of midnight last night.
So as employers woke up this morning, 63000 workers were being supported by the state. There are no longer and they will not be supported now from from from today on. And that's a major concern for us, because we've been inundated with letters and correspondence from employers, some very small, some very large, which have told us because of the financial situation, because of the precarious nature that they're in their midst, that they've left with no choice but to to cut their cloth to fit.
And the obvious choice they've told us is that they're making is that they will let employees go that are no longer supported by the state and that that is OK.
John Fleming is listening to this. And, you know, he made the case that if you can't afford to pay 100 euro whatever to your employees and you want the state to do it, maybe you shouldn't be in business. I'm paraphrasing slightly. But John Fleming, that business, that that reality, 61000 employees were benefiting from that up to midnight last night. And this morning they don't. What's to happen to those 61?
The first thing just very quickly to clear the text here and start, every employer has to be on electronic payroll system with the revenue. So that means the taxpayer service will come very quickly, electronically in relation to the large number of employees. The 63000, as I did, mentioned here earlier, there is there were over 600000 people on the scheme, the some duration. And yes, the figures would have been high. But the figure is starting today and last week and next week are expected to be about half of that.
And the issue here would be that if we lower that figure to 100 zero, I would be afraid someone's group this entire is my cut and the wages of the low paid workers so they could get in on the scheme at a lower level. We're putting some of this on an employer to pay some decent wage to an employee before to come to the government looking for a subsidy. And there has to be, I think, some cutoff point because you can't give him Tyre's carte blanche to pay nothing to the workers and expect the state to pay everything completely.
So it's right that there should be some contribution to them, Kyra. OK, because the market wants to the industry in business. Let me ask you this.
If currently someone is paying someone, say, 140 euro or 130 euro a week for whatever kind of part time activity they're doing, is it the minister's belief that they will boost the earnings up above 150, 150 so they can qualify for the scheme, even though, you know, increase can be very important because they may not be able to raise this issue separately.
And that's the issue. You don't want employers bumping up the payroll just to get in on the scheme. If to give them Tyee an extra two or three hours to do an extra two or three hours more work on their wages go up. So the increasing the employee's income to get in on this scheme, there's the revenue will, at the end of the day began to examine to make sure there is no manipulation of this, to get the grant that didn't match increase hours for the employee.
So there is a mechanism there to prevent abuse by employers Piers.
Well, first of all, yes, if you artificially increase, say, either the average or the wages of the employees, not only would you lose the support for that employee, but for every single employee that you would have. So that would be a serious consequence for employer. And it was a mixed message going out, because we did have it from the minister originally saying that, you know, this is an incentive to increase wages, but actually that would be illegal if it wasn't done in the normal course of business.
And actually it would debar the employer from any support from the state under the scheme.
So look what the minister's in there. It doesn't make sense. He's talking about if there was a threshold of one euro there that people would reduce their wages to get it not. That doesn't make any sense, because if you're on if the threshold was 100 year old, then everybody. Above that would also be benefiting from that and actually decreasing the wages as well are trying to cut the number of employees in half. So you given half the number of workers so that the state supports each worker by two hundred two hundred three year, which would also be illegal and would debar them.
Look, we put forward an amendment at at committee stage that would resolve this issue, as you say. Sixty three thousand workers out of three hundred and sixty. That's one in six workers who are benefiting from the temporary wage subsidy scheme will not benefit from this because they're low wage workers. We are suggesting that what you do is for those category of workers, you bring in an 85 percent real so that the state would support 85 percent of net weekly wages.
So if it was one hundred and fifty euro, that there were a bit and then it would be eighty five percent of that. If it was one euro that they were being paid, then it would be easy, five euro that would go to the state. That's the way to deal with this issue. It was rejected by government. And unfortunately, what we have and this is just the reality of it, because, you know, there are employees out there are workers out there and employers out there who are in a very difficult situation.
It's not a 30 percent downturn that they have in terms of their their intake, but it's actually 60, 70 and 80 percent.
And they simply aren't in the position to continue to have those employees in employment if there is absolutely no support from the state. And crucially, what is a crucial for us is that we do not we do not abandon those workers, which could potentially become long term unemployed and all of the challenges that we know that that brings. So that's a major, major concern for us. There are two other concerns that we have. Just briefly. One is the six weeks delay for those who pay weekly their employer.
The minister did address that.
If you pay your employees weekly, you're in that bind. Worst case scenario, you don't get the money that you paid in week one until six weeks later. In other words, two weeks after your monthly return.
But, you know, what are people to do in that situation? Start paying their employees monthly? Is that the only way out of this?
Well, look, a lot of people pay their employees weekly, particularly in the private sector, and particularly when you're Low-Income and, you know, in the public sector, you may be paid monthly or fortnightly, but a lot of the private sector are paid weekly. This is where this is directed at. It doesn't save a penny for the state to actually not pay the debts owed more promptly. And remember the old scheme, which had its flaws, but some of them were addressed, was paid out with a nearly 48 hours.
We have a huge cash flow issue in terms of businesses. So if a business, for example, has 30 employees, the cash flow problem that this creates is about thirty six in Europe. They don't have that type of money that this is the concerns that they have. And there is there is a solution in this. And it is actually just either to change, to change to a weekly or a fortnightly solution. Revenue can do it. They've been doing it with a temporary wage subsidy scheme.
I understand where the government wants to get to to administer, Flatman says, to a more normalized approach where it's monthly. But the problem is the economy isn't normal. Businesses are not operating in the normal scenario. So for a business who's paying weekly, six weeks is a death knell to some of those businesses. So I think that given that this doesn't save a penny for the state, given that this causes serious problems for businesses, we need to relook at this.
And I think there will be a willingness from from from government to do that because it just makes sense.
Minister of the line words, do you make your last point? And then I go to the last point.
The last point. And again, we try to address this in amendments and legislation is that the one size fits all does not sit the economy and where it is and where it will be in the next period of time. So the idea that, you know, if you have a 30 percent downturn, that this is the supports that are available for you and that's it isn't good enough because what we need to start doing is getting more forensic and more clinical nurse sectors of the economy that are more impacted them.
You know, when you talk about the SoftLayer usually talk about pulps, you talk about tourism, you talk about hotel hospitality, you talk about tour operators. They are severely affected. They are not looking at 30 percent don't turn. They're not looking at 40. They're looking to hire numbers. And therefore, we need the ability to actually have supports that are more detailed or more designed for them. It isn't allowed in the legislation. It is basically at the two three to ensure that.
One last words to you on this, that the revenue could be more flexible and adjust and get the money to those people who need it very, very quickly rather than have a huge cash flow problem which could do for the business.
As I said, it can be anywhere from 60 days to six weeks plus people will be somewhere in between what it will say and acknowledged. Even under the old system, there were slight improvements made as the system went along. The first thing it will be based on the employer getting in his returns before the and you can look at it, so you'll have to talk to them. Tyre's and some employers might be happy to accept the monthly arrangement and. They know where to stand.
Others might need to do it on a more frequent basis, and that will be something that can be looked at and not given a commitment. It will be done. But definitely if there are practical issues and the players can come in on a more timely basis than once a month, that's something that can be looked at. I think they're OK. Yeah, we have to leave it there.
Minister of State of the Department of Finance Funeral ETD, Shaun Fleming and posterity's Sinn Fein's spokesperson on finance.
Right, you tell it off and off to bed. No, I never go to bed to 30 now. I'm not even tired, I promise. Make it easy on yourself, John, and just let her stay up. No, we said we're getting back to the usual routine. Looks like I have to be the bad guy again.
Five more minutes, please.
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