Your Wage Subsidy And Your Boss

at | 7 Replies

From top: Minister for Employment Affairs and Social Protection Regina Doherty; Employment law solicitor Richard Grogan

Is your employer not taking part in the the Government’s emergency wage subsidy scheme, announced by Minister for Employment Affairs Regina Doherty?

Whereby employees, whose work has stopped due to the coronavirus, are paid 70 per cent of their salary by the State, capped at €410 a week? And whereby employers can top that sum up?

This morning, on RTÉ’s Today With Seán O’Rourke, employment law solicitor Richard Grogan explained why he and other employment solicitors are advising employers not to sign up.

From the interview…

Richard Grogan: “Any company that signs in for this new wage subsidy is going to be giving a declaration saying that they’re insolvent, that’s what they’re going to have to say on the bill, the way it’s currently drafted.

That means that the directors of those companies are going to be in the position that they are effectively fraudulently trading. So that’s a very serious issue.”

Seán O’Rourke: “We haven’t heard of this before you. You’ve been studying this legislation now I mean it’s rushed legislation. Take us through that argument.”

Grogan: “All right. You’re going to have to, as an employer, make a declaration to the Revenue saying that you are not in a position to pay your wages as they come through. That means that you are saying that you are insolvent. That means that you are going to be saying you are trading insolvent, you’re fraudulently trading if you continue to keep the business open. That is a very, very serious issue.”

O’Rourke: “Now I don’t have the paper in front of me but my recollection is that the requirement is that you would have to show Revenue that your income had dropped by 25 per cent?”

Grogan: “The headline was/is that the income is dropped by 25 per cent but the bill also has a section, in sub section 2, which says that you must also show that you’re not in a position to pay the wages. So that’s the issue that insolvency practitioners have been talking to me, have a real concern about.”

In relation to the issue of the €410, it has been put that it’s up to the employer whether they increase the amount. That’s not the position in the bill. The employer will have to be able to prove that they were not in a position to pay the full wages. So even if they go into this scheme which is now one that I think employment lawyers are going to be, and insolvency practitioners, I would say, this is not one that we can be happy with.

The employers are still going to have to show that they’re not in a position to pay the full wages, the top-up element. So this is a very serious…the proposal is a great proposal and it’s laudable and I applaud it.

“But, however, how this bill has been drafted is such that there is serious concerns in the legal profession, those who advise others that this is going to work and that we could actually advise our clients to go into it.”

O’Rourke: And are you saying to your clients at the moment that they shouldn’t go into it?

Grogan:Yes.

O’Rourke: “That would be very serious.”

Grogan: “As the bill is currently drafted, yes. And I’ll tell you why. The first [inaudible] is, the 25 per cent reduction period, that’s not specified as to what it should be. Secondly, you have to say that you’ve an intention to keep the employee in employment to a specified date which is yet to be specified so that may not be the 30th of June. It could be the 30th of September.

“You also have a situation where there’s a mistake in the drafting so that if you do top-up the wages, you won’t be allowed claim that as an expense on your business. So, and in addition, if you do go into this scheme, your name and your address, as an employer, is going to be put on a website. Now that’s your credit rating absolutely gone.”

O’Rourke: “Now, is this not…because it’s an emergency measure, right? It’s a measure in the public interest. Does that not, or might that not mean that the usual rules would not apply, Richard, like, in regards to trading insolvently and so forth?”

Grogan: “Well that’s not in the bill. So they would now have to bring in an amendment to the bill to say that you are allowed to trade when you are insolvent. That’s a massive issue of drafting. So the problem on this is it could be easily dealt with by simply saying that you’ve a 25 per cent reduction and get rid of this provision that you’re not in a position to pay.”

O’Rourke: “Or could you say that people participating in this scheme are not deemed to be insolvent?”

Grogan: “You could say that they’re not deemed to be insolvent but the easiest one is simply to say you’ve got a 25 per cent reduction in turnover. Now what I will also say to you is I’ve been looking at this and I can’t work out, from the bill, what the relevant period is for working out what your reduction in turnover is compared with what period.

“So it doesn’t say, is it 25 per cent reduction on what your turnover in January and February or is it in the same period last year or what is it?

“So this bill has been rushed through but it hasn’t been thought out.”

O’Rourke: “Yeah. I presume various representations would have been made to the minister Paschal Donoghue about this?”

Grogan: “Well, I think representations will be made about this. And I hope they are going to be made. And I know that there are some that are being put in place at the moment. But this bill, as it currently stands, if an employer goes to an employment lawyer, they’re going to say we’re going to now have to go, you are going to need accountancy advice on your accounts and legal advice to get it.

“So if you take the average small SME, the actual cost of working out can you go into this scheme, without ending up in a situation where if you get it wrong, you’re liable to repay every single penny, plus interest, plus penalties.

And it’s going to be, for most SMEs, ‘I’m sorry, you cannot afford the cost of actually working out can you go into the scheme’. That’s ridiculous.

Listen back in full here 

Rollingnews

7 thoughts on “Your Wage Subsidy And Your Boss

  1. Listrade

    This is all kinds of things. Proof we could do with less lawyers, proof of unintended consequences, but more importantly proof of a an open government knowing that they’re making stuff up on the fly and accepting there will be mistakes and taking as many steps as they can to engage with stakeholders to iron out as many as practicable.

    So while the lawyers and the tax advisers were looking at a draft bill, written in haste on the back of a fag packet, the government, and revenue commissioners were actively (daily) talking to business and business representatives looking at some of the practical issues, looking at what needs to go into the actual legislation and also openly saying that there will be mistakes, but that the current emergency doesn’t give them the luxury of a committee sitting for 5 years to debate it.

    And with a nod and wink suggesting that some of the “technical” breaches may not be enforced. Exactly what we need wherein the spirit of the law takes precedence over the words.

    When we’re are making it up practically hour by hour, we need more of the open spirit of cooperation that is being seen and less of the “well actually, I think you’ll find that’s illegal.”

    At the end of today, it may well be that the only practical solution to getting this vital legislation through will be to have a technical breach of insolvency. Unwrapping that legislation may be too difficult and time consuming. So I trust the government position that they aren’t going enforce those things. Don’t ask, don’t tell. We’ve lay offs to do. We’ll have more to do. This legislation makes a huge difference to keeping the doors open and the people on the books.

    I like the pitch there Richard on the “expensive” work to get an accountant/lawyer to pass on your submission.

    Reply
  2. Cian

    Hmm.. If I am an employer and I can’t afford to pay my employees then I am only insolvent if I actually pay them. I can sign up to Revenue saying that if I pay them I am insolvent. If the government steps in and pays 75% of their wages, then I’m not paying that amount, so I’m not insolvent, and not breaking any laws.

    Taaa-da!

    Thanks you. I’ll forward my invoice via BS for payment.

    Reply
    1. The Old Boy

      This is closer to the interpretation that any High Court judge would take than Mr Grogan’s.

      Nurse! I can’t find my scintilla temporis!

      Reply
    2. GiggidyGoo

      Aren’t we lucky to have such an educated lawyer as yourself to tell (distract) us Cian?

      Somehow, I’d take the offering from Mr. Grogan above yours, given his qualifications

      And now, so as not to disappoint you, the requisite dig at FG. With FG, the devil is always in the detail. Big announcements, and a bag of air to back them up.

      Reply
  3. V

    Trading Restrictions doesn’t mean insolvent
    and this is an abnormal and extraordinary event, that has significantly impacted any enterprises’ ability to operate
    it is either shut down, or it is up the walls, like say a surgical mask manufacturer

    Any entity, can only be tackled under fraudulent trading if its failures are ongoing, and specifically intended to mislead, and its Financial Statements confirm their “going concern” is sound
    And no window dressing, like in Anglo

    Lads need to chill

    Year ending 2020 is going to be useless as a comparison period – either against YE2019 or YE2021
    So I reckon most entities, certainly in Industry anyway, no matter their size, scale, area of activity or regulation, will probably adjust their trading years/ period being reporting in their Financial Statements

    I know I would as it will give far better information about normal levels of activity
    And that’s all that should matter – is the business sound and well run and capable of growth, and worth investment, in the normal trading environment.

    Also for internal management reporting, whats the point of comparing the wage bill in say James’ in March 2021 v March 2020
    Or say, McDonalds

    Fraudulent trading
    GTF

    Fraudulent claims more like

    Reply

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