COVID Wage Supplement and Shireburn indigo
As everyone is aware, the COVID-19 crisis has impacted all businesses in Malta. The Government has issued a number of schemes with different types of assistance, one of which is the COVID Wage Supplement scheme (CWS), being administered by Malta Enterprise (more details here). It is the COVID Wage Scheme which is the object of this document.
The Government is providing different levels of COVID Wage Supplements (CWS) dependent on the sector of the employer and various other parameters. These are published on the Malta Enterprise web site. Organisations that fall under the business sectors defined in Annex A of the Malta Enterprise list are subject to an € 800 monthly CWS, while those sectors listed in Annex B are entitled to a € 160 CWS. Other companies will not receive any CWS.
This document does not enter into the issue of the eligibility of organisations for the CWS but on how, if your organization benefits under the scheme, this impacts the payroll calculation process using Shireburn’s Indigo Payroll. Click here for detailed Indigo step-by-step instructions to process COVID payments.
As Shireburn always does, being the leading provider of payroll solutions in Malta, we always look to assess the impact on businesses of regulatory changes and to assist our clients in adapting to new schemes and regulations. The COVID crisis is no different and we have been working flat-out to understand and influence the mechanics of the scheme. In doing this, we have been in close contact with Malta Enterprise (M.E.) as well as the Commissioner for Revenue (CfR) to ensure that their directives and guidance align and that the procedures to be adopted are practical.
While initially there was some conflicting information, things are now clearer, and we are therefore reaching out to you to ensure that you are aware of these and the procedures that need to be adopted. While this document contains an executive overview, detailed processing instructions are available in Indigo’s On-line Help for staff operating the Indigo payroll. Click here for the official notice to employers from the Commissioner for Revenue.
The information contained in this document is not and should not be interpreted as legal advice.
Below are some important points using Annex A organisations as an example, but they are equally applicable for organisations covered under Annex B:
- The Government will be providing the CWS to the employer not to the employee and employers need to pass this onto the employees.
- Employers will deduct the normal SSC contributions from employees for the payroll period, based on their SSC category and the standard rules.There is no change to this process.
- However, the CWS being paid by the Government includes the employee’s Social Security Contribution (SSC) which is being paid by the Government.
- The employer therefore will not need to remit the employees’ SSC contributions to Government as part of the monthly FS5 process, even if this is deferred. They will of course still remit the employers’ SSC and the tax deducted from the employees as usual or after the acceptance of a deferral of these payments.
- Since the employer will have already retained the employees’ SSC, the CWS that the employer will receive from Government will have the employees’ SSC contribution subtracted.As a result, the €800 CWS will be received by employers as a result of a €720 contribution directly from the Government and €80 (i.e. 10%) that they would have already deducted from the employee as per standard calculation process.
- The above requires no change whatsoever to the processing on Indigo but only affects the payment to be submitted by the employer.
- As the CWS is a replacement of the wage usually paid by the employer to the employee, the CWS is not tax-exempt. It continues to be taxed as if the €800 had been paid as a part of the basic wage. Of course, there will be instances where the remuneration level of the employee as calculated under FSS rules makes this taxable at 0% (as distinct from non-taxable).
- Because the CWS is required to be identified on the payslip, and possibly also on the FS7, produced either at the end of-year or at the end of an employee’s employment, it will be necessary to separate out the CWS with its own description from the basic salary. Using an Annex A example, to implement this in Indigo, a pre-tax deduction of €800 would need to be made to applicable employees as well as a pre-tax addition of €800. It is important that both the deduction and the addition are affected pre-tax.
- The Pre-tax addition should use the Pay Item in Indigo called COVID Wage Supplement to ensure that this description appears on the employees pay slip.
- Please note that the CWS received by the employer is not to be treated as taxable revenue as part of the tax computation at the end of the financial year but nor is the CWS to be treated as a taxable expense.They are tax neutral.
Click here for detailed Indigo step-by-step instructions to process COVID payments.
Please be aware that the regulations, guidance and any legal notices are evolving. While these documents provide our understanding of the requirements, as confirmed by the Commissioner for the Revenue as of Friday 3rd April 2020, please ensure that you obtain professional advice where needed and keep up to date with changing guidance.
Help us to help you
As you can imagine, our support team are receiving many emails and phone calls about this issue, We have prepared these documents to make our clients and users as self-sufficient as possible and to allow them to obtain clear guidance. Please take the time to go through the documentation and, then if you still need assistance, please get in touch with firstname.lastname@example.org as usual.