ISME, the body which represents small and medium businesses, has warned that any sudden move to halt the Temporary Wage Subsidy Scheme could trigger a massive wave of redundancies.

Their chief executive Neil McDonnell issued the warning as the Revenue Commissioners commenced a programme of compliance checks to ensure that employers are still eligible for the scheme, which has so far delivered government wage subsidies totalling almost €1.7bn to help companies hit by the Covid-19 emergency.

Revenue is warning employers that it may claw back the subsidy from those who did not have a reasonable basis for believing they qualified for the scheme.

Mr McDonnell acknowledged that the scheme could not go on forever, and that Revenue had a duty to protect the taxpayer.

However, he warned that any sudden ending of the TWSS could "crystallise" a massive wave of job losses among employers who could not afford to retain staff without the wage subsidies.

He cautioned that that in turn would trigger a requirement to pay redundancy lump sums to staff, and that where the employer could not afford that, the burden would fall on the state via the Social Insurance Fund.

He said that the Covid-19 emergency would have a "long tail", and that many small and medium enterprises still had a very uncertain future regarding their long-term viability.

Revenue anticipates the TWSS compliance programme will last several months, during which it will write to the 57,000 employers who have received a TWSS payment to date, to ensure that the scheme is operating correctly.

Documentary evidence will be sought to establish that employers participating in the scheme meet the eligibility criteria, that employees are receiving the correct amount of subsidy, and that the subsidy amount is being correctly identified in employee payslips.

Revenue says it expects these contacts to confirm that the "vast majority" of employers are fully compliant in their operation of the TWSS.

When the TWSS was launched on 26 March - initially for a period of 3 months but now extended to the end of August - employers had to have a reasonable expectation of a drop in business activity of at least 25% due to the pandemic. 

However, no immediate proof was required, as the government encouraged employers to sign up, in order to retain a link with the workers rather than laying them off, making it easier to restart activity when the Covid-19 emergency ended.

Revenue states: "When the scheme was announced in March, employers joined based on the principles of self-assessment and a best estimate determination in relation to a decline in turnover, customer orders or any other 'reasonable basis' measurement. Revenue has advised employers that as the end of Quarter 2 approaches, it is timely to review their eligibility for the scheme and determine whether they did in fact meet the eligibility criteria."

They say that employers can continue to avail of the TWSS if, following a review, they establish that the eligibility criteria were met.

"If an employer determines that the eligibility criteria were not met but had reasonable grounds for assuming the criteria would be met, the employer should now cease claiming the subsidy for the extended scheme.

"Revenue will not seek to claw-back the subsidy paid to such employers where evidence of the best estimate determination supporting the original application is found to be reasonable. If there was not a reasonable basis the subsidy is repayable to Revenue."