Furloughed workers: Job retention bonus and how to calculate statutory redundancy and notice payments for furloughed workers

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Furloughed workers: Job retention bonus and how to calculate statutory redundancy and notice payments for furloughed workers

Published 6 August 2020

More details have been published about the Government’s Job Retention Bonus and legislation has come into force governing the calculation of statutory redundancy payments for furloughed workers.

THE FACTS

In July, the Government announced that it would pay a bonus to employers who retain employees who have been furloughed until January 2021. The Government has now published a policy paper on the job retention bonus scheme. Further details are expected in September.

 The key points are:

  • It is a one-off payment of £1,000 for every employee who has been previously claimed for under the Coronavirus Job Retention Scheme (“CJRS”), and who remains continuously employed through to 31 January 2021.
  • Eligible employees must earn at least £520 a month on average between 1 November 2020 and 31 January 2021.
  • Employers are able to claim for the Job Retention Bonus after they have filed PAYE for January 2021 and payments will be made from February 2021.
  • The details published say “Where a [CJRS] claim for an employee was incorrectly made, a Job Retention Bonus will not be payable.”
  • A new employer may be eligible to claim the Job Retention Bonus in respect of employees of a previous business which were transferred to the new employer if either TUPE applies, or the PAYE business succession rules apply to the change in ownership.
  • The bonus will NOT be payable if an employee is serving a contractual or statutory notice period, that started before 1 February 2021.
  • The bonus will be taxable, so the business must include the whole amount as income when calculating taxable profits for Corporation Tax or Self-Assessment.

The Government also brought in legislation on 31 July 2020 that requires employers to base the calculation of statutory redundancy payments for furloughed employees on the employee’s normal weekly pay rather than on their reduced furlough pay (where pay has been reduced during furlough). For those who do not have normal working hours, a week’s pay is calculated according to their 'reference salary' for claiming furlough pay under the CJRS, but without the cap. The legislation also covers other statutory employment rights that depend on calculating a week’s pay.

WHAT DOES THIS MEAN FOR EMPLOYERS?

Employers who are considering making furloughed employees redundant may wish to factor the retention bonus scheme into their decision making.  While the sums involved may not be sufficient to save jobs, it will be prudent for employers to show they have at least considered the possible additional revenue that the job retention bonus scheme could bring in as part of the alternatives to dismissal.    

It is unsurprising that the Government has acted to ensure that employers calculate statutory redundancy and notice payments based on employees’ “normal” weekly pay, rather than any reduced furlough pay.

Job Retention Bonus Policy Paper

The Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations    2020

Authors

Ceri Fuller

Ceri Fuller

London - Walbrook

+44 (0)20 7894 6583

Zoë Wigan

Zoë Wigan

London - Walbrook

+44 (0)20 7894 6564

Hilary Larter

Hilary Larter

Leeds

+44 (0)113 251 4710

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