On 31 July 2020, the government published a new policy paper titled “Job Retention Bonus”. This further guidance follows the announcement of the new retention scheme and other measures in the summer budget on 8 July 2020.
New measures for Employers
We have outlined the key points for employers based on the information currently known as at 31 July 2020.
Job Retention Bonus – £1000
The Chancellor has announced that a new Job Retention Bonus will be introduced to reward and incentivise employers who keep on their furloughed employees. Detailed guidance will be published in September, including guidance on how employers should claim for the bonus.
We have summarised the key information currently known:
- The government will offer a one-off fixed payment of £1,000 to UK employers for each furloughed employee who remains continuously employed through to 31 January 2021. The bonus amount is fixed at £1000, irrespective of the employee’s earnings. The bonus will be taxable.
- An employer will be able to claim the bonus for any employees that were eligible for the Coronavirus Job Retention Scheme and they have claimed a grant for. HMRC will withhold payment where it believes there is a risk that Coronavirus Job Retention Scheme claims may have been fraudulently claimed or inflated, until the enquiry is completed.
- Employers can claim the bonus for all employees who meet the criteria, including office holders, company directors and agency workers, including those employed by umbrella companies.
- It is important to note that the bonus is not available for employees that are serving a contractual or statutory notice period that started before 1 February 2021.
- Employees must earn at least the Lower Earnings Limit (which is £520 per month) on average between the end of the Coronavirus Job Retention Scheme (i.e. 1 November 2020) through to the end of January 2021, to be eligible. Employers must ensure that they have up-to-date Real Time Information (RTI) records for the period to the end of January.
- Employers should keep their payroll up to date and address all requests from HMRC to provide missing employee data in respect of historic Coronavirus Job Retention Scheme claims.
- Employers can expect to receive the bonus payments from February 2021. The bonus is paid directly to the employer. There is no corresponding obligation on the employer to make any similar bonus payment to the employee.
- It is not yet clear whether the employee must return to their existing job, or whether they could return to a different job and remain eligible.
- The policy paper does not confirm whether employees that have already returned from furlough would be entitled to receive the bonus. Further clarification on this is needed.
- It also unclear whether, under the terms, an employer could ask employees to remain on furlough leave until 31 October 2020, before returning to work between 1 November 2020 through to 31 January 2021. Again, the detailed guidance will help to explain whether there is any relevant deadline for employers to note.
What does this mean for Employers?
The new bonus will be welcomed by employers that are already planning to bring back staff from furlough leave over the coming months. The scheme is clearly intended to assist employers and to help avoid mass redundancies occurring when the furlough leave scheme concludes in the autumn.
However, the bonus payment of £1000 per employee will not be enough to offset the cost of paying staff through to the end of January. This is particularly notable in the case of higher earners, given that the bonus is a fixed sum. Therefore, it may only offer a real financial benefit in industries where the employer can foresee a genuine prospect of work levels improving.
Unfortunately, for employers who are experiencing a downturn in work, the bonus is unlikely to be enough of a financial incentive to prevent redundancy measures from being taken. We therefore do not consider that this will prevent redundancies- albeit it may offer a silver lining to help employers when planning their next steps.
The Chancellor also announced the introduction of a new Kickstart Scheme. The scheme has been outlined as a £2 billion fund with the aim of creating hundreds of thousands of 6-month work placements aimed at those aged 16-24. The scheme is intended for individuals who are on Universal Credit and are deemed to be at risk of long-term unemployment.
The funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
This is a time-limited offer as the bonus scheme is only available for employers who apply between August 2020 and January 2021.
The government will be providing an additional £111 million for traineeships in England. This is intended to fund work placements and training for individuals aged between 16-24 years old.
The government will fund employers who provide trainees with work experience, at a rate of £1,000 per trainee. This is designed to improve provision and expand eligibility for traineeships to those with Level 3 qualifications and below, to ensure that more young people have access to high quality training.
A new payment of £2,000 will be offered to employers for each new apprentice they hire that is aged under 25. A payment of £1,500 will be made for each new hired apprentice aged 25 and over, from 1 August 2020 through to 31 January 2021.
These payments will be in addition to the existing £1,000 payment the government provides for new 16-18 year old apprentices, and those aged under 25 with an Education, Health and Care Plan, where applicable.
Coronavirus Job Retention Scheme (Furlough Leave)
Finally, whilst acknowledging that there has been some demand to extend the furlough scheme, the Chancellor was firm in his clear rejection of this. He suggested that extending the scheme would give “false hope” and he confirmed that, as previously announced, the furlough scheme would conclude on 31 October 2020.
Please see our previous update Furlough Scheme – Changes to contribution and ‘flexible furloughing’ which sets out in detail how the furlough leave scheme is changing over the coming months and what employers should expect.
If you would like to discuss any issues covered in this update please contact a member of the Employment team.
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