On 2 October 2020, the government produced new guidance relating to the Job Retention Bonus Scheme. This is also supported by a new Treasury Direction on the Job Retention scheme and some useful practical examples to assist employers. We have outlined the key points for employers based on the new information known as at 2 October 2020.
New measures for Employers on the Job Retention Bonus Schenme
The new Job Retention Bonus is intended to reward and incentivise employers who keep on their furloughed employees.
The bonus is a one-off fixed payment of £1,000 to UK employers for each eligible employee that was furloughed and remains continuously employed through to 31 January 2021. The bonus amount is fixed at £1000, irrespective of the employee’s earnings and it is taxable. There is no obligation on the employer to pass the bonus payment to the employee.
Who is eligible to receive the bonus?
An employer will be able to claim the bonus for employees that were furloughed under the Coronavirus Job Retention Scheme and they have claimed a grant for. 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.
Employers can claim the bonus for all employees who meet the criteria, including office holders, company directors and agency workers, as long as the employer claimed a grant for them under the Coronavirus Job Retention Scheme and the other eligibility criteria are met.
The guidance confirms that employers can still claim the bonus even if they are planning to make a claim for that employee through the new Job Support Scheme.
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.
What is the minimum income threshold?
In order to be eligible to receive the bonus, the employer must have paid the “minimum income threshold” to the employee. In effect, this means that the employee must have received pay of at least £1560 (gross) between the period 6 November 2020 to 5 February 2021.
This falls into three tax months of:
- 6 November to 5 December 2020
- 6 December 2020 to 5 January 2021
- 6 January to 5 February 2021
It is really important to note that the employer must have paid the employee at least one payment of taxable earnings (of any amount) in each of the three relevant tax months. Taxable earnings would include a payment of statutory sick pay.
The government has produced some useful examples for employers to help demonstrate the minimum income threshold which applies irrespective of how often the employees are paid. It also disregards any circumstances that may have reduced the pay in the relevant tax periods, such as being on statutory leave or unpaid leave.
When can employers start to claim?
Employers will be able to claim the bonus between 15 February 2021 and 31 March 2021. The guidance will be updated by the end of January 2021 with details on how to access the online claim service on GOV.UK.
What about employees who have been transferred under TUPE?
The new guidance specifically addresses the position in relation to business transfers. In TUPE situations, employers may be able to claim for employees that have transferred to them. However, to claim the Job Retention Bonus, the employer must have furloughed and successfully claimed the individuals under the Coronavirus Job Retention Scheme, as their new employer. Practically, this means that an employer cannot claim the bonus for any employees that transfer to them after the Coronavirus Job Retention Scheme closes on 31 October 2020.
What should employers do to prepare?
Before an employer can claim the bonus, they will to need to have reported all payments made to the employee between 6 November 2020 and 5 February 2021 to HMRC through Full Payment Submissions via Real Time Information (RTI).
In preparation, employers should ensure that:
- they are enrolled for PAYE online;
- they comply with their PAYE obligations to file PAYE accurately and on time under Real Time Information (RTI) reporting for all employees between 6 April 2020 and 5 February 2021;
- they keep their payroll up to date and report the leaving date for any employees that stop working for them before the end of the pay period that they leave in;
- they use the irregular payment pattern indicator in Real Time Information (RTI) for any employees not being paid regularly; and
- they comply with all requests from HMRC to provide any employee data for Coronavirus Job Retention Scheme claims.
What does this mean for employers?
The bonus will be welcomed by employers that have been planning to bring back staff from furlough leave. The scheme is clearly intended to assist employers and to help avoid mass redundancies occurring when the furlough leave scheme concludes entirely on 31 October 2020.
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.
If you would like to discuss any issues covered in this update please contact a member of the Employment team.
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