New Legislation to Combat Redundancy and Notice Pay “Loophole” and what is the Job Retention Bonus?

On 30 July 2020, the Government announced that it would be introducing new legislation intended to remove a “loophole” that allowed employers to pay employees’ redundancy and notice pay based on employees’ furlough wages. This legislation came into force on 31^st July 2020.  

The legislation applies to employees that have been furloughed, it does not apply to employees who have agreed to a voluntary reduction in pay but have not been furloughed.

What rate of pay should employers use when paying their employees’ notice pay and redundancy pay?

Employees receiving redundancy pay on or after 31^st July 2020 must be paid based on their weekly pay, prior to any furlough pay.

The same position applies to employees serving statutory notice. Again, notice pay should be paid at the employees’ wage or salary prior to any furlough pay.  

For employees who do not have normal working hours, employers must calculate their redundancy and notice pay using an average of 12 weeks’ salary exclusive of any periods on a furlough wage.

The new legislation does not apply to contractual notice periods that are more than one week longer than statutory notice; those notice payments may be paid based on employees’ furlough salaries.

Employers can claim wages paid during the notice period under CJRS but cannot claim redundancy payments or payments in lieu of notice.

What is the Job Retention Bonus?

The Job Retention Bonus is a one-off £1,000 government payment payable in respect of every employee, previously furloughed, who remains employed by a Company on 31^st January 2021.

For an employer to be entitled to the bonus, both the employer and the relevant employee must meet certain eligibility criteria.

Which employers are eligible?

To be eligible for the bonus payments, employers must have:

• complied with their obligations to pay and file PAYE accurately under the Real Time Information (RTI) reporting system for all employees;
• maintained enrolment for PAYE online; and
• must have a UK bank account.

HMRC must be satisfied that respective CJRS payments have not been fraudulently claimed or inflated and may withhold bonus payments if they are not immediately satisfied that this is the case.

Which employees are eligible?

Employers will be able to claim the bonus in respect of employees who:

• were furloughed; employers must have submitted CJRS claims that meet the relevant criteria;
• have been continuously employed by the employer until at least 31 January 2021;
• paid an average of at least £520 per month between 1 November 2020 and 31 January 2021. Payments need not be £520 each month but the employee must receive some earnings for each of the three months;
• have an up-to-date RTI record; and
• must not be serving a notice period (contractual or statutory) that started before 1 February 2021.

When can employers claim for the bonus?

Claims can be made from February 2021 through Gov.UK. The Government has advised that further guidance on how to do so will be provided in September 2020.

Will there be a further extension to the Coronavirus Job Retention Scheme (CJRS)?

The Government has confirmed that there will be no further extensions to the CJRS. The Scheme will, therefore, cease to operate on 31 October 2020.  

We’re here to help.

Be sure to follow our social media channels as we continue to keep you updated on the latest coronavirus developments. If in doubt, please take advice. You can contact the Employment team at Myerson on 0161 941 4000 or via email at lawyers@myerson.co.uk.