As the Coronavirus Job Retention Scheme comes to an end on 31 October, employers will be considering if their business may be eligible for the Job Retention Bonus from the Government. However, there is a sting in the tail at the end of the Job Retention Scheme as, to claim the Job Retention Bonus, certain conditions need to be met and consideration should be given to these conditions now to ensure the eligibility criteria are satisfied.
What is the Job Retention Bonus and is my business eligible?
The Job Retention Bonus is a one-off £1,000 taxable payment paid to the employer, for each eligible furloughed employee for whom a successful Job Retention Scheme claim was made and who remained continuously employed from the final furlough claim made on their behalf until 31 January 2021. While it will not be enough to offset their salary costs it will be a welcome cash flow addition.
This is a fixed bonus regardless of the employee’s earnings and there is no requirement for the employer to pay this to the employee.
An employer can still claim the Job Retention Bonus even if they make a claim for those same employees through the Job Support Scheme.
Who is an eligible employee?
For the purpose of the Job Retention Bonus, an eligible employee:
- Was eligible for, and a eligible claim made under, the Job Retention Scheme;
- Has been continuously employed since the last Job Retention Scheme claim in respect of them until 31 January 2021;
- Is not serving any contractual or statutory notice period on 31 January 2021 (this includes people serving notice of retirement); and
- Has been paid sufficient taxable pay to meet the Job Retention Bonus minimum income threshold (see below).
There are also rules covering employees transferred under TUPE or otherwise due to a change in employer ownership, as well as for non-employees such as office holder and agency workers. If the individual was not eligible for the Job Retention Scheme then the Job Retention Bonus will not be paid.
What is the minimum income threshold?
In order to meet the minimum income threshold, the eligible employee must be paid a total minimum of £1,560 (gross) taxable pay throughout the three tax months:
- 6 November 2020 to 5 December 2020;
- 6 December 2020 to 5 January 2021; and
- 6 January to 5 February 2021
A payment of taxable earnings must be made to the employee in each tax month regardless of their ‘normal’ pay pattern, albeit it does not need to be the same each month as long as the total £1,560 threshold is met. Therefore, care will be needed during this eligibility period with regard to irregular payment patterns and statutory benefits receipts. In addition, certain pension contributions made by the employee will reduce their taxable pay each month.
The following examples are from current HMRC guidance for an eligible employee:
Bob usually earns around £1,800 each month but was off sick and receiving Statutory Sick Pay (SSP) for several weeks, including the whole of December. His taxable pay in the relevant tax periods was:
- 6 November to 5 December 2020 – £1,500
- 6 December 2020 to 5 January 2021 – £383.40
- 6 January to 5 February 2021 – £1,750
SSP counts as taxable earnings, so Bob received a payment of taxable earnings in each relevant tax period. The total taxable pay was £3,633.40. As this exceeds the minimum income threshold of £1,560, Bob’s employer can claim the Job Retention Bonus in respect of Bob.
Charlotte works part time variable hours for £10 per hour, paid on the last day of each month. She is a member of the company pension scheme and makes 5% contributions under a net pay arrangement. Charlotte was paid for 50 hours in November and 55 hours in December and January. The total gross pay was £1,600 across the relevant tax periods, however the effect of the pension deductions mean that her taxable pay in those periods was:
- 6 November to 5 December 2020 – £475
- 6 December 2020 to 5 January 2021 – £522.50
- 6 January to 5 February 2021 – £522.50
Charlotte received a payment of taxable earnings in each relevant tax period but the total taxable pay is £1,520. This is less than the £1,560 minimum income threshold so her employer cannot claim the Job Retention Bonus in respect of Charlotte
What should employers do and when can they claim?
In order to prepare employers should:
- Identify those employee’s previously furloughed who will still be continuously employed as at 31 January 2020;
- Of those, identify those that will meet the minimum income threshold;
- Ensure all RTI submissions are made correctly and on time; and
- If HMRC enquire into a Job Retention Scheme claim, provide HMRC with the information they need promptly as the Job Retention Bonus will not be paid if HMRC are still reviewing any Job Retention Scheme claim
Employers can claim the Job Retention Bonus from 5 February 2021 and applications will remain open until 31 March 2021. HMRC should provide further guidance on how to claim by the end of January 2021.
If you would like any assistance regarding the Job Retention Bonus please contact the Employment Tax team on email@example.com or your usual PEM contact.
The above is based on HMRC guidance as at 2 October 2020