Coronavirus Job Retention Scheme - Update Bulletin

Since the Government’s announcement of the Coronavirus Job Retention Scheme in March, there have been numerous updates regarding its operation. This bulletin aims to give an overview of the key updates over the last two months.

Employer Costs

On 1st August, the level of grant received under the retention scheme reduced for the first time since the scheme’s introduction, with further reductions to follow each month until its closure on 31st October 2020.

From September, employers will be required to contribute 10% of the employee’s wage, up to £312.50 per month, towards the employee’s furlough pay, together with employer national insurance contributions and pension contributions.

In October, this contribution will increase to 20% of the employee’s wage, up to £625 per month, again together with employer national insurance contributions and pension contributions.

Wage caps are, however, proportional to the hours during which an employee is furloughed. For example, where an employee is furloughed for 50% of their hours, the £2,500 furlough pay cap is reduced to £1,250, together with the employer contributions outlined above.

Full details of the contributions and costs can be found here.

Job Retention Bonus

On 31st July 2020, details of the Government’s Job Retention Bonus were released, see here and here.

Chancellor Rishi Sunak announced the bonus as part of his ‘Plan for Jobs’ to assist the economic recovery from COVID19 and offer an incentive to retain employees. The announcement of the bonus also coincided with the reduction in the level of grant received under the retention scheme, outlined above.

The bonus provides a payment of £1,000 to employers who retain employees who have previously been furloughed under the Coronavirus Job Retention Scheme. Key requirements to obtain the bonus are:

• The previously furloughed employee must remain continuously employed by their employer until the end of January 2021;

• The employee must earn at least £520 per month on average between November 2020 and the end of January 2021;

• The employee must not be serving either contractual or statutory notice that started before 01 February 2021.

Employees who have been furloughed by their current employer following the 10th June deadline for new entrants, either due to a TUPE transfer or due to returning from parental leave, will be captured under the bonus scheme, subject to meeting the above criteria.

The £1,000 bonus will be payable to employers for every eligible employee retained.

Full details and guidance relating to the bonus will be issued in September.

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

Another month and another piece of new legislation has been enacted. On 31st July, the above Regulations came into force in order to confirm the calculation of a week’s pay in light of the retention scheme for the purposes of statutory payments.

Two key clarifications arising out of the Regulation are summarised below:

Redundancy Pay

Whilst many employers continued to calculate redundancy pay based upon the employee’s ‘usual’ wage, some aimed to reduce the value of the redundancy payment due by utilising the employee’s reduced earnings under the retention scheme in calculating the sum due.

The Regulations however confirm that employers must calculate redundancy pay based upon the earnings the employee would have received, had they been working on full pay. Any reduction in earnings due to the application of the retention scheme should therefore be disregarded.

Notice Pay Calculation

“If the employee is going to be on furlough during their full notice period, then I can just pay the furlough pay can’t I?”

Where an employee’s notice period is the statutory minimum, being one week’s notice per full year of continuous service, no.

In the same vein as redundancy pay above, an employee’s statutory notice pay must be calculated based upon their normal earnings, not the reduced earnings under the retention scheme.

Important Note

As above, the Regulations confirm the calculation of a week’s pay for statutory payments. The Regulations do not apply to entitlements above the statutory minimums.

Where employees are entitled to higher benefits, it is advisable to seek legal advice to confirm the impact of the retention scheme on the calculation of payments.

If you require specific legal advice please contact our Employment & HR team on 01228 552222 or hello@burnetts.co.uk.