Job Retention Bonus: How Does It Work?

4 August 2020

To encourage employers to retain furloughed employees, the Government will pay a Job Retention Bonus of £1,000 for each furloughed employee who is hired back.

advice : COVID-19, Employment and Fundraising

The Coronavirus Job Retention Scheme (CJRS) has provided a lifeline to millions of employees and their employers during the Covid-19 pandemic.

As of 19 July 2020, 9.5 million employees had been furloughed by 1.2 million employers, benefitting from support totalling £29.5 billion.

As with all good things, the CJRS must come to an end. The scheme is now is its second and final phase, which runs from 1 July 2020 to 31 October 2020. This phase provides a transition from Government support to employers once again meeting the costs of employing their employers.

From 1 July 2020, furloughed employees can return to work on reduced hours under the flexible furlough rules, with employers paying the employees as usual for the hours that they work and claiming a grant under the CJRS for the remainder of their normal hours.

Employees who were not furloughed for at least three consecutive weeks prior to 1 July 2020 are not eligible for a grant under the scheme from July onwards (unless the employee returns from statutory leave).

During the final phase of the scheme, employees will continue to receive 80% of their pay up to the equivalent of £2,500 a month – this is known as minimum furlough pay.

From 1 August 2020, the financial support provided under the scheme starts to reduce. For claim periods on or after 1 August 2020, employers cannot claim back the employer’s National Insurance and minimum pension contributions on grant payments but must instead meet these costs themselves.

For September, employers can only claim 70% of the employee’s wages; this reduces to 60% for October. However, furloughed employees will continue to receive their minimum furlough pay – 80% of their wages – with the employer making up the shortfall.

Job Retention Bonus

When the scheme comes to an end, employers will need to assess their staffing requirements and decide whether they can bring furloughed employees back to work.

The Government are keen that they do. To encourage employers to retain furloughed employees, they will pay a Job Retention Bonus of £1,000 for each furloughed employee who is employed continuously for at least three months, from the time of the employer’s most recent claim for that employee until at least 31 January 2021 until 31 January 2021.

To qualify for the bonus, the employee’s earnings during this period must, on average, be at least equal to the lower earnings limit for Class 1 National Insurance purposes, set at £120 per week (£520 per month) for 2020/21.

The Government will pay the bonuses from February 2021.

Differently from grants provided under the Job Retention Scheme, employers will be able to spend the bonuses at their discretion, not necessarily to remunerate employees.

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