Coronavirus – Furlough bonus scheme and redundancy pay announcements

Coronavirus - Furlough bonus scheme and redundancy pay announcements 2
Coronavirus - Furlough bonus scheme and redundancy pay announcements 3

Eversheds Sutherland – The government has published further details of the £1,000 employer bonus for every furloughed employee who remains employed until the end of January 2021. It has also implemented legislation to ensure that furloughed employees receive statutory redundancy pay, and some other statutory entitlements, based on their normal wages, rather than any reduced furlough rate.


From 30 June 2020, significant changes were made to the Coronavirus Job Retention Scheme (“Scheme”), including the introduction of “flexible furloughing” and confirmation that the Scheme would be wound down, in terms of wage contribution, before closing at the end of October (for further information, read our flexible furlough Alert). These changes were followed by the announcement of a new job retention bonus “to provide additional support to employers who keep on their furloughed employees in meaningful employment”.

The bonus: further details published

The government has confirmed that the following rules apply to employers claiming the £1000 bonus per employee:

Eligible employers

  • an employer will be able to claim the bonus for any employees that were eligible for furlough and for whom they have claimed a grant
  • all employers are, subject to what follows below, eligible for the bonus including recruitment businesses and umbrella companies
  • employers must have complied with the Scheme rules to be eligible. For example, employers are warned that: they “must keep their payroll up to date and accurate and address all requests from HMRC to provide missing employee data in respect of historic Coronavirus Job Retention Scheme claims”; “they must have previously and correctly claimed for the employee under the Scheme” and the bonus may be withheld if HMRC believes there is a risk that Scheme claims may have been “fraudulently claimed or inflated”
  • where TUPE or the PAYE business succession rules apply, a new employer may also be eligible for the bonus if it has successfully claimed for the transferred employees under the Scheme post-transfer. Similarly, a new employer may also be eligible in respect of the employees associated with a transfer of business from the liquidator of a company in compulsory liquidation where TUPE would have applied were it not for the company being in compulsory liquidation. This seems to create an odd incentive for transferees to place transferred employees onto furlough so they are eligible to claim the bonus. However, there is a cut-off date – the bonus cannot be claimed for any employee transferred under TUPE or under the business succession rules after 31 October 2020 

Eligible employees

  • employees must have been furloughed and meet all Scheme eligibility criteria
  • they must have been continuously employed from the time of the employer’s most recent furlough claim for that employee until at least 31 January 2021
  • employees must have been paid an average of at least £520 per month between 1 November and 31 January 2021 (a total of at least £1,560 across the three months). As a three month average, the £520 does not have to be paid in each month but the employee must have received some earnings in each of the three calendar months. Further guidance on what earnings can be included in the £520 average will be published in September
  • the employer must have up-to-date PAYE Real Time Information records for the period to the end of January
  • importantly, the employee must not be serving a contractual or statutory notice period that started before 1 February 2021. That may not prevent an employer from commencing a redundancy consultation period prior to the end of January. However, we would recommend a cautious approach as it is possible that the rules/guidance may be changed and, in any case, employers will be mindful of any reputational concerns from receiving a bonus in respect of an employee whom they are proposing to/have agreed to make redundant
  • according to the guidance, the bonus extends to all employees who meet the above criteria, including “office holders, company directors and agency workers, including those employed by umbrella companies. The above criteria must be met regardless of the frequency of the employee’s pay periods, their hours worked and rate of pay”
  • those who were furloughed and had a claim submitted for them after the 10 June (when the CJRS closed to new entrants), because they were returning from paternal leave or time serving as a military reservist will also be eligible for the bonus as long as they meet the other eligibility criteria
  • the bonus is also available for employees on fixed term contracts, provided the eligibility criteria are met, and contracts can be extended or renewed without affecting eligibility for the bonus providing that continuous employment is maintained

Bonus payments may be claimed from February 2021 and further details on the process will be available in September.

Calculating redundancy payments

New legislation came into force on 31 July ensuring that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than any reduced furlough rate. The legislation also addresses other employment rights that rely on average weekly pay, including statutory notice pay, unfair dismissal and short-time working.

There was some uncertainty as to how a week’s pay should be calculated for employees who had been furloughed and subsequently dismissed, with the prospect that they might receive less than if they had been working normally. In broad terms, the legislation ensures that any pay reductions, made because the employee was temporarily furloughed, are ignored for the purposes of statutory redundancy pay, notice and related statutory entitlements. Many employers had already been basing redundancy and notice pay on normal wages, given the circumstances.


There is a notable nudge element to this bonus guidance, with HMRC looking to reward ‘good’ employer submissions: no bonus will be paid where furlough claims have been incorrectly or fraudulently made by employers. Employers must also have up-to-date, accurate records and have responded to requests from HMRC to provide missing employee data. Further guidance is promised in September 2020, but at least employers do now have more clarity on eligibility. 

NB this Alert covers England, Wales and Scotland. It does not cover employment law differences that apply only in Northern Ireland

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