With government statistics showing over 9.5m employees and 1.2m employers having been signed up to the Coronavirus Job Retention Scheme or furlough scheme, which is now closed to new entrants, the government has moved onto the next stage of their jobs retention plan by introducing the Jobs Retention Bonus.
The bonus of £1,000 will be available to be claimed by employers for every employee who had been previously furloughed and has been retained until 31 January 2021 and earns on average at least the Lower Earnings Limit (£520 per month) between 1 November 2020 and 31 January 2021.
While the bonus is welcome, many have criticised it for paying out to employers who would have likely retained the jobs anyway and, indeed, more than half the workers to have been furloughed during the coronavirus pandemic are already likely to have returned to work, according to analysis of official statistics by the Resolution Foundation.
This in itself is good news, and is in line with the Bank of England’s view that the economic shock triggered by the coronavirus pandemic will not be as severe as initially feared, with the economy back to pre-pandemic levels by the end of 2021.
This positive prediction is supported by spending levels having already reached those levels seen in January 2020, following the relaxation of Covid-19 restrictions.
However, many have said that the Job Retention Bonus is not enough of an incentive to encourage employers to retain the jobs that they are already considering cutting.
Whether this criticism is warranted or not, the likelihood is that the bonus will not be sufficient to save some jobs. Current predictions are that unemployment levels will, at their worst, double, with around 2.5m people unemployed.
Redundancy is always a difficult topic of conversation, but it is inevitable in the current situation that there will be significant levels of job losses.
There have already been reports of redundancies at some of the UK’s most well-known organisations.
Unsurprisingly, the last thing that employees and employers alike will want when going through this process is an unexpected tax bill; something which is not easily avoidable when considering the complexities of the income tax and National Insurance Contributions (NICs) treatment of termination payments.
Lessons need to be learned from the financial crisis of 2008, when employers had to make redundancies while trying to manage through the recession.
We saw from this, that a large number of employers did not apply the correct tax and NICs treatment to their termination payments with HMRC, opening time-consuming enquiries as a result.
