TUPE and the Coronavirus Job Retention Bonus

Monday 5 October 2020

If you are looking to buy (part or all of) a business in the near future, then you may be eligible to claim the Coronavirus Job Retention Bonus for any employees transferring to you who have previous been furloughed by the seller.

What is the Coronavirus Job Retention Bonus Scheme (CJRBS)?

This government scheme allows employers to claim a sum of £1,000 per employee that returns to work and remains employed by them until 31 January 2021 following a period of claimed furlough leave.

The objective clearly being to incentivise the UK’s employers to keep as many people in employment as possible. Eligible employers who make a claim should receive the bonus payments in February 2021.

At present, the only government guidance directly relating to CJRBS is a policy paper published on 31 July 2020 that summarises the main principles. Further, more detailed, guidance has been promised by the end of September 2020.

However, in light of the ample guidance already provided as to the operation of the Coronavirus Job Retention Scheme (CJRS), which governs the rules relating to furloughing employees (which is intrinsically linked to the eligibility of an employer to a bonus under CJRBS), we have a reasonably complete picture of how the scheme will work.

Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)

The primary aim of TUPE is to protect employees upon a transfer of a business (or a service provision change). However, these regulations now also have the additional benefit of preserving the right of the employees’ employer to make a claim under CJRBS where the transferred employees had been furloughed by the previous employer.

It is uncertain from the wording of the guidance provided so far whether a TUPE transfer arising in consequence of a service provision change qualifies the new employer to make a claim either under CJRS or CJRBS. However, it is clear that TUPE transfers arising in consequence of a purchase of a business (or part of a business) will qualify provided that the other criteria are met.

Eligibility

In order to be eligible to claim under CJRBS in respect of an employee that TUPE transfers to them on or after 10 June 2020, the new employer will be eligible to make a claim if:

• it has filed a pay-as-you-earn (PAYE) return for January 2021;
• the employee being claimed for has earned an average of £520 per month between 1 November 2020 and 31 January 2021;
• the previous employer furloughed the employee for at least 3 consecutive weeks between the period 1 March 2020 and 30 June 2020;
• the previous employer made a claim for the employee under the furlough scheme by 31 July 2020; and
• the new employer has also furloughed the employee in question and made a successful claim under CJRS (which effectively rules out any employees transferred after 31 October 2020).

Maximum Cap

There is a cap imposed in respect of the maximum number of employees in respect of which a claim can be made by an employer. The cap for organisations to which employees are TUPE transferred will be the aggregate of:

• the maximum number of employees the new employer claimed for in any one claim ending on or before 30 June 2020; and
• the number of transferred employees who are eligible upon satisfying the bonus scheme criteria (provided that the previous employer had not exceeded their maximum cap).

Compulsory Liquidation

The government’s policy paper states that claims can also be made under CJRBS in the event of employees transferred from a company in liquidation. Provided that:

• the provisions of TUPE would have applied had it not been for a compulsory liquidation of a previous employer; and
• the employees in question had been furloughed by the previous employer for at least 3 consecutive weeks between the period 1 March 2020 and 30 June 2020,

then a new employer would (subject to the other criteria stated above) be able to make a claim for any employee transferred to them from the liquidator of a company in compulsory liquidation.

Conclusion

Our Corporate team are able to assist with conducting due diligence into the proposed target business, drafting contracts to help protect the right to claim under CJRBS in relation to transferring employee, and advising on the structure of the proposed transaction to ensure it achieves the buyer’s objectives (it possibly goes without saying that buying the limited company that runs a business, rather than buying the business itself, would also result in the buyer inheriting any rights to claim under CJRBS).

If you have any questions in relation to any of the above, please email or contact our Corporate team on 0113 207 0000.