The current economic conditions are having a huge impact on us all, however it’s at times like this when we can support you and your clients more than ever.
These Q&As will help with your client conversations about their workplace pension scheme. We’ve split them into two – general questions about what employers need to consider, and the Government’s Coronavirus Job Retention Scheme.
We’re constantly reviewing and updating this page based on new information and guidance available. This information is based our current understanding of the position for employers on 10 November 2020. For more information about this scheme, have a look at the Government’s website.
The original scheme was open to all UK employers that had created and started a PAYE payroll scheme on or before 19 March 2020. The original scheme closed to new entrants on 30 June, with the last three-week furloughs before that point commencing on 10 June.
The scheme was extended at the end of October and will now run until 30 April 2021. All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the Job Retention Scheme.
It’s open to any UK organisation with employees, but there are restrictions on certain public sector organisations and those receiving public funding
The original scheme included any employees who were on the employer’s PAYE payroll on or before 19 March 2020 and which were notified to HMRC on a Real Time Information (RTI) submission on or before 19 March 2020. An RTI submission notifying HMRC that a payment has been made for an employee, must have been made on or before 19 March 2020.
The scheme was extended at the end of October and will now run until 30 April 2021. Under the extension employees needed to be employed by the employer on 30 October 2020 and had to be have been on an employer’s PAYE payroll between the 20 March 2020 and 30 October 2020, and the employer has to have made a PAYE RTI submission to HMRC notifying a payment of earnings for that employee. Neither the employer nor the employee needs to have previously used the scheme. Currently the scheme is due to end on 30 April 2021 but this will be reviewed by the Government in January 2021.
Any employees not included in an RTI submission on the relevant date cannot be furloughed or claimed for as part of this scheme.
The original scheme closed to new employees on 30 June. Employers could then only furlough employees they had furloughed for a full three-week period prior to 30 June. So the final date by which an employer could furlough an employee for the first time is 10 June.
If an employee had been made redundant or stopped working for the employer or after 23 September 2020 they can be re-employed and put on furlough. This applies as long as the employee was employed and on the employer’s PAYE payroll on or before 23 September 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made between 20 March and 23 September 2020.
From March to the end of June to be eligible for the grant, employees couldn’t do any work for or on behalf of the organisation. This included providing services or generating any revenue. If an employee was working, but on reduced hours, or for reduced pay, they weren’t eligible for the scheme.
Since 1 July 2020, businesses were given the flexibility to bring furloughed employees back part-time. Individual firms can decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them. Employers will be responsible for paying their wages while in work.
To be eligible for the grant, employers need to write to the employee confirming they’ve been furloughed and keep a record of this communication. They’ll also need to discuss this with their employees and make any changes to their employment contract by agreement.
They may need to start group consultation processes to get agreement and change the terms of employment. This includes considering any changes to pension contributions or rights.
When employers are making decisions in relation to the process, including deciding who to offer furlough, equality and discrimination laws will apply in the usual way. So some employers may also want to get legal advice.
Since 1 July, employers could bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim the grant for their normal hours not worked.
No. Employers don’t need to place all their employees on furlough.
They could have a mix of those on furlough who cannot do any work, some on reduced hours and some still being paid in full. However, they can only claim for those designated as furloughed.
As a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month, plus the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
Employers can also choose to top up an employee’s salary beyond this, but there’s no obligation on the employer to do this as part of the scheme. They’ll also need to pay the employee all the grant they receive for their gross pay. They can’t charge any fees from the grant.
For March to July, the grant covered whichever was the lowest of either 80% of an employee’s regular earnings or £2,500 per month, plus the associated employer National Insurance contributions and minimum AE employer pension contributions on any subsidised earnings.
From 1 July, employers could bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim the grant for their normal hours not worked.
From August, employers had to pay the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
From September, the government paid 70% of wages up to a cap of £2,187.50. Employers paid employer National Insurance contributions and 10% of wages to make up 80% total up to a cap of £2,500.
From October, the government paid 60% of wages up to a cap of £1,875. Employers paid employer National Insurance contributions and 20% of wages to make up 80% total up to a cap of £2,500.
Between November and March 2021 the government will pay 80% of wages up to a cap of £2,500. Employers will pay employer National Insurance Contributions and employer pension contributions. The government will review the scheme in January 2021.They’ll need to calculate the 80% / 70% / 60% using the employee’s actual earnings before tax and they can’t include any discretionary fees, commission or bonuses. Any regular payments the employer is obliged to pay including past overtime, fees and compulsory commission payments can be included.
If the employee has been employed (or engaged by an employment business) for a full 12 months prior to the claim, they can claim for the higher of either:
However, if the employee has been employed for less than a year, they can claim for an average of their monthly earnings since they started work. And if they only started in February 2020, employers can use a pro-rata for their earnings so far to claim.
Employers will need to claim this online from HM Revenue & Customs (HMRC). There's more guidance on their website.
Employers can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for, but they can backdate claims to 1st March.
While on furlough, the employee’s earnings will be subject to usual income tax and other deductions. And all employers are still responsible for the associated employer National Insurance contributions.
From March to the end of July they could also claim employer National Insurance contributions on the earnings paid.
Employers must pay at least the minimum automatic enrolment employer pension contributions on behalf of their furloughed employees. Up to the end of July they could claim back the minimum automatic enrolment employer pension contributions on the earnings paid, but from August they had to pay this themselves.
The minimum mandatory employer contribution is 3% of income above the lower limit of qualifying earnings (which was £512 per month until 5th April and is £520 per month from 6th April 2020 onwards).
The Pensions Regulator has provided more guidance to employers to help them calculate claims on their National Insurance contributions and minimum automatic enrolment employer pension contributions; this can be found on their website.
The employer will also need to consider their employment contracts, any scheme rules and communicate with their employees before they make any changes to the contribution levels.
Guidance from the Government makes it clear the salary for calculating the grant should not include the cost of non-monetary benefits provided to employees, including taxable benefits in kind. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.
Schemes which operate a salary sacrifice basis will therefore get back less from the Job Retention Scheme than if they didn't have the arrangement, as the salary used for the 80% grant and the minimum employer contribution is reduced.
It is important to note that all the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.
Changing the salary sacrifice arrangement now will not alter the grant. The Government has produced some guidance.This is because the reference salary to be used for calculating the grant is as at 19 March 2020 or, the 28 February if the employer had used this date based on previous HMRC guidance or other period defined in the rules, all of which relate to the past tax year. Therefore choosing to remove the agreement after the event would not change the grant.
If an employer is “topping up” and paying 100% of an employee’s salary then an employee may wish to be removed from the salary sacrifice arrangement so they increase their take home pay at this time.
If they do this, it will have an impact on both employer and employee National Insurance contributions.
HMRC has confirmed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contracts are updated accordingly.
To ensure workers who are about to take family related leave are not penalised by being furloughed, the Government has brought forward regulations which require furloughed workers planning to take paid parental or adoption leave to be entitled to pay based on their usual earnings rather than a furloughed pay rate. The regulations include:
There are more details from the Government here.
TPR has confirmed they expect employers to continue making contributions into their scheme, and we would encourage any employers to do so if they can.
If the employer is concerned about whether they can meet their ongoing duties, we would suggest they speak to TPR. There’s more information about this on online.
Yes. Employers will need to continue deducting contributions from the members’ salaries. Statutory sick pay is part of the qualifying earning rules for automatic enrolment.
However, to help in the immediate situation, the government is currently updating the rules to allow sick pay to be paid earlier. There’s more information about this online.
Employees can stop their contributions at any time. Yet if they decide they want to leave the scheme after the opt out window has ended, they’ll need to do this in conjunction with the scheme rules or in agreement with the employer.
If an employee stops their contribution, automatic enrolment rules do allow employers to stop making their contributions, but they’ll need to make sure this is done in line with any scheme rules if it’s an occupational scheme, or any previously agreed processes or contractual arrangements if it’s an automatic enrolment scheme.
If the employee and/or the employer want to re-start the contributions, this can be done, but again it will need to be in line with any agreed processes.
If the employee’s contribution stops, employers will need to stop deducting contributions from their salary.
Similar to the previous question, employers will need to check to see if there are any conditions that apply to minimum/matching contribution amounts. And then ensure they update their schedules to reflect the new contribution.
If the employer is not paying any salaries, then they wouldn't need to make any contributions.
The Government introduced the Job Retention Scheme which provides a grant for 80% of wages, reducing to 70% in September, to 60% in October but increasing back up to 80% of wages in November and subject to certain conditions.
Until August, the grant also supported employer contributions equivalent to the minimum employer automatic enrolment contribution, which is 3% of band earnings.
There are more details on this scheme in Q&A’s below along with details of where to find out more from the Government online.
If the salary has been reduced, any pension contributions the employer makes, should be based upon the revised salary. It’s important employers check that any reduced pension contributions are still in line with any specific arrangements they have with employees.
If the scheme’s contribution basis meets the statutory minimums then yes they can change the scheme’s basis. If they decide to make the change, they’ll need to:
Yes. Until TPR provide any other advice around new joiners, employers should continue to enrol any new employees into the scheme in the normal way.
TPR appreciate that current circumstances will be challenging for employers, however until TPR confirms otherwise, employers should try to make their pension contributions as soon as they can.
If any employers are concerned about how they can continue to meet their ongoing duties, we suggest they speak to TPR.
Under the Coronavirus Job Retention Scheme, all UK employers have access to support measures. It’s designed to help them continue paying their employees’ salaries during these times, and hopefully avoid having to let some of their workforce go.
If employers do need to let their workforce go, they’ll need to follow the normal rules and processes for terminating employment, make any final payments into the pension scheme and complete the notification of leaving process on the scheme.
There is more information about the scheme available on the Government’s website.
If you or your clients need to get in touch with TPR, here’s their contact details.
We’re constantly reviewing and updating this page based on new information and guidance available. This information is based our current understanding of the position for employers on 10 November 2020. For more information about this scheme, have a look at the Government’s website