On 17 April The Pensions Regulator (TPR) provided updated information on the interaction between the Coronavirus Job Retention Scheme [CJRS] with salary sacrifice arrangements.
You can find TPR’s update here.
In summary, the guidance states that employers must continue to pay furloughed workers’ pension contributions as normal where they have entered into a salary sacrifice arrangement.
“Salary sacrifice is an arrangement employers may make available to employees – the employee agrees to reduce their earnings by an amount equal to the employee’s pension contributions.”
There are a few key points to note:
- The Coronavirus Job Retention Scheme sets out that when calculating 80% of a furloughed worker’s salary or wage, the reference salary or wage to use is the amount after the salary has been sacrificed.
- All of the grant received from government to cover the furloughed worker’s pay must be paid to them in the form of money. The pay during the furlough period should be treated as the post-sacrifice pay so that no further sacrifice is made on that amount.
- Any contractual obligations you have entered into as part of the salary sacrifice arrangements and the obligation in the pension scheme rules continue to apply as normal.
- If, as a result of your contractual arrangements, you cannot reduce pay then you will continue to pay your furloughed workers their full pay and calculate pension contributions and the salary sacrifice element as usual on this pay.
- If this is the case, you can only claim a grant under the Coronavirus Job Retention Scheme to cover the lower of 80% of your furloughed workers pay or £2,500 a month plus the associated employer’s national insurance contribution costs and the employer’s pension contribution up to the level of the AE statutory minimum employer contribution.
- HMRC has advised that COVID-19 counts as a life event, meaning that the terms of a salary sacrifice arrangement could be changed, if the relevant employment contract is updated accordingly with agreement from the employee.
Correct at the time of writing [20 April 2020] and is intended for general information only and should not be construed as advice.