Because tackling the coronavirus crisis involves grappling with uncharted territory, government rules and regulations can get amended very quickly.
So, we aim to keep you updated about any changes that can affect you or your clients, and tweaks to the government’s Coronavirus Job Retention Scheme announced recently certainly fall into that category.
Although the scheme had been due to end in June, Chancellor Rishi Sunak has now extended it until the end of October. The basic terms remain the same, although a greater degree of flexibility will gradually start to kick in after the end of June.
As with all intended lockdown measures, however, exact timings are conditional on coronavirus infections remaining confined to safe levels, as the government has repeatedly stated that it is not willing to risk a further peak in the epidemic that could overwhelm NHS resources.
The Coronavirus Job Retention Scheme, which has already protected 8.4 million workers, continues to make grants available via HMRC to UK employers needing help to pay the wages of staff who would otherwise be made redundant.
Employers can claim 80% of furloughed employees’ usual monthly wage costs – up to a cap of £2,500 a month per employee – plus associated employer NI contributions and minimum auto-enrolment employer pension contributions (3% of qualifying earnings).
Employees will remain entitled to the same amounts until the end of October but employers are due to have to start contributing towards some of the costs on a phased basis.
From the beginning of July, the intention is that furloughed workers will be able to return to work on a part-time basis – a month earlier than originally announced – with employers paying them in full for the hours they work.
Then in August employers are due to lose the ability to reclaim NI contributions and minimum auto-enrolment pension contributions from the scheme, and in September it is intended that they start having to pay for 10% of furloughed wages – rising to 20% in October.
The government is also exploring ways through which it can support furloughed workers who wish to do additional training or learn new skills during this period.
Although employers are due to start funding their own minimum auto-enrolment contributions in August, other pension rules remain unchanged for the time being.
The minimum contributions required under auto-enrolment must still be paid – albeit based on the lower furlough salary amount. However, any employer that feels it cannot pay its contributions, or which has other immediate concerns about its scheme or its administration, should contact The Pensions Regulator (TPR) as soon as possible.
It should be noted that there are particular messages to take on board when a salary exchange arrangement is in place for a furloughed employee, and the situation in this respect has become clearer during recent weeks.
Most straightforwardly, employers using such an arrangement must continue to pay furloughed workers’ pension contributions as normal, and when calculating 80% of salary, the reference salary to use is the amount after the salary has been exchanged.
But salary exchange also has implications for what the employer can claim in pension contributions from the scheme until August, and this may have to involve a bit of number crunching.
An employer may be required to pay pension contributions for furloughed employees that are more than the 3% of qualifying earnings they can currently claim for from the Coronavirus Job Retention Scheme, but they can’t claim the excess from the scheme or reduce an employee’s furlough salary to fund the additional amount.
If the contractual arrangements for furloughed employees state that a set amount will be sacrificed and paid to the pension scheme, then an employer should continue to pay this amount across as part of the employer contribution – even if the amount is greater than the amount due under the pension scheme rules or governing documentation.
If, on the other hand, pension contributions are calculated as a percentage of pay, then contributions should reduce if an employee’s furlough salary is lower than their normal salary. It is necessary to calculate what pension contributions are due – taking into account the furlough salary and the notional pre-sacrifice salary relating to that – and what can be claimed from the scheme.
Content correct at the time of writing and is intended for general information only and should not be construed as advice.