CORONAVIRUS JOB RETENTION SCHEME - EMPLOYER CONTRIBUTIONS
We recognise that the ongoing Coronavirus outbreak may be placing considerable strain on you and your employees. As part of our support for you, we’ve provided a summary of the Government’s Coronavirus Job Retention Scheme (CJRS) and its effects on employer pension contributions. The CJRS was set up in March 2020 by the Government in response to the COVID-19 virus. The scheme has been amended and extended several times since then. As announced in the Budget on 3rd March 2021, it’s now running until 30th September 2021.
CORONAVIRUS JOB RETENTION SCHEME – HOW IT WORKS
The key elements are as follows, but for further information, including how to access the scheme, visit this link.
The CJRS is available to UK employers with a PAYE scheme. It provides financial support towards continuing to pay part of employees’ salaries for those who would otherwise have been laid off during this crisis. It originally applied to fully furloughed workers who were asked to stop working altogether, but who were kept on the payroll. Flexible furlough allowing for part-time working was introduced from 1st July 2020, with pro-rated CJRS financial support for hours not worked.
1st March to 31st July 2020
Up to 31st July 2020, the CJRS financial support covered up to 80% of salary capped at £2,500. It also covered the employer’s National Insurance (NI) contributions and the minimum employer pension contribution of 3% of qualifying earnings required under automatic enrolment.
Flexible furlough was introduced from 1st July 2020. Up to 31st October 2020, this was only available for previously furloughed workers who were returning to work on a part-time basis.
1st to 31st August 2020
For fully furloughed workers, the scheme covered up to 80% of salary capped at £2,500 – there was no longer any financial support for employer NI or pension contributions. Flexible furlough was available.
1st to 30th September 2020
For fully furloughed workers, the scheme covered up to 70% of salary capped at £2,187.50, with employers required to pay at least 80% of salary. Flexible furlough was available.
1st to 31st October 2020
For fully furloughed workers, the scheme covered up to 60% of salary capped at £1,875, with employers required to pay at least 80% of salary. Flexible furlough was available. The CJRS was originally intended to end on 31st October 2020, but has been extended.
1st November 2020 to 30th June 2021
From 1st November 2020, CJRS financial support returned to the August 2020 basis – covering up to 80% of salary capped at £2,500 for fully furloughed workers. It also became possible to move workers straight onto flexible furlough, with part-time working and pro-rated CJRS support for hours not worked. Following the Budget announcement on 3rd March 2021, these provisions apply until 30th June 2021.
1st to 31st July 2021
For fully furloughed workers, the scheme covers up to 70% of salary capped at £2,187.50, with employers required to pay at least 80% of salary. Flexible furlough is available.
1st August to 30th September 2021
For fully furloughed workers, the scheme covers up to 60% of salary capped at £1,875, with employers required to pay at least 80% of salary. Flexible furlough is available. The CJRS will now end on 30th September 2021.
SUMMARY OF EFFECTS ON EMPLOYER PENSION CONTRIBUTIONS
The CJRS applies where a business has fully or flexibly furloughed workers as explained above. The scheme now provides financial support for furloughed workers’ salaries only – it ceased to provide any contribution towards the cost of employer pension and NI contributions after 31st July 2020.
For furloughed workers, we expect that contributions to automatic enrolment and other qualifying schemes should be maintained at the normal percentage, but based on the furloughed employee’s reduced pensionable earnings. If employers wish to reduce contributions to the statutory minimums, they should consider The Pension Regulator’s (TPR’s) guidance.
Where a business has made other arrangements with employees such as reducing pay (for example to 50% of normal salary), we would expect pension contributions to continue and be based on the reduced salary applying to each pay reference period.
Where a business is carrying on its operations as normal, we would not expect any changes in relation to pension contributions.
Where an employer falls into arrears, the current rules require missed contributions to be made up at a future date. Normally a recovery plan would be agreed with TPR at the earliest point. We expect that in the current circumstances the matter of arrears will be addressed with TPR at a later date.
Where a business has ceased trading, no further contributions will be payable. However, if the scheme was in arrears prior to this there may be a claim on the assets of the business in respect of missed contributions, as is normally the case.