Coronavirus job retention scheme - employer contributions

The Coronavirus Job Retention Scheme was set up by the government in response to the COVID-19 virus. The scheme intends to support businesses and their employees through the outbreak by covering up to 80% of the costs of employment up to an overall cap of £2,805 per employee per month. This includes salary, plus the employer National Insurance contributions and the minimum employer pension contribution of 3% of qualifying salary required under automatic enrolment.

We recognise the Coronavirus outbreak may be placing a considerable strain on you and your employees. We want to reassure you that we’re working with Government and Regulators to determine whether any change to current industry practice is required. To continue to support you, we wanted to share our understanding of the current situation and what it means for you as an employer.

We’ve summarised the latest update on employer pension contributions from the Department for Work and Pensions (DWP).

  • Where a business has ‘furloughed workers’, that is where the employees aren’t active, the Coronavirus Job Retention Scheme is intended to support a business and their employees by covering up to 80% of the costs of employment up to an overall pay cap of £2,500 and a total of £2,805 per employee per month (up from £2,500 just to cover pay as previously announced). The total of £2,805 per employee includes salary, employer National Insurance (NI) contributions and the minimum employer pension contribution of 3% of qualifying salary required under automatic enrolment (AE).
  • Where a business has made other arrangements with employees such as reducing pay (for example to 50% of normal salary), we would expect AE 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 AE 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 The Pensions Regulator (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.

This is our current understanding of the DWP’s latest update on employer contributions based on conversations we are having with Government and Regulators.

how it works

  • Under the Coronavirus Job Retention Scheme, all UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salaries for those that would otherwise have been laid off during this crisis.
  • This applies to employees who have been asked to stop working, but who are being kept on the pay roll, otherwise described as ‘furloughed workers’. HMRC will reimburse 80% of their salary, up to £2,500 per month. This is to safeguard workers from being made redundant.
  • In addition, the scheme will pay the employer National Insurance contributions and AE minimum employer pension contributions (capped at 3%). Making the total maximum payment £2,805 per month.
  • The Coronavirus Job Retention Scheme will cover the cost of salary, employer NI contributions and employer pension contributions backdated to 1st March 2020 and is initially open for 3 months, but will be extended if necessary. HMRC will set out more details shortly.

For further information including how to access the scheme, visit businesssupport.gov.uk/coronavirus-job-retention-scheme/