Ultimately, employers may have three options when considering workers during challenging times for the business:
- Unpaid leave
With the first two options, the worker will not benefit from pension contributions. If the worker is furloughed, however, they will.
The government also clarified that:
- It would cover employer National Insurance and pension contributions of furloughed workers on top of 80% of salary.
- Those furloughed can volunteer for the NHS without risking their pay.
Have workplace pension duties changed?
Automatic enrolment (AE) duties continue to apply as normal, including re-enrolment and re-declaration duties. This is the case whether staff are still working or are being furloughed as part of the Coronavirus Job Retention Scheme.
Individuals may choose to either reduce their contribution level (if the scheme rules allow this), opt out or cease active membership of the scheme, if they decide that is the right for them at this time. However, an employer must not encourage or induce them to choose this option.
Unless a member of staff asks to opt out of their workplace pension, or reduces their contributions, employers and staff members must continue to make the contributions required under the scheme at the correct time.
What are the options if an employer is struggling to make pension contributions?
The Pensions Regulator appreciates that this is a challenging time in terms of cashflow and resources. As mentioned above, the government recently announced that the Coronavirus Job Retention Scheme would include the employer’s statutory minimum AE contribution.
If an employer makes a claim for a grant (to cover the lower of 80% of furloughed worker’s salary or £2,500 per month), they will also be able to claim the statutory minimum employer pension contribution on those wages.
If an employer thinks that they may not be able to make their pension contributions, they need to speak to the provider in the first instance to explore whether there is flexibility to change the due date for payment of employer contributions to a future date or, whether they may be able to help plan to pay contributions over a longer period. They can also consider using the Government’s support packages, which are there to help with cashflow.
While this information is correct at the time of writing, obviously things are changing at a fast pace, and I’d always recommend checking for the most up-to-date guidance when needed.
Keeley Paddon is head of pensions technical at SimplyBiz Group