Pensions changes to the Coronavirus Job Retention Scheme
What you need to know
- In March 2020, as part of the Government’s response to COVID-19, the Coronavirus Job Retention Scheme (CJRS) was introduced with the goal of supporting employers during this challenging time.
- To date, if an employer is claiming a grant towards employees’ salaries under the CJRS, it has been able to claim a grant towards the employer’s pension contributions limited to the auto-enrolment (AE) statutory minimum of 3%.
- On 29 May 2020, the Government announced key changes to the CJRS:
- The latest date an employer can place an employee on furlough for the first time is 10 June 2020, should they wish to continue to furlough them beyond 30 June 2020.
- From 1 July 2020, employees can return to work part-time (‘flexible furlough’). If used, the CJRS grant towards employer pension contributions will continue for any normal hours not worked.
- From 1 August 2020, the grant towards employer pension contributions will cease, whether on full
or flexible furlough.
- The CJRS will then cease completely on 31 October 2020.
- Further guidance from HMRC on calculating claims will be published on 12 June 2020.
Actions you can take
- Understand how the pension benefits you provide are covered under the current CJRS structure, and how the recent amendments will change this over the coming months.
- Review the effect on pension and wider benefits if you are bringing employees back part-time and intend to claim under the CJRS for flexible furlough.
- Review your options for pension benefit levels and structures to ensure they are in line with your workforce plans, business contingency plans and reflect the cessation of the grant for pension contributions from 1 August 2020.
Reminder of key pension actions when using furlough
The finer detail: Changes to the Coronavirus Job Retention Scheme
Changes to the current CJRS will start from 1 July 2020.
How much can employers currently claim?
Employers can currently claim a grant covering 80% of a furloughed employee’s wages up to a cap of £2,500 per month. Employers can also claim a grant to cover National Insurance contributions (NICs) and up to 3% of the statutory minimum employer pension contribution required under AE on those wages.
Closing to new claimants
The CJRS will close to new entrants on 30 June 2020, and only employees who have previously been furloughed by their employer for a minimum of three consecutive weeks will remain eligible. In practice, this means that the latest date an employer can place an employee on furlough for the first time is 10 June 2020. Employers have until 31 July 2020 to make any claims in respect of the period to 30 June 2020.
Changes from 1 July 2020
Flexible furloughing will be introduced from 1 July 2020, enabling furloughed employees to return to work on a part-time basis, working just some of their contractual hours. Employers will be able to claim a grant in respect of previously furloughed employees either for full furlough (i.e. to cover 80% of a furloughed employee’s wages capped at £2,500 per month), or for flexible furlough. Under flexible furlough an employee may, for example, work two days per week (during which time the employer pays their wages as normal) whilst being furloughed for three days per week. There are no restrictions on the number of working hours or shift pattern, but the minimum period for a claim will be just one week (instead of the current three-week minimum).
Wages for flexible furloughing
Employers will need to pay the wages, employer NICs and all of the pension contribution in respect of the hours worked by flexibly-furloughed staff. They can continue to claim a grant under the CJRS in respect of the normal contractual hours not being worked, including employer NICs and up to 3% statutory minimum employer pension contributions.
Changes from 1 August 2020
From 1 August, the employer becomes responsible for all employer pension contributions and NICs, with no grant available for these. The CJRS will continue to cover 80% of wages up to the £2,500 cap.
Changes from 1 September 2020
From 1 September, the CJRS grant will be reduced to 70% of a furloughed employee’s wages capped at £2,187.50 per month. This means the employer must pay 10% of the capped wages for the hours the furloughed employee does not work (to ensure the employee continues to receive 80% of wages subject to the cap).
Changes from 1 October 2020
From 1 October, the CJRS grant will be further reduced to 60% of a furloughed employee’s wages capped at £1,875 per month. This means the employer’s contribution increases to 20% of the capped wages for the hours the furloughed employee does not work.
If they wish, employers can continue to top up the wages of furloughed staff beyond 80%.
How long is the CJRS open for?
The CJRS will close completely on 31 October 2020, but claims for the period to 30 June 2020 must be made by 31 July 2020.
For further information, please get in touch with Christopher Barnes or Paul Burt speak to your usual XPS contact.