The Coronavirus Job Retention Scheme (CJRS) has been extended again, so now claims can be made for a further month than previously announced. The scheme will now run until the end of April 2021.
As a reminder, the grant has reverted back to levels seen at the start of the scheme with employees receiving 80% of their current salary for hours not worked (up to a maximum of £2,500).
However, you are not able to claim for statutory minimum automatic enrolment employer contributions. You are also liable for National Insurance contributions for employees on furlough for the extension of the scheme.
The Coronavirus Job Retention Scheme (CJRS) has been extended. The grant has reverted back to levels seen at the start of the scheme with employees receiving 80% of their current salary for hours not worked (up to a maximum of £2500).
However as has been the case with the CJRS since 1 August 2020, you are not able to claim for statutory minimum automatic enrolment employer contributions. You are also liable for National Insurance contributions for employees on furlough for the extension of the scheme.
Employees must have been on an employer’s PAYE payroll by 23:59 30th October 2020. Flexible furloughing continues to be allowed in addition to full-time furloughing. However employers will need to report and claim for a minimum period of 7 consecutive calendar days.
This policy will be reviewed in January 2021at which point if economic circumstances have improved employers could be asked to contribute further as was the case in August, September and October when employers paid towards the 80%.
The Coronavirus Job Retention Scheme (CJRS) was initially scheduled to last for November only, but the chancellor has announced it will continue to be made available to all parts of the UK under the highest levels of Covid-19 restrictions until March 2021.
The Job Support Scheme, which was scheduled to come in during November, has been postponed until the furlough scheme ends and the incentive of the Job Retention bonus will fall away. This was a £1,000 one-off taxable bonus payment to the employer, for each eligible employee that was furloughed and was then continuously employed until January 31 2021.
The Coronavirus Job Retention Scheme (CJRS) ends on 31st October 2020 and a new Job Support Scheme (JSS) will open on 1 November 2020, running for 6 months, until April 2021.
You do not have to have previously used the CJRS to use the JSS.
All small and medium-sized businesses are eligible. Larger businesses can take part, but you must be able to prove you've been adversely affected by coronavirus (and no dividends can be paid whilst using the scheme).
To qualify, employees must work at least a third of their normal hours, for which you would need to pay them in full.
For the remaining 'normal hours' they don't work, the cost will be split three ways – the Government pays a third, you pay a third and essentially the employee has reduction in pay of one third.
The Government payment for a third of hours not worked is subject to a cap of £697.92 per month. This means the maximum government contribution will be 22% of normal full pay, reducing on a sliding scale the more hours an employee actually works.
This means employees being paid under the JSS will receive at least 77% of their normal wages (subject to the cap on government contributions).
Employees for which you make a claim under the new JSS must have been on payroll on or before 23 September 2020. If you have anyone on zero-hours contracts or working irregular hours they will be eligible.
Further calculations for those with variable working patterns will be published in Government guidance shortly.
Unlike the CJRS employees cannot be made redundant or put on notice of redundancy during the period for which the employer is claiming a grant for that employee.
Employer National Insurance Contributions and pension contributions are not covered as part of the JSS.
These remain payable and we await further guidance which will set out exactly how pension contributions should be calculated under the new scheme.
The Government has announced a new £2bn Kickstart scheme. This scheme provides funding to create 6-month job placements for young people.
The scheme targets young people aged 16-24 years, who are claiming Universal Credit or Jobseeker’s Allowance.
If you are thinking about taking on any young people through this scheme, you can apply for funding which will cover 100% of the relevant National Minimum Wage for 25 hours work per week, including National Insurance contributions and minimum employer pension contributions.
Anyone you employ will need to be taken on before December 2021 and they’ll need to work for you for a minimum of 6 months. They cannot replace any existing or planned vacancies.
This funding will fulfil your minimum automatic enrolment duties for anyone you take on aged 22 years and over, plus any workers under that age who opt into your pension scheme.
The Coronavirus Job Retention Scheme will close on 31 October 2020.
From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.
From 1 August 2020, the level of grant will be reduced each month.To be eligible for the grant employers must pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they are being furloughed.
The timetable for changes to the scheme is set out below. Wage caps are proportional to the hours an employee is furloughed. For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours:
- there are no changes to grant levels in June
- for June and July, the government will pay 80% of wages up to a cap of £2,500 for the hours the employee is on furlough, as well as employer National Insurance Contributions (ER NICS) and pension contributions for the hours the employee is on furlough. Employers will have to pay employees for the hours they work
- for August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough
- for September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed
- for October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed
Employers will continue to able to choose to top up employee wages above the 80% total and £2,500 cap for the hours not worked at their own expense if they wish. Employers will have to pay their employees for the hours worked.
The table shows Government contribution, required employer contribution and amount employee receives where the employee is furloughed 100% of the time.
Wage caps are proportional to the hours not worked.
|Government contribution: employer NICs and pension contributions||Yes||No||No||No|
|Government contribution: wages||80% up to £2,500||80% up to £2,500||70% up to £2,187.50||60% up to £1,875|
|Employer contribution: employer NICs and pension contributions||No||Yes||Yes||Yes|
|Employer contribution: wages||-||-||10% up to £312.50||20% up to £625|
|Employee receives||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month|
There are important changes being made to the Coronavirus Job Retention Scheme, and what you claim as part of the grant.
From 1 August 2020, you will no longer be able to claim for statutory minimum automatic enrolment employer contributions. You are also unable to claim for National Insurance contributions for employees on furlough from this date.
You are still however able to claim the lower of 80% of staff wages or £2,500 a month for August.
- From 1 September 2020 this reduces to the lower of 70% or £2,187.50 a month
- From 1st October 2020 this reduces to the lower of 60% or £1,875.
The Coronavirus Job Retention Scheme is due to close on 31st October 2020.
Over the weekend detailed guidance from the Pensions Regulator was published regarding the treatment of pensions salary sacrifice for furloughed staff under the Coronavirus Job Retention Scheme (CJRS)
Where salary sacrifice is in operation for an employee, for which you are making a claim under the grant (CJRS), the 80% claim can only be made on the post-sacrifice pay.
The treasury have confirmed that furlough grants must be passed to the furloughed employee in full (with no deductions for any pension salary sacrifices). The pay during the furlough period should therefore be treated as the post-sacrifice pay.
This means the full pension payments will be an employer cost and you may have higher employment costs than you had anticipated for any staff who are furloughed and making salary sacrifice pension contributions.
Practically you will need to work out the notional pre-sacrifice pay based on treating the furlough pay as your worker’s post-sacrifice amount. You can then calculate the total employer pension contribution as normal.
Johnson Fleming have produced a calculator and can support you with these calculations to ensure you are paying contributions correctly.
You may be able to change your scheme rules so your contributions match the auto-enrolment statutory minimum (which is 3% based on Qualifying Earnings), please see the update below (9th April) regarding regulatory easement for furloughed employees.
Please contact your Johnson Fleming Consultant to discuss if you have any questions regarding this.
If you currently pay more than the auto-enrolment employer minimums into your Workplace Pension you may be able to reduce this, for any staff you have furloughed.
This means you are able to pay employer contributions based on the amounts which can be reclaimed in full under the Coronavirus Job Retention Scheme - 3% of an employee’s qualifying earnings (up to a £2,500 maximum)
There are however some important things to think about including whether you can do this in line with your current employee contracts (as you may have included specific contribution levels in these) and if your scheme rules allow this (which may need to be checked with the pension provider)
Reducing employer pension contributions usually requires consultation, however The Pensions Regulator have announced a regulatory easement to the usual 60 day notification period (required for companies with more than 50 staff).
The relaxation will apply where:
- There are furloughed staff for whom you are making a claim under the Coronavirus Job Retention Scheme.
- You are proposing to reduce the employer contribution to your workplace pension in respect of furloughed staff only.
- For staff who have not been furloughed their existing pension contribution rate will continue to apply
The reduced contribution rate for furloughed staff will only apply during the furlough period, after which time it will revert to the current rate.
You must also write to your affected staff to describe the intended change and the effects on the scheme and on your furloughed staff.
Please contact your Johnson Fleming Consultant to discuss if you have any questions regarding this.
If an employer cannot cover staff costs due to Covid-19, they may be able to access support to pay wages through the Coronavirus job retention scheme. This will entail classifying staff as ‘furloughed workers’ – that is, workers away from work due to exceptional economic conditions. It basically means that staff can be kept on the payroll rather than being laid off.
The Government announced that the Coronavirus job retention scheme to run initially for 3 months from the 1st March 2020, but has recently extended this the scheme to run until the end of June 2020.
Employers can claim a grant of up to 80% of the furloughed employee’s wages capped at £2,500 per month maximum per furloughed worker, as well as auto-enrolment minimum pension costs, and employer national insurance contribution costs. Employers can pay the difference between the 80% and the workers full pay, but they don’t have to.
The Government has provided welcome detail on how the furlough scheme will work in relation to pension contributions. On top of the 80% of pay up to £2,500 which has been widely publicised, the scheme will also pay employers NI and minimum auto- enrolment pension contributions of 3% of Qualifying Earnings. This may not meet your full normal pension payments, depending on your pension structure, Full detail is available at https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job- retention-scheme
It is important to note that there is no relaxation from the government of the need to pay employee pension contributions and ceasing payments will be a breach of auto-enrolment rules and there is no clear guidance that the Regulator will take a different approach to this breach during the current crisis.
As an employer you are not permitted to stop/reduce contributions if your employee is still paying contributions at the statutory minimum level (or the minimum as stipulated in their contract of employment).
An employee may request to reduce their contributions. If their contribution falls below the statutory minimum contribution, then you are not obliged to continue employer contributions. However, you may do so if you wish. Suggesting or requesting an employee reduce payments below auto-enrolment minimums would be encouraging employees to opt-out for auto-enrolment purposes and would be a breach of auto-enrolment regulations. If an employee does opt-out then they can opt in again in the future providing they meet the auto-enrolment eligibility criteria at that point.
If an employee takes unpaid leave and does not have a salary, then you do not have to make an employer contribution as payments are based on pay in the pay period. However, you may continue to pay either the total pension (employer and employee) or simply continue with the employer contribution only at your discretion.
Market Volatility remains high, but we have always assessed funds based on volatility in high volatility markets. The moves we are seeing are not unexpected, but part of the normal investment cycle. The unique and unpredictable cause of the market volatility - Coronavirus combined with an initial oil price shock – just highlights that forecasting short term markets and avoiding drops is not a practical approach.
The long term nature of pensions means having a suitable asset allocation for long term growth is the key to returns over these very long time frames.
We are on hand as always to answer any member concerns, but generally get few even in very volatile markets. We are not planning to communicate to members as highlighting a drop can cause more concern and encourage people to take action at what may not be a good time.
Although sharp market falls understandably cause concern, we would emphasise that investments should be viewed as long-term in nature and we would not recommend a short term change. The US Dow, the world’s largest stock market, has seen its 5 largest absolute falls in a single day in the last month. However it has seen the 5 largest rises too. Change would take time and change in volatile markets risks missing a market recovery as much as it limits a further fall. Employers should continue to review their default fund as part of a regular governance process, but from a long term viewpoint.
At times like this, many people can benefit from the reassurance provided by professional advice. If your employees would like to speak with an adviser we can put them in touch with our advice team.
Individuals are currently only allowed to access their pension funds from age 55 onwards. Any promotion that your employees see offering to ‘unlock’ their pension is almost certainly a scam. Scams are generally more prevalent during uncertain times and employees should be wary of unsolicited offers. Johnson Fleming would recommend that anyone considering accessing their funds early seek professional advice.
Pension provider updates
More information from your workplace pension provider regarding their support during Covid-19.