The minimum level of auto-enrolment contributions is:
1. Start with £1,700 (this is the gross pay grant) 2. Deduct £520 (this is the Lower Level of Qualifying Earnings) 3. Multiply by 3% = £35.40
The total employer pension contribution made by A Ltd under the terms of the pension scheme is the gross pay to the employee of £2,125 multiplied by 3%, which equals £63.75.
As A Ltd can only claim the lower of the minimum level of contributions for an auto-enrolment pension (based on the furlough payment) and the amount actually paid into the employee’s pension, they can claim £35.40 to cover employer pension contributions.
Calculating employer pension contributions where the employee is furloughed during the pay period
If an employee is paid for a pay period in which not all days are furlough days then the Lower Level of Qualifying Earnings should be apportioned on a daily basis.
This example is given:
A Ltd pays employees on the last day of every month. A Ltd pays employer pension contributions into employees’ pensions in line with the minimum level of contributions for an auto-enrolment pension.
An employee agrees to be furloughed from 16 April 2020.
Their April 2020 gross pay is £1,501.20. This is made up of £810 which they earned before being furloughed, and £691.20 of furlough pay.
The amount of the grant which A Ltd can claim towards their employer pension contributions is:
1. Start with £691.20 (this is the furlough pay) 2. Deduct £260 (this is a proportion of the Lower Level of Qualifying Earnings) 3. Multiply by 3% = £12.94
The minimum level of auto-enrolment pension contributions on the furlough pay is £12.94.
A Ltd can claim for the lower of £12.94 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme in respect of the furlough pay.
The Lower Level of Qualifying Earnings in this example is calculated as £520 divided by 30 days (the number of days in April), and then multiplied by 15 days (the number of days that the employee is furloughed in April).
When claiming
Claims can only be made for periods when employees are on furlough.
Only one claim can be made during a claim period and this should be made shortly before payroll is run, when it is actually running or after the payroll has been run. All employees must be claimed for in each period at one time, and changes cannot be made.
Claims can be backdated from 1 March 2020 where employees have been furloughed from that date but a claim cannot start any earlier than the date the employee was first furloughed.
By making a claim, the agreement is made that:
• The grant received can only be used to pay employee salaries and the employer NI contributions and pension contributions that must be paid in relation to the salary paid to the employees • Any grants will be returned to HMRC if it cannot be used or if any party is unwilling to use it to pay employee salaries and the associated employer NI and pension contributions
If these points cannot be accepted, then a claim must not be made.
After a claim has been made
The Chartered Institute of Payroll Professionals
Payroll: need to know
cipp.org.uk
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