Pensions
CJRS and JSS: effects on pensions
Ian Neale ACIPP, director, Aries Insight, summarises the rules and details
T he coronavirus job retention first to 30 June and then later (subject to some significant changes) to 31 October 2020. Under the CJRS in its original form the government paid cash grants of 80% of furloughed workers’ wages up to a maximum of £2,500; plus the associated employer’s costs, comprising: ● National Insurance contributions (NICs) and scheme (CJRS) began in March 2020 and was twice extended, ● pension contribution up to the level of the automatic enrolment (AE) statutory minimum employer contribution, i.e. 3% of qualifying earnings. Employer pension contributions (and any other benefits) paid via salary sacrifice do not qualify for reimbursement. This is significant as many employers operate salary sacrifice, by agreement with their workers, for AE. Usually the scheme rules or governing documentation will define pensionable pay as the notional pre-sacrifice pay. The amount the member sacrifices is paid across to the pension scheme as part of the overall employer contribution. There is no obligation under the pension scheme rules or governing documentation for the member of staff to contribute. When calculating 80% of a furloughed worker’s salary or wage, the reference salary or wage to use is the amount after
...the employer will need to meet all NICs and statutory pension contributions.
for an employee and 3% of qualifying earnings (i.e. monthly earnings above £520, but only up to the £2,500 CJRS compensation limit). However, this will often be insufficient to satisfy their employer duties: they might have to pay more and/or the furloughed employee to pay more, to make up the full 8% minimum of qualifying earnings paid to the employee. Three significant changes were made when the CJRS was extended beyond 30 June: ● Staff on furlough under the CJRS may now work part of the time for their employer (and claims made for the pro- rated equivalent of the lower of 80% of salary/wages and £2,500 per month). ● The maximum grant reduces to the lower of 70% of the reference wage or £2,187.50 (pro-rated if the member of staff is also working part of the time after 1 July 2020) in September 2020, and the lower of 60% or £1,875 (pro-rated if the member of staff is also working for part of the time after 1 July 2020) in October 2020. ● For claims starting on or after 1 August 2020, employers are no longer able to claim a grant for up to the statutory minimum AE employer contribution, or employer’s NICs. The new job support scheme (JSS) will run for six months from 1 November, replacing the CJRS. The government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand. To be eligible, employees must: ● be registered on the employer’s PAYE (pay as you earn) payroll on or before 23
September 2020, which means a real time information submission notifying payment in respect of that employee must have been made to HM Revenue & Customs on or before 23 September 2020; and ● work at least 33% of their usual hours. The government will consider whether to increase this minimum hours threshold after the first three months of the scheme. All employers with a UK bank account and UK PAYE scheme can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS. Large businesses will have to meet a financial assessment test, so the scheme is only available to those whose turnover is lower now than before experiencing difficulties from Covid-19. There will be no financial assessment test for small and medium enterprises. The employer will continue to pay the wages for the hours staff work. For the hours not worked, the employer and the government will each pay one third of their usual wages (capped at £697.92 per month). This means that employees will receive at least two thirds of their usual wages for the hours not worked. Put another way, the employer will pay at least 55% (33% + 22%) of normal pay and the government will add 22%, making a total of at least 77%. In a significant difference from the CJRS in its original form, the employer will need to meet all NICs and statutory pension contributions. Claims under the JSS will start in December, with grants being paid on a monthly basis. The scheme will operate in addition to the job retention bonus. n
the salary has been sacrificed. All of the grant received from
government to cover the furloughed worker’s pay must be paid to them in the form of money. The pay during the furlough period should be treated as the post-sacrifice pay so that no further sacrifice is made on that amount. The employer is able to claim from the CJRS the lower of the amount actually paid to a registered pension scheme
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| Professional in Payroll, Pensions and Reward |
Issue 65 | November 2020
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