Coronavirus and workplace pensions: What employers need to know
With coronavirus having such an impact on company operations, The Pensions Regulator has issued guidance on handling workplace pensions amid the disruption.
Here’s what employers need to know – about complying with their obligations and supporting staff.
Pension contributions must continue – unless the employee opts out
Employers are still required to contribute at least 3% of a staff member’s earnings into their workplace pension. The only way this changes is if the employee states - in writing – that they wish to opt out – temporarily or permanently.
It is illegal for companies to require or encourage staff to opt out.
Contribution amounts will change based on adjusted/furlough salaries
Pension contributions are a percentage of salary – the legal minimum is currently 3%. If staff have been furloughed or had their wages cut, the pension contribution adjusts accordingly.
If you have taken the decision to use the coronavirus Job Retention Scheme and paying 80% of wages, your employer pension contribution is therefore 3% of the 80%. Likewise, employee contributions also continue based on their current earnings.
The exception is redundancy – employer contributions don’t apply to redundancy pay.
The Government is helping businesses meet their workplace pension obligations
Grants under the Government’s Job Retention Scheme cover costs relating to employment, of up to £2,805 per employee. This includes the 80% of wages up to £2,500 per month, as well as employer’s National Insurance and the minimum 3% employer workplace pension contribution on their qualifying earnings.
In other words – for furloughed staff, the Government is covering your employer pension contributions, but based on the 80% salary. If you top up wages, the increased pension contribution won’t be covered by the Government grant.
Workplace pension admin is more complex thanks to coronavirus
Coronavirus-related changes to contributions are making workplace pension management more complicated.
The Pensions Regulator has said it will take a “proportionate and risk-based approach towards enforcement decisions, in light of these challenging times, with the aim of helping to get employers back on track and supporting both employers and savers.” But compliance remains essential – not just to mitigate risk of fines, but to keep the business and staff in the strongest possible position.
Husky’s cloud-based workplace pension platform eliminates the complexity, time, risk and cost associated with managing pensions.
Contact us on 0800 044 8114 or email firstname.lastname@example.org to learn about how we can support finance and payroll during this unusual, evolving period.