Coronavirus Job Retention Scheme Claims

Pension Salary Sacrifice Issues

Detailed guidance has been issued by The Pensions Regulator (TPR) regarding the effect of the Coronavirus Job Retention Scheme (CJRS) on the calculation of normal pension contributions and the contributions that can be claimed under the scheme. 

Under the CJRS employers may only claim the mandatory employer contribution (3% of qualifying earnings) relating to the furlough pay (care needs to be taken in calculating this for employees that are furloughed part way through a pay period). 

The CJRS guidance states that the 80% of a furloughed employee’s pay is based on the salary after the salary sacrifice, and that all the grant received must be paid to employees. 

However, the grant under CJRS does not change the employer’s contractual obligations under the salary sacrifice scheme and the full normal pension contribution, based on the employee’s original salary, must still be paid to the pension scheme. 

As the salary sacrifice amount cannot be deducted from the furlough pay this will mean that the employer will be required to pay the full pension contribution (including the salary sacrifice amount) without the salary sacrifice being deducted from the employee, unless topping up salary such that the salary sacrifice can be deducted from the non-furlough pay. 

The full guidance can be found here: 

https://www.thepensionsregulator.gov.uk/en/covid-19-coronavirus-what-you-need-to-consider/automatic-enrolment-and-pension-contributions-covid-19-guidance-for-employers/covid-19-technical-guidance-for-large-employers 

For further support and guidance please contact Devila Rabadia at Rayner Essex or fill out the form below and we will get back to you.