Coronavirus – furlough and automatic enrolment


HMRC recently issued guidance on its Coronavirus Job Retention Scheme. The scheme, which went live on 20 April, aims to reimburse employers for part of the wages of staff on furlough (for a period currently running until 30 June 2020).

The guidance states that the scheme will cover 80% of furloughed employees’ usual monthly salary up to £2,500 a month, plus the associated Employer NICs and minimum automatic enrolment employer pension contributions (up to 3% of band earnings) on that salary. Employers can choose to provide top-up salary in addition to the grant, but the scheme will not fund Employer NICs and automatic enrolment contributions on any additional top-up made. Where employers pay higher pension contributions than the default AE minimum, eg because they use a different DC basis to satisfy AE requirements or provide a DB scheme, the excess will not be funded by the job retention scheme.

Further guidance, including on how employers should calculate their claims for Employer NICs and minimum automatic enrolment employer pension contributions, has been published.

TPR has also published guidance looking at the interplay between the furlough scheme and automatic enrolment issues (see our Alert).

Schemes and employers should ensure that:

  • HMRC’s guidance is reviewed as and when it is updated
  • there is dialogue between employers and trustees as to which employees have been furloughed and the consequences for their pension benefits if salaries are reduced whilst on furlough
  • employer choices are compliant with automatic enrolment obligations (and scheme rules), and that contractual changes have been made where necessary
  • decisions are made in compliance with equality and discrimination laws, and have been carefully documented – both in terms of records, and communication to the employees concerned
  • any knock-on impact, for example to death benefits, has been considered.

Furlough – other pensions issues

Schemes should consider issues such as the impact furlough may have on employee contributions, and whether there are any salary sacrifice issues. (see our Hot Topic).

Clients at or near their re-enrolment deadlines may wish to use the flexibility permitted to move their date for this by up to three months.