Coronavirus: Pensions Questions and Answers for Employers
Bira Workplace Pensions have pulled together some of the most frequently asked questions surrounding COVID-19. This update covers key questions including what support is available for independent retail businesses and what happens if you’re late or fail to pay contributions.
Please note – Employers in any doubt over the legal situation should seek their own legal advice. What follows should not be construed as legal advice and we accept no liability for decisions you may make.
Q – Given the difficult conditions that we are working under, am I still expected to pay pension contributions for my staff?
We appreciate how difficult the business environment has become, and how this is affecting thousands of employers across the UK.
The UK Government has not announced any changes to the existing Automatic Enrolment legislation. For this reason, all employers continue to be obliged to make contributions in respect of all relevant earnings that they are paying to their staff, and to pass both employer contributions and employee contributions across to their pension provider.
Q – Could I take a break from paying pension contributions on behalf of my employees?
As there has been no change in the UK Government’s legislation, in order to comply with the legislation, you will need to continue to pay contributions, and to pass these across to your pension provider.
Q – I have no contributions to submit, what do I do?
Your pension provider will still require a submission for each pay period.
If you have no current employees/members, a declaration confirming this will be available when submitting data.
However, if we have records of current employees and/or members, the declaration will not be available. A payroll data file is therefore required, if there are no earnings, nil earnings and contributions should be submitted.
Q – Will I be reported to The Pensions Regulator if I am late submitting data?
The reporting requirements have not changed: however, the Pensions Regulator has stated:
“We know this is a challenging time for everyone and we recognise the strain this is putting on employers.
We will take a proportionate and risk-based approach towards the enforcement of decisions, in light of these challenging times, with the aim of helping to get employers back on track and supporting both employers and savers.”
The Pensions Regulator has issued COVID-19 guidance for employers here.
Your pension provider is required to enforce legislation and the scheme rules, neither of which currently allow for contributions to be delayed or less than the workplace pension quality requirements. To adapt these requirements would require legal changes as well as significant development work at a time when resource is not at full capacity and working remotely.
Therefore, for the foreseeable future we must continue to monitor contributions in the usual manner. This is unlikely to be welcome given the unprecedented circumstances, however, it is the only way all parties can be protected; the employer by ensuring their obligations are met, employees rights being protected, as well as ours and our ability to continue to provide employers and employees with a compliant workplace pension.
Q – What are the implications for employers using one of the UK Government Business Support schemes during the pandemic?
If a UK Government support scheme is used to pay employees, the pay is subject to PAYE rules and pension regulations as normal. If the employee is:
- not a member of a pension scheme, the employer must continue to assess age and earnings (including the earnings from the support scheme) and meet their auto-enrolment duties as appropriate, including enrolling into a pension if necessary;
- a member of a pension scheme, the pay is part of normal pay and pension contributions should be paid by the employer and employee as normal.
Note: there are now several different support schemes for businesses during the pandemic. Following the introduction of localised restrictions, which are likely to be relevant until early 2021 at least, the type and level of support may vary dependent on an employer’s circumstances.
Employers may therefore wish to visit the UK Government website for detailed information on support available.
Q – Am I able to stop or decrease pension contributions in respect of my employees, with the intention of catching up in the future when the business environment recovers?
There is no allowance for this under the Automatic Enrolment legislation. For the time being, employers are obliged to pay Automatic Enrolment contributions on all relevant payments to employees.
If pay is wholly or partially postponed, and therefore pension contributions are as well, when pay is subsequently paid it should be deemed as relevant earnings and pensionable as if paid at the correct time.
Q – The employees are paying contributions through salary sacrifice, what impact does that have?
Salary sacrifice (also known as salary exchange) is a contractual agreement between an employer and an employee. The agreement forgoes salary for an equivalent non-cash benefit, one option being in exchange for employer pension contributions.
Unless that agreement is changed, the employer has a contractual obligation to continue the non-cash benefit. However, the contractual wording should be reviewed, and legal advice sought if unsure.
Note: the post sacrifice salary would be the claim amount for any UK Government support schemes. The employer would be responsible for the employee contribution due to the salary sacrifice agreement.
Q – Are my employees able to temporarily opt out of the pension scheme?
Employees are allowed to cease their pension scheme membership at any time. However, there is strict legislation which prevents employers from encouraging their staff from opting out or leaving their scheme and employers would be well advised not to discuss opting out with their staff.
Employers are obliged to allow employees to opt back in should they wish to do so, unless a previous request to opt in was received in the last 12 months. Given the current circumstances we would encourage employers to facilitate employee wishes where possible.
Q – If I am taking on new staff, am I still obliged to enrol them into the pension scheme?
You are. The UK Government has not suspended its legislation, so any new staff should be sent pension communications in exactly the same way as usual and enrolled into the pension scheme in exactly the same way as usual.
Q – Some of my staff are off sick, what do I do?
Statutory Sick Pay (SSP) forms part of their relevant earnings if they are already a member of the pension, if the pensionable salary is:
- Qualifying Earnings, pension contributions are due on earnings between the Lower and Upper Earnings Limit including SSP; or
- any other definition, pension contributions are due on the whole of SSP.
If they are not a member, Automatic Enrolment regulations require them to be assessed each pay period and should they meet the enrolment criteria, they need to be automatically enrolled.
Q – I laid all my staff off – what should I do?
All employees that have been laid off should be submitted as leavers in the normal manner.
Please note that the above reflects our current understanding of the situation. We will attempt to keep you up to date with developments as the Coronavirus situation moves forward.
Click below to find out more about the Bira Workplace Pension scheme for Bira members.
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