Out-Law News | 16 Apr 2020 | 12:46 pm | 2 min. read
New guidance from the regulator sets out limited flexibilities for employers around consultation requirements when decreasing contributions above the statutory minimum, due dates and re-enrolment. It also provides additional details about the interaction of the auto-enrolment rules with the UK government's Coronavirus Job Retention Scheme (CJRS).
Pensions expert Tom Barton of Pinsent Masons, the law firm behind Out-Law, said: "The message from the regulator is that AE carries on as normal".
"Whilst employers can take some comfort that enforcement measures might be lighter, the expectation is that contributions remain accurate and timely," he said. "This will be easier said than done, especially for employers putting in place new pay arrangements or putting staff on furlough."
Whilst employers can take some comfort that [auto enrolment] enforcement measures might be lighter, the expectation is that contributions remain accurate and timely.
"In particular, employers should make sure they calculate and pay contributions as normal. Money from the Coronavirus Job Retention Scheme may well cover some or all of those contributions - but it should be thought of along the lines of a subsidy, not a swap. Where employers pay more than statutory minimum based on qualifying earnings, they need to keep up those payments and make up the shortfall themselves. Any honest failings may well escape a fine - but employers should work on the basis that they may have to make later 'true-ups' if things are not done quite correctly during this period of disruption. Particular attention should be paid to contribution terms under scheme rules, employment contracts and salary sacrifice arrangements," he said.
The guidance encourages employers to contact their pension provider if they are concerned that they will struggle to make pension contributions on time, as they may be able to agree a change in due date or a longer-term payment plan. TPR has written to providers to ask them to be as flexible as possible when agreeing contribution dates. It previously announced an extension to the period within which schemes must report payment failures from 90 days to 150 days, to give them more time to work with employers to bring payments up to date.
Employers must continue to pay into the scheme as usual unless staff reduce their own contributions or opt out or cease active membership of the scheme altogether. They must not encourage or induce their staff opt out, and any staff who choose to opt out should be re-enrolled at the next three-yearly re-enrolment date provided that they meet the re-enrolment criteria. Employers can take advantage of an additional three months in which to complete their re-enrolment duties if they are struggling to get this done in time.
Statutory minimum employer contributions can be claimed back from the CJRS in respect of furloughed employees, and TPR is working with the government to keep guidance for employers up to date as the scheme develops. Employers should continue to run the usual payroll processes for these employees, and upload contribution schedules and make payments to their pension provider as normal. Employer contributions above the statutory minimum must continue to be funded by employers themselves.
Where the employer wishes to reduce contributions above the statutory minimum, TPR has relaxed the usual consultation requirements until 30 June where the reduction applies to furloughed staff during the furlough period only. The employer must write to the affected staff and their representative to inform them of the change and its effects, and the employer contribution rate must revert to the usual higher rate once the furlough period ends. Any other proposed reductions remain subject to a 60 day minimum employee consultation period.
Tom Barton said that the regulator had taken a "fairly hard stance" to the consultation requirements.
"The criteria for the easement, which applies where contribution rates are being reduced in connection with furlough arrangements, are very narrow," he said.
"Employers re-structuring their pay arrangements generally are unlikely to qualify for this easement – although pre-existing consultation guidance may still offer some options for employers wishing to take swift action," he said.
24 Mar 2020
22 May 2020