WORK OUT HOW MUCH YOU CAN CLAIM FOR EMPLOYER’S PENSION CONTRIBUTIONS
You’ll still need to pay pension contributions on behalf of your furloughed employees, and you can claim for these up to the level of the mandatory employer contribution, even if it’s not an auto-enrolment pension.
You cannot claim for any pension contributions:
if there are no contributions made, or due to be made for an employee
you make that are above the mandatory employer contribution
You’ll need to work out how much you can claim for employer’s pension contributions.
Start with the amount you’re claiming for the employee’s wages.
Deduct the minimum amount your employee would have to earn in the claim period to qualify for employer pension contributions – this is £512 a month for periods before 5 April 2020, and £520 a month for periods after 6 April 2020.
Multiply by 3%.
Grants for pension contributions can be claimed up to this cap provided the employer pays the whole amount claimed to a pension scheme for the employee as an employer contribution.
Example if employee is furloughed for the whole pay period, and you do not top up their pay
A Ltd pays employees on a monthly basis. An employee was furloughed on 1 April 2020 and is paid £1,500 of furlough pay on 30 April 2020. A Ltd did not top up the employee’s pay. A Ltd pays employer pension contributions into the employee’s pension.
Start with £1,500 (this is the gross pay grant)
Deduct £520 (this is the Lower Level of Qualifying Earnings)
Multiply by 3% = £29.40
A Ltd can claim £29.40 towards employer contributions it makes into the employee’s pension.
Example – employer makes contributions above the minimum level of contributions for an auto-enrolment pension
A salaried employee of A Ltd earns £2,125 per month, and is furloughed from 1 May 2020 to 31 May 2020. A Ltd has agreed to top up the employee’s salary to its usual amount, including making employer pension contributions which are usually 3% of the employee’s entire salary. The amount of gross pay grant is 80% of £2,125, which is £1,700.
The grant that can be claimed towards the employer pension contributions is the lower of the minimum level of contributions for an auto-enrolment pension, based on the furlough payment, and the amount actually paid by A Ltd.
The minimum level of auto-enrolment contributions is:
Start with £1,700 (this is the gross pay grant)
Deduct £520 (this is the Lower Level of Qualifying Earnings)
Multiply by 3% = £35.40
The total employer pension contribution made by A Ltd under the terms of the pension scheme is the gross pay to the employee of £2,125 multiplied by 3%, which equals £63.75.
As A Ltd can only claim the lower of the minimum level of contributions for an auto-enrolment pension (based on the furlough payment) and the amount actually paid into the employee’s pension, they can claim £35.40 to cover employer pension contributions.
Example of how to calculate the grant towards employer pension contributions where the employee is furloughed during the pay period
Where an employee is paid for a pay period where only some of the days are furlough days then the Lower Level of Qualifying Earnings should be apportioned on a daily basis.
A Ltd pays employees on the last day of every month. A Ltd pays employer pension contributions into employees’ pensions in line with the minimum level of contributions for an auto-enrolment pension.
An employee agrees to be furloughed from 16 April 2020.
Their April 2020 gross pay is £1,501.20. This is made up of £810 which they earned before being furloughed, and £691.20 of furlough pay.
The amount of the grant which A Ltd can claim towards their employer pension contributions is:
Start with £691.20 (this is the furlough pay)
Deduct £260 (this is a proportion of the Lower Level of Qualifying Earnings)
Multiply by 3% = £12.94
The minimum level of auto-enrolment pension contributions on the furlough pay is £12.94.
A Ltd can claim for the lower of £12.94 or the employer pension contributions due on the furlough pay under the terms of the pensions scheme. in respect of the furlough pay.
The Lower Level of Qualifying Earnings in this example is calculated as £520 divided by 30 days (the number of days in April), and then multiplied by 15 days (the number of days that the employee is furloughed in April).