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Law360, London (April 20, 2020, 5:12 PM BST ) The pensions watchdog has issued further guidance for employers on making retirement contributions for workers furloughed during the COVID-19 pandemic as the government-backed scheme opened to a flood of applications.
The Pensions Regulator laid out technical new rules on Friday that would govern how businesses in Britain make contributions to savings for furloughed staff when a "salary sacrifice" arrangement is already in place.
HM Revenue and Customs was inundated with tens of thousands of claims for workers within 30 minutes of the coronavirus job retention scheme going live on Monday. The program will allow businesses to receive grants for 80% of a furloughed employee's salary, up to a maximum of £2,500 a month.
Employers should continue to meet their obligations for pensions contributions for furloughed staff, the regulator, known as TPR, said.
"Any contractual obligations you have entered into as part of the salary sacrifice arrangements and the obligation in the pension scheme rules continue to apply as normal," TPR said in a statement.
An employee will typically make contributions to her pension savings out of her salary, which is matched by her employer. Under a so-called salary sacrifice arrangement, the employee agrees to a slightly reduced salary, but the employer takes responsibility for all pension contributions.
Under the U.K.'s job retention plan, staff will receive only 80% of their salary. The regulator said employers should not seek to reduce any further the amount received by staff on a salary sacrifice arrangement.
"The pay during the furlough period should be treated as the post-sacrifice pay so that no further sacrifice is made on that amount," the regulator said.
The advice comes after TPR warned employers at the start of the month to continue to make contributions as usual for standard pensions arrangements. Under the job retention scheme, the government will meet minimum contributions for furloughed employees.
Under U.K. pension rules, the minimum contribution to workplace plans is 8% of earnings, with employees paying in 5% and their employers contributing at least 3%.
--Editing by Ed Harris.
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