Corporate law

COVID-19 FAQs: National Insurance contributions & pensions

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Businesses and employers across the country are continuing to adapt their business structures in reponse to the rapid pace of change brought about by the pandemic. For many this means continuing to work remotely, meeting their customers’ needs as best they can. 

While it’s understandable that you may be tempted to let certain tasks slip as you focus on keeping your business afloat, employers need to remember that their day-to-day administrative duties and legal responsibilities to their staff haven’t simply gone away. 

You must continue to administer your workplace pension scheme and make both pension and employer National Insurance contributions. We can help you with advice about what you need to do regarding workplace pensions, as well as considering other employee benefits.

Do I have to pay pension and employer National Insurance contributions for employees placed on furlough leave?

Yes, if an employee decides not to opt out of their workplace scheme while on furlough leave under the Coronavirus Job Retention Scheme, and therefore continues making pension contributions, then you will continue to be legally obliged to pay the minimum employer contribution. 

You will also need to continue making your usual employer National Insurance contributions on behalf of your furloughed employees. 

However, in addition to allowing employers to reclaim 80% of their furloughed employees’ salary costs, the Coronavirus Job Retention Scheme also assists struggling businesses in meeting the additional costs of pension and employer National Insurance contributions. Read on to find out more.  

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Can I temporarily stop paying pension and employer National Insurance contributions?

Only employees can opt out of their workplace pension scheme by confirming their wish to leave in writing. While they continue paying into their workplace pension, however, you are legally obliged to continue paying your minimum contribution for as long as they remain enrolled. 

You are not allowed to withdraw employees from the scheme without their permission, nor is it legal to encourage or force them to opt out. 

As with pension contributions, your duties related to employer National Insurance contributions remain unchanged, whether or not your staff have been placed on furlough leave.  

Do I have to pay pension and National Insurance contributions for staff if they are temporarily not being paid?

Pension and employer National Insurance contributions are calculated based on your employee’s earnings. This means that if your employee has agreed to a temporary pay suspension, then you won’t have to continue making contributions until you resume paying their salary. 

What financial support is available to help employers pay pension and employer National Insurance contributions?

The Coronavirus Job Retention Scheme is a business support measure introduced by the Government to prevent mass redundancies due to employers being unable to pay their workers. The Scheme, which began on 1 March 2020, allows employers to claim back 80% of their usual monthly salary costs up to a cap of £2,500 per month per employee. Importantly, this also covers any associated employer National Insurance contributions and the minimum pension contribution of 3% of qualifying wages. 

Can I claim extra support if I pay more than the minimum contributions?

The Coronavirus Job Retention Scheme does not allow you to claim the extra employer National Insurance or pension contributions you would be liable for if you topped up the remaining 20% of your employee’s salary while they are on furlough leave. 

Nor will you be able to claim pension contributions that exceed the mandatory employer contribution (currently 3% of qualifying earnings). So, if you voluntarily pay a 4% contribution into your employee’s workplace pension, the Government will only reimburse you the minimum contribution of 3%. 

What if my business is not eligible for support from the COVID-19 Job Retention Scheme?

If the Coronavirus Job Retention Scheme isn’t suitable for your situation, then you may be eligible for another of the Government’s fiscal measures aimed at supporting businesses severely impacted by Coronavirus.

If you are a business in the retail, hospitality or leisure industries, or a nursery, you will not have to pay business rates during the 2020-2021 tax year. 

Some businesses may also be eligible for Government grants. Eligible businesses include those in receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR); these businesses can apply for a one-off cash grant of £10,000. 

Businesses in the retail, hospitality and leisure industries with a rateable value of less than £51,000 may also be able to access cash grants of either £10,000 or £25,000. They will be eligible for £10,000 if their business property has a rateable value of less than £15,000, while the £25,000 grant will be reserved for businesses with a rateable value of £15,000 to £51,000. 

Businesses that have seen serious disruption to their cashflow may also be able to apply for a commercial loan through either the Coronavirus Business Interruption Loan Scheme (CBILS) or the Coronavirus Large Business Interruption Loan Scheme (CLBILS). These loans are only available to firms who cannot access ordinary commercial finance.

The CBILS supports small and medium-sized businesses (those with an annual turnover of up to £45 million) to gain access to business finance of up to £5 million, to be repaid over a period of up to six years. The Government provides an 80% guarantee on these loans to give lenders confidence in providing finance to smaller businesses hit by COVID-19. 

The CLBILS is designed to help large businesses (those with a turnover of between £45 and £500 million) to access finance of up to £25 million, with the Government once again offering an 80% guarantee on the loans. 

The scheme for large businesses will launch at the end of April 2020, while the scheme for smaller and medium-sized businesses is already up and running.

What if my business is still struggling to pay contributions despite receiving support?

Wherever possible, your business should endeavour to continue paying contributions as normal and make use of the assistive measures outlined above.

If you are still struggling to pay your pension contributions, there are some options you could try. In the first instance, you should contact your pension provider. They may be able to suggest options such as extending the due date for your employer pension contributions, or paying contributions over an extended time period. 

You could also discuss options with your employees during these unprecedented times – but remember that it is illegal to force them to leave their workplace pension scheme.

Have my workplace pension responsibilities changed as a result of the pandemic?

As well as continuing to be obliged to make the minimum employer pension contribution, your duties regarding the assessment and enrolment of staff, and the administration of your chosen workplace pension scheme, also remain unchanged. 

However, if you are a new employer and are struggling to carry out your staff assessment and enrolment duties during the Coronavirus pandemic, you can take advantage of a process called postponement, which allows you to postpone the assessment and enrolment process (and therefore the payment of pension contributions) for up to three months. 

Employers must continue to automatically re-enrol staff who have left their workplace pension scheme every three years. This also applies to staff currently on furlough leave. 

If you are struggling to complete your re-enrolment duties during the Coronavirus pandemic, you cannot use the postponement process. However, The Pensions Regulator does advise that you may choose a date up to three months after the third anniversary of your staging date or duties date to carry out staff assessments and re-enrol any eligible staff. 

It should be noted that you will have to continue paying contributions for currently enrolled staff.  

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Managing Director, Wealth management, Bishop's Stortford office

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