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Some useful reminders of your obligations under workplace pension and employee benefits rules during the COVID19 pandemic.

June 2020


COVID19 - Workplace Pensions & Employee Benefits


Workplace Pensions

With everything that’s going on at the moment, employers have a lot on their plates, so we want to take the time to provide some useful reminders of your obligations under workplace pension and employee benefit rules. We hope you find this guidance helpful during these unprecedented times. 

Contributions

Each week/month when you process your payroll payments, you must continue to deduct pension contributions in line with auto enrolment regulations. The standard criteria for auto enrolment is that you must pay in to a pension for anyone who is between 22 and State Pension Age and who is earning over £10,000 per annum (£833 per month or £192 per week). If you have used contractual enrolment to meet your duties, please refer to your contractual arrangement with employees and ensure this is adhered to.

Contribution Deadline

Once contributions have been deducted from an employee, they must be paid over to the pension scheme by 22nd of the month following the month in which the deduction was made (19th if paying by cheque). If you fail to do this, your pension scheme may report you to The Pensions Regulator and this could lead to a fine.

Contributions for Furloughed Employees

Whilst employees are furloughed, their income is still paid to them via payroll, and therefore, still counts as pensionable earnings. You must continue to calculate and deduct pension contributions from furloughed employees and pay them in to a pension scheme along with the employer contributions. As contributions are percentage based, if an employee is only being paid the 80% which is claimed from the government, both the employee and employer contributions are based on the lower amount.

The Coronavirus Job Retention Scheme also allows for employers to claim back employer pension contributions in the same way as the 80% salary can be claimed. However, the amount that can be claimed is based on the default option for calculating contributions, known as qualifying earnings. Qualifying earnings is the amount between the Lower Earnings Limit of £6,240 per annum and the Upper Earnings Limit of £50,000. Employers can only claim 3% of an employee’s qualifying earnings to cover the employer’s pension contribution.

If you use an alternative salary definition (such as basic salary or total earnings) or, if you pay in more than the 3% minimum employer contribution, you may not be able to claim back the full amount of the employer pension contributions from the government.

The Coronavirus Job Retention Scheme is changing from August, with the support provided by the government being tapered. This means that the support is slowly being reduced, meaning employers will start sharing the costs of furloughed employees. Initially, employers will just have to cover employer pension contributions and national insurance contributions, however, from September, employers will have to start covering a portion of the 80% furlough salary that is paid to employees.

Ongoing Auto Enrolment Duties

As well as the regular monthly/weekly contribution requirements, other periodic auto enrolment duties still apply. Every three years, you must still reassess your workforce and re-enrol anyone who has opted out of the pension scheme but still meets the requirements for auto enrolment. You can exclude employees who have opted out of your pension scheme in the 12 months leading up to your re-enrolment date.

Following re-enrolment, you must also declare to The Pensions Regulator that you have completed your duties via the Declaration of Compliance. This must be completed within 5 months of your re-enrolment date.

Furthermore, if you have based your contribution calculations on an alternative definition to qualifying earnings, then you must continue to ensure you have a valid self-certification in place at all times. These documents can only be valid for a maximum of 18 months, so ensure you renew this each time it expires.

 


Employee Benefits

As many employee benefits revolve around health, there are a lot of areas where we need to consider the impact of COVID-19. We also need to consider the impact of employees working from home or how their benefits might be affected if they have been furloughed.

Claims in Relation to Coronavirus

Group Life Assurance - Under a group life assurance scheme, the insurer is very unlikely to refuse a claim due to a death being caused by Coronavirus. We can’t speak for all insurers, but many of the insurers we use have published guidance which specifically states that a claim for a Coronavirus related death would not be treated any differently to a claim for any other reason.

The only thing that might cause a restriction on claims would be if your policy has a Catastrophe Event Limit. A Catastrophe Event Limit is a limit on the value of claims that can be made under one policy. This will be stated in your policy documentation and will be stated as a monetary amount. COVID-19 does count as a catastrophe under most policies, so if you start to have a large number of claims for COVID-19 on your group life assurance scheme, you may need to check this limit. Some policies don’t include a Catastrophe Event Limit or include an extremely high limit, so this may not become an issue.

Group Income Protection - Under group income protection policies, the definition of incapacity can vary, however, each claim will be assessed and if an employee meets the definition of incapacity due to COVID-19, you should be able to claim on the policy as you would with any other valid claim.

Group Critical Illness - We are not aware of any group critical illness policies that have COVID-19 listed as one of the insured illnesses, so it is unlikely that an employee could claim under a group critical illness policy if they had COVID-19.

Group Private Medical Insurance - With the additional strain on the NHS, many private medical treatment facilities have either closed down so their medical staff can support the NHS, or are being used to treat COVID-19 patients. Therefore, in the short term, you may not be able to source private treatment which would normally be covered by your private medical insurance.

As the strain on the NHS reduces, some private medical facilities are reopening, however, they are focusing on more severe conditions, such as cancer, so services may still be restricted for some time.

If you require medical treatment which would normally be covered by your private medical insurance, the best thing to do is to call your insurance providers claim line and they should be able to help you work out whether private treatment for your condition is a feasible option. Some insurers use a large group of approved medical practitioners to treat claimants, so they receive status updates from these practitioners as to whether they are available for private patients at the present time and they should be able to identify if there are any suitable practitioners in your area.

Furloughed Employees and Their Benefits

If you have furloughed some of your employees, you may be wondering how this affects their employee benefits. Many employee benefits are insured via group risk products, such as a group life assurance scheme to insure an employer’s death in service benefit. These group risk products are often based on the employee’s salary, so what is the effect of the employee only receiving 80% of their salary through the government’s furlough scheme?

We contacted all of the group risk insurers that we use for our clients to ask these sorts of questions. They all seem to be taking a similar approach, but if you have any group risk policies, we would urge you to contact your insurer to check their stance. Most providers have a handy COVID-19 FAQ which should be able to answer your questions.

The general consensus from the insurers we spoke to was that, where a benefit is based on salary, a furloughed employee can still be insured based on their full, pre-furlough salary. As long as the premiums continue to be calculated on the higher salary and the employees maintain a contract of employment. Most insurers are stating that this falls under their temporary absence provisions, which may have a limited time period.

In terms of communicating details of furloughed employees to insurers, some insurers are asking to be notified of furloughed employees within 1 month of being furloughed. Others are just requesting this information is provided at the annual renewal.

Further to this, most insurers have provided clarification on what this means for their ‘actively at work’ requirements. Again, there was a general consensus that furloughed employees are deemed actively at work, unless they are ill and would have been unable to work under normal circumstances.

But, as mentioned above, we would urge you to contact your insurer to discuss your individual circumstances and ensure you have complied with any notification or other requirements.

Employees Working from Home

Where employees are working from home, this should not affect their membership of any group risk schemes. As they are still working, they still meet the actively at work requirements, so this should not be an issue. If working from home means they are now in a different country, you should contact your insurer to receive confirmation that the cover is unaffected.

For some schemes, you need to provide a workplace postcode. Most insurers are not asking for people’s home postcodes and are still accepting the normal workplace postcode in these circumstances.

Support from your Insurer

Most group risk policies now come with lots of additional benefits which are often ignored or unused by insured members. Depending on the type of scheme, these services range from a simple helpline to one on one counselling. Some even include support services aimed at the employer, such as legal support services.

During these difficult times, your employees may benefit from some form of support, so utilise these services that come with your group risk policies and remind your employees of what is available to them.

As well as the regular services, some insurers are providing additional support during the coronavirus pandemic. Some insurers have extended their support schemes to support all employees, regardless of their membership to group risk schemes, and some have extended the support to families of insured members.

Please take the time to check what services are available to you and your employees as part of the insurance policies you are paying for. Most providers have promotional material to help you communicate these services to your employees.


If you would like to discuss your employee benefits or your group pensions, please contact us on the details below.

Call us on 01473 408422
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