In September 2020, the government announced the replacement to the Coronavirus Job Retention Scheme, replacing it with the Job Support Scheme (JSS). This scheme came with very mixed reactions, particularly businesses wondering what the actual incentive is to pay employees for a third of their work and also contribute to the government's top-ups.
However, what has been left out is the impact on pensions and national insurance (NI) contributions. Based on the JSS factsheet published by HM Treasury, the government's JSS will not reimburse organisations for employers' pension contributions or NI contributions. The employer will still be liable to bear that cost without reimbursement.
Under the JSS, employers are to be liable to pay employees their normal contracted wage for the time worked which must be at least 33% of their usual hours. The employer will be liable in the usual way to pay its pension contributions under the auto-enrolment legislation on that normal contracted wage, as well as paying the employer's NI contributions on it. The employer will be liable in the usual way to deduct the employee's pension contributions under the auto-enrolment legislation from that normal contracted wage, as well as the income tax and NI contributions to which the employee is liable.
It seems to me that the same position on pension contributions and NI and income tax will apply to the two-thirds of usual wage which the employer will be liable to pay under the JSS for the time not worked by employees. The employer will be liable to pay one-third of that usual wage without reimbursement. The employer will be liable to pay a further one-third of that usual wage and claim reimbursement of that sum from the government up to a cap of £697.92 per month.
The employer will be liable to pay its pension contributions under the auto-enrolment legislation on the two-thirds of usual wage paid by the employer under the JSS for the time not worked by employees, as well as paying the employer's NI contributions on that two-thirds. The employer will be liable to deduct the employee's pension contributions under the auto-enrolment legislation from that two-thirds usual wage, as well as the income tax and NI contributions to which the employee is liable.
The above position on pension contributions is subject to the right of an employee to opt out of auto-enrolment and pension scheme membership altogether, which may occur if an employee finds his or her own pension contributions to be unaffordable.
Jeremy Harris is a pensions lawyer at Fieldfisher.
