Salary sacrifice on furlough

Psyduck1980

I have been furloughed with effect from 1st May and, as such, I will be paid £2,500 per month until further notice. 

However, I currently pay approximately £325 per month into my workplace pension scheme via salary sacrifice. Does anyone know if the figure of 2,500 is pre or post salary sacrifice deduction? To put it another way - should I just be paying tax and NI on £2,500 or tax, NI AND salary sacrifice pension contributions? 

I hope this makes sense! Any advice would be greatly appreciated. 

calcotti

My understanding is that the £2500 is the gross amount from which NI, tax and pension contributions will be taken.

Jeremy535897

Guidance to employers, which refers to salary sacrifice schemes:

"What to include when calculating wages

The amount you should use when calculating 80% of your employees’ wages is regular payments you are obliged to make, including:

• regular wages you pay to employees
• non-discretionary overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments

You cannot include the following when calculating wages:

• payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including:
  • any tips, including those distributed through troncs
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.

Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly."

From https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme

Psyduck1980

Jeremy535897 said:

The entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.

Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.

I read this as meaning I should be paid £2,500 less tax and NI only and that my employer should pay over my £325 pension contributions (plus their employer contributions). Do you agree?

calcotti

Psyduck1980 said: I read this as meaning I should be paid £2,500 less tax and NI only and that my employer should pay over my £325 pension contributions (plus their employer contributions). Do you agree?

No I don't. Your pension contributions are your contributions not your employers. They should be made at the same % rate as before. Your employer will also make the employer contribution. The employer will be reimbursed for the government for their contribution (unless they are topping the contributions up over and above the minimum requirement - they will not be reimbursed for the excess).

sharpe106

Why would your employer pay your contribution?

Psyduck1980

calcotti said:

Psyduck1980 said: I read this as meaning I should be paid £2,500 less tax and NI only and that my employer should pay over my £325 pension contributions (plus their employer contributions). Do you agree?

No I don't. Your pension contributions are your contributions not your employers. They should be made at the same % rate as before. Your employer will also make the employer contribution. The employer will be reimbursed for the government for their contribution (unless they are topping the contributions up over and above the minimum requirement - they will not be reimbursed for the excess).

I’m not sure how you can reach that conclusion based on the information I quoted. Please can you clarify? 

Jeremy535897

Has your employer amended your contract of employment to change the salary sacrifice arrangements?

Psyduck1980

sharpe106 said:

Why would your employer pay your contribution?

Because that’s what salary sacrifice means. 

Psyduck1980

Jeremy535897 said:

Has your employer amended your contract of employment to change the salary sacrifice arrangements?

When my employer introduced a salary sacrifice pension scheme employees were required to sign a contract addendum. The same applies if/when an employee wants to change the amount they sacrifice. 

Jeremy535897

See https://www.ftadviser.com/pensions/2020/04/20/tpr-clarifies-treatment-of-salary-sacrifice-under-furlough/

TPR guidance here:
https://www.thepensionsregulator.gov.uk/en/covid-19-coronavirus-what-you-need-to-consider/automatic-enrolment-and-pension-contributions-covid-19-guidance-for-employers/covid-19-technical-guidance-for-large-employers