Reshaping HR, Pensions and Benefits in a COVID-19 world?

Ian Chapman Curry: Hello and welcome to this webinar brought to you by the Pensions Team and the Combined Human Resource Solutions Team at Gowling WLG. Today we will be looking at re-shaping the world of HR, pensions and benefits in a COVID-19 world with a particular emphasis on the recent announcements made by The Chancellor of the Exchequer on the future of the Coronavirus Job Retention Scheme. I am very happy to be joined today by Richard Lee, a partner in the CHRS Team and by Liz Wood a principal association also in the CHRS Team.

Hello Richard, how are you?

Richard Lee: Hi Ian, I am very good thank you. Good morning everyone.

Ian: Lovely. Hi Liz, how are you doing?

Liz Wood: Good thanks Ian.

Ian: Fantastic.

So, before we go on to some of the details of the impact of winding down the Coronavirus Job Retention Scheme, and you will be very glad that I will not be using that unwieldy name for the whole presentation, we will start referring to that now as the CJRS.

Before the impact of COVID-19 was seen in the UK, we had gone from a record high so by the end of March according to the ONS Datasets, we had a record number of people in work in the UK, over 33 million people. And obviously there have been some changes since then. We only have the figures for April 2020 of the number of people claiming out of work benefits but we can already see that very stark increase in just one month and we will see what impact there has been in May when that dataset is released on 16 June, but it would not surprise me if we start to see that upward number increase further. But that number would be an awful lot higher if it had not been for the government introducing various schemes to protect employment.

And what seems to have happened is that the world of work has split into thirds roughly speaking. At the moment around 10 million people are working mainly or entirely as normal, so thinking about everything from train drivers through to doctors and nurses, people working in supermarkets and people collecting rubbish. Those people are still working in their usual way, at their usual places of work, whether that is a hospital, or on the train.

There is then a large chunk of people who are working mainly or entirely from home. All three of us that are presenting today are presenting from home and that has become a huge growth area where people are shifting to work mainly from home where they can.

And that leaves the last third, the sheer number of people who are in one way or another being supported by the government and out of that 10.7 million the biggest chunk comes from two schemes, the CJRS which covers workers with 8.7 million people being supported in that way and then also the self-employed income support scheme with a further 2.3 million and the rounded out numbers are then made up by a few other government schemes that are in place.

So that has been fantastic for the preservation of employment. It is a model that we have seen rolled out in a number of other countries and it really is the only thing that has been between the impact of COVID-19 and mass unemployment.

But of course it comes at a huge cost. The office for budget responsibility predicts that the cost of the CJRS is going to be over £60 billion and depending on the uptake to the end of the CJRS in October could be as high as £100 billion so the Chancellor of the Exchequer has really been walking a tightrope between protecting employment and not exposing the treasury to an unlimited amount of money to fund those schemes.

So on 29 May the Chancellor announced the next steps for the schemes, what would happen going forward from July and there are three main areas that the scheme is going to change.

There is going to be the introduction of a cut off so no new employers and no new employees. There is also going to be the ability for employers to bring back furloughed workers on a part time basis and then finally the tapering of government support.

As many of you will know at the moment all of the support under the CJRS comes from the government with the government with the government paying for wages and associated national insurance and pension costs up to a cap of £2,500 and 80% of the individual's wages.

So all of these changes are going to be introduced from dates in the next quarter. From 1July we will see the introduction of the cut off so claims from 1 July onwards will be restricted to employers currently using the scheme and previously furloughed employees.

In addition part time work will be introduced from 1 July 2020 so employers will be given the flexibility to bring furloughed employees back part time under the CJRS and they will be able to decide with their employees what that pattern will be, how much work there will be but anyone that is brought back part time their wages for the periods that they are actually in work will be covered by the employers with the CJRS scheme picking up periods of time when they are not in work.

But let us interrogate that 1July 2020 date a little bit further. Because of the way furloughing works, the real cut-off date for an employer to start using the scheme for the first time or for an existing employer who is using CJRS to bring any new employees into furloughing is the 10June 2020. Furloughing works on three weekly cycles and 10June when you work back from 1July is the cut-off date for the three week cycle that will end at that date. So although, if we go to the previous screen, it seems like the 1July is the key cut-off date in reality for people working in HR you need to be thinking about the 10June and the 10June is not very far away, less than a week, so that is a key date.

Another key date in June is the 12^th. On the 12June we have been promised detailed guidance on the next stages of the furlough scheme being wound down. Somewhat unhelpfully that comes after the 10June cut off, but from 12June we will be able to provide more detail on the nuts and bolts of what the wind-down will actually look like in practice and I expect there will be follow on insights and webinars from the Employment and CHRS teams on those things.

So from 1August 2020 we then see the third element of the reduction and the elimination of the CJRS going into effect, and this is the tapering of government support to employers. From 1August 2020 the government will still be paying what we talking about earlier, 80% of wages up to a cap of £2,500 for furloughed employees, but employers will have to pay the employer national insurance contributions and pension contributions in respect of furloughed employees.

Two things to note there, we think that that would cost roughly 5% of pay roll in total and in terms of pension contributions we are talking about the minimum required under automatic enrolment from the employer and that is under the CJRS. It might be as Liz and Richard will come on to later, that there are additional pension contributions that employers have to pay outside of the CJRS, we are just talking about what employers will be required to pick up under the CJRS.

From 1September 2020 the tapering will go a next stage further. So as well as paying employers NICs and pension contributions, employers will be required to pay 10% of wages, so there will be a 70/10% split between the government and employers for paying for the CJRS scheme, and again a rough estimate for employers that would look something like 13-14% of the wage bill.

And then finally, from 1October the last stage of tapering this is when employers will need to pay, again, employer NICs along with pension contributions and 20% of wages. So the government will be paying 60% and employers will be paying 20%, so just gradually bringing in that tapered amount up until the end of October.

And you will see all of that has been very gentle, you have seen from 1October through very gradual increases in the amounts that employers have to pay, but of course with the CJRS ending at the end of October from November onwards, employers are then faced with the full cost of paying for employees and some very difficult decisions that many business will have to make about what is going to happen to ensure that their businesses are stable in a post-COVID-19 world.

So just moving on now, I am going to handover to Liz who is going to cover some of the details about what we have learned on salary sacrifice both during the operation of the CJRS and what is going to happen as it is wound down and afterwards.

Liz: Thank you. Well along with the vagaries of the CJRS we found the impact of existing salaries sacrifice arrangements to be particularly confusing and I think part of the reason for this is because employers are required to establish an employee's reference salary under which the grants can claimed from HMRC by reference to a specific date being 19March 2020. But it certainly was not immediately clear in the early days of the CJRS how the salary sacrifice arrangements, particularly pension salary sacrifice, fitted into that equation. Which pay should be taken into account for the purposes of a CJRS, should that be the employee's notional salary or post salary sacrifice salary and what impact might that on a grant paid by HMRC. It might result in additional costs for employers and lower pension savings for employees.

And I think the position is made more complicated by there also being plenty of questions about how pension contributions would be treated under the CJRS and that proved to be quite a heavy mix.

Now fortunately the position is a lot clearer then it was two months ago when we last did a webinar on this area. Because the CJRS will still be with us for some months to come albeit in an evolving form as Ian has outlined, I am going to talk through what we now know about salary sacrifice, its interaction with the CJRS, the impact on furloughed workers and what options there are for employers as the CJRS begins to wind up.

So moving onto the next slide. Let us take this back to basics. Well the salary sacrifice arrangements are pretty common and as a reminder they work by employer and employee agreeing a contractual variation. The employee agrees to give up part of their salary, the sacrificed amount, and in return the employer agrees to provide the non-cash benefits of equal to the value of the reduction in the earnings. The appeal of these arrangements is they allow the employer and the employee to make reduced national insurance contributions then would otherwise have been the case.

I think it is fair to say that HMRC has tolerated such arrangements over a number of years rather than particularly loving them. Commonly non-cash benefits provided in this way have been things like childcare vouchers, cycle to work schemes and pension contributions and that is what we will be focusing on today.

And these are causing something of a headache for many employers looking to control costs, claim their grant amounts under the CJRS but also honouring their contractual obligations to employees. Now the starting point is that where an employer has furloughed its staff and where a salary sacrifice arrangement is in place, the employer should make a claim under the CJRS for pay based on the worker's post salary sacrifice pay, so hopefully that will be clear for most employers where they are furloughing staff who will already be claiming on this basis, and the main reason for this is because the cost of benefits provided through salary sacrifice schemes does not form part of the reference salary for the CJRS, it is basically a policy decision, the government was not willing to reimburse employers for the cost of non-cash benefits. So that means that a furloughed worker is on a salary sacrifice arrangement on 19March, that will reduce their reference salary and the grant payable. It also means that the amount of contributions under the CJRS the pension contributions, that will be based on the reference salary and not on the worker's pre-sacrifice salary.

So moving onto the next slide, what do we know about what pension contributions should be made during the furlough period. Well fundamentally the CJRS does not alter an employer's usual obligations to make pension contributions. This was confirmed in the Pensions Regulator's guidance on the impact of COVID-19 which we had in the middle of April 2020 which was after the latest webinar we have done on this area. And this is about an ongoing contractual commitment to maintain the salary sacrifice arrangements, in the absence of anything else being agreed to the contrary. The fact that the employee or the worker has been furloughed does not change this. This can immediately place the employer in a more financially onerous position then was the case before the furlough arrangements, because once the employer claims under the CJRS in respect of post-salary sacrifice pay and claims the statutory minimum employer pension contributions on that basis, it still has this obligation to honour the salary sacrifice arrangements in respect of the furloughed staff unless it has done something to vary that arrangement which we will come onto later.

So essentially the employer has to continue to make those pension contributions whether or not by salary sacrifice, it is contractually agreed with the employee during furlough period. And in addition most scheme rules will define pensionable pay as the notional pre-sacrifice pay, that is the basis on which the non-cash benefit, the salary sacrifice pension contributions are being calculated and it is worth checking that that has been worked through on the pay roll systems, because employers need to know two things at the moment in respect of furloughed workers. First the post-salary sacrifice pay for claiming under the CJRS, but also the notional pre-salary sacrifice pay calculating the appropriate salary sacrifice contribution to the pension scheme.

OK, moving onto the next slide.

One question we have had from clients is whether it is permissible to apply salary sacrifice to pension contributions for a furloughed employee who is being paid the 80% salary under the job retention scheme. So essentially whether deductions in salary are allowed to claw back this additional cost for the employer. The short answer is no, there is no ability for the employer to offset those salary sacrifice costs when the grant in respect of a furloughed worker's pay is being received by the employer from HRMC.

And government guidance, again updated since our last webinar in this area, confirms that no part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme and the Pensions Regulators have also come out with guidance consistent with this, and no pay received during the furlough period should be treated as subject to salary sacrifice amounts.

So let us imagine an example where before furloughing, before COVID-19, the employee could agree to a reduction in salary which resulted in the non-cash benefit of salary sacrifice contributions which would be paid by the employer on her behalf and let us say that was an addition to the employer's usual pension contributions of let us say 5% of pay, assuming this is a defined contribution pension scheme. The employee is then furloughed, the employee's pay is limited to the CJRS grant amount during the furlough period and in that case where does that 80% or 2,500 cap applied, the salary sacrifice contributions cannot be recovered from the employee. So the employer now is effectively doubling its pension scheme commitment during a period of furlough because it has got to make, well if it saying 5% employer contributions and the additional salary sacrifice 5% contributions and of course the employer can only claim back a small amount of this under the CJRS in respect of minimum statutory automatic enrolment, employer contributions 3% of qualifying earnings, in that band of earnings, and it is specific to automatic enrolment. So this means employers are required to meet some pretty large potential additional costs simply by virtue of the fact that employees were in salary sacrifice arrangements before COVID-19 emerged and I think what we are saying is that employers were more generous than the minimum contributions required under automatic enrolment with those salary sacrifice arrangements are disproportionately worse hit.

It is worth mentioning though as a final point on this slide that if an employer has chosen to top up the 80% or the £2,500 grant under the CJRS, the salary sacrifice deductions can continue to be operated in the amounts in excess of the grant paid under the CJRS. So that might be helpful for some of you.

The next slide is just a summary of the position that I have just talked about in very general terms if you want to look at that afterwards. To the extent that you do need more angular worked examples do take a look at the government, I should say Pension Regulator's 17April guidance, that contains really helpful practical examples of how the salary sacrifice arrangements work in the context of furloughed workers and the CJRS.

So some employers have been looking at whether it might be better off to remove or vary the salary sacrifice arrangement for furloughed staff and I guess a good question is whether it is too late to make changes now.

Well in principle, salary sacrifice arrangements are intended to be permanent variations of a contract but HMRC has always allowed salary sacrifice to end or be varied in cases of what it calls life events. HMRC guidance quite recently has clarified that the COVID-19 situation is one such life event, allowing employers and/or their employees to bring the arrangement to an end or to review its terms and I think it's a really helpful clarification.

So it means for furloughed workers during the furlough period they could be brought out of the salary sacrifice arrangements, either at the employers instigation or because is it is preferable for the employees themselves and where this happens we are generally seeing that as a suspension rather than a permanent change.

The potential downside of this though is that change is made to employees' pay, including for example bringing people out of the salary sacrifice arrangements can't be taken into account for the CJRS but suspending salary sacrifice now for a furloughed employee won't increase the amount an employee can recover from the furlough scheme. But it doesn't necessarily mean there is no value in an employee coming out of salary sacrifice at the moment and a potential advantage of doing so is that the employer does not have that ongoing obligation to meet the salary sacrifice contributions on the employee's behalf. Instead, the position generally reverts to the employee having their pension contribution deducted from pay. In our experience whether it's worthwhile for the employer to suspend the arrangement does depend on a number of variables and that will involve what the employee's pay is or employee's workforce involves, whether the employer's pay and salaried employees sacrificing or topping up, and the employer might want to take into account what it would do with its NI savings because some employers use some or all of the NI savings to boost employees' pension savings. Ideally, in agreement to suspend or vary someone's terms should be documented in writing on the basis that salary sacrifice is a contractual variation and there needs to be agreement on how pension contributions are going to made once that variation has taken place, what will those contributions look like during the furlough period or longer, if this is to be a permanent change. It's also worth checking the pension scheme rules if you are thinking of doing it just to ensure that rules do set out what happens when an employee chooses to opt out of salary sacrifice but remains a pension scheme member, you might need to make that decision clearer in furlough terms if it is not already clear for example in the pension scheme documents.

And just moving on to the last slide here.

As if it's not enough for employers to get their heads around salary sacrifice scheme contributions and options available have been mentioned, the Chancellor has just announced changes to the operation of the CJRS in the coming months. The general principles changes in final salary sacrifice arrangements work in the context of furloughed staff but as we have mentioned previously employers will have to pay their National Insurance contributions as well as pension contributions and they won't be able to claim those back previously hence the CJRS. So that could mean an additional cost to take into account obviously, given that salary sacrifice arrangements are designed to provide for anyone's savings, and employees might want to just put that in the mix in terms of what it might want to do with salary sacrifice arrangements at the moment. I think I mentioned further guidance is expected from the Government on the 12^th June so we will wait to see what firm cost impacts there might be for employers there.

Going to move on now to Richard's part of the Webinar so I will just handover to him now.

Richard: Thanks very much Liz and Ian. I was thinking to myself how do I follow those two and I was going to go for a slide entitled Brexit The Silver Lining but I think that probably would have finished all of us off so I've gone for a bit of time travel, past, present and future, and taking the themes that Ian and Liz have talked about and looking at how employers are dealing with those and might want to deal with those in the future so the first three of my slides takes you through those different scenarios so on the first slide…

Ian: Just before we get to those Richard and this is my fault entirely for not remembering at the beginning, but just to encourage everyone that if they have any questions about this, the whole set up was complicated enough before the Chancellor made the announcement around all of this being tapered off, so if you have questions around how CJRS works in practice now and also questions what might be happening in the future, then please use the question announcer button. We've already had quite a few questions in and we'll be answering as many of those on this live webinar as possible at the end but you get a bonus guarantee that we respond where possible to all the questions that come in. The only thing that I would ask is that we can't easily respond if you have submitted an anonymous question so if you do want an answer, if you want someone to get in touch with answers, then please let us know your name or the best place to contact you.

Richard: Thanks, thanks very much Ian. So just looking at the first line up there on this next section. So back in March, only back in March, ten/12 weeks ago, when the Government first introduced furlough, we had a webinar and a lot of employers were looking at that point urgently at protecting income, cost flow and capital in particular sectors where businesses were struggling and just to be clear for everyone out there, there is actually very little in the way of new law. We have got this new Coronavirus Act of 2020 which was passed back in March, it's on the books for two years to allow the Government to take action, but in our area, in HR law, pensions, benefit, employment. Very little actual new laws will come into to effect with work in time to allow all the carry over for example but the vast majority of this is all based on existing law or the Government simply produced guidance, announcements, declarations alongside other organisations such as Pensions Regulator and ACAS also issuing their own bodies and guidance so, you know, that's good news, and at that time when this originally came in many employers were looking at reducing employer contributions on the DC defined contributions site, or potential benefit reductions on the defined benefit side of the scheme, final salary schemes, and certainly we had a number of employers that put in place some very, very urgent measures which were designed to save their costs in the short term. Questions were asked and there was a lot of catch up being played, not only by the Government, but by TPR The Pensions Regulator, who did realise that having a full 60 day consultation in terms of reducing contributions, benefits would be too late for some employers, so announcements were made about easing those, or furloughed workers reducing DC contributions for those that took the place up to the end of this month. TPR may well align itself with the latest announcements and have that easement continued, but we are waiting to see what happens on that and at the time, I think back in March and April, there was possibly a presumption that things would return to normal at the end of furlough or other reduced working arrangements. Generally furlough agreements didn't put in place timescales or contemplate what would happen at the end of the agreements so it will be necessary now and for future to build in agreements on furlough arrangements and other variations to employment terms.

So the next slide deals with more where we are in the present. So it is still clear that there are statutory consultation requirements for the more permanent changes for those employers that have now decided that the last three months was potentially a game changer. Many businesses are reshaping entirely and so they are now having to think about closing down employee benefit schemes for example and to the extent they did not reduce employer contributions previously. They are now looking at that rather more urgently and when you step forwards in to the measures that Liz and Ian have talked about so from the 1^st August it is no longer possible to claim the minimum 3% qualifying earnings reimbursement under the CJRS, which for those employers who have not yet reduced contributions would be another cost burden. Of course even those that are only providing the minimum now from 1^st August will have to pay for that as well, so that's going to have to be built in to budget requirements going forwards and just to state as previously that the law has not really changed much in our arena and certainly employer duties and automatic enrolment under the Pensions Act to continue as normal. There are three or four concessions and easements but basically employers still have to make automatic enrolment contributions on that minimum basis.

And then finally just trying to meld together the Chancellor's latest announcements and points that Ian and Liz have made, for those employers who now can see that from September the CJRS starts to taper and by November there will be no longer any Government subsidy in place that now needs to start taking effect in terms of financial planning, employers may then decide that they can no longer sustain the high levels of contribution to the extent that they provide those. Secondly, during September and October those costs obviously start to increase with the subsidy lowering so other considerations around HR budgets and pensions such as the definitions of pensionable pay, what do you pension, pay itself and other benefits such as income protection and private medical, which I'll touch on shortly.

So from furlough we now unfortunately have to start looking towards more permanent solutions such as redundancies. On the pensions side it will be necessary for you all as employers to review very closely the redundancy benefits and early retirement benefits that were payable under defined benefit scheme rules in particular and although for the longer term reshaping all businesses that will be crucial the short term costs consequences may be substantial as redundancy and early retirement benefit rules are triggered and for those of you that have unions, for example they will be very conscious of pension benefits in this circumstance but I'm sure those of you who are involved with unions have already been negotiating hard in terms of furlough and other variations to working arrangements.

So that's past, present and future. The next slide was just a very brief mention for trustees, we wouldn't want to miss you out. For those of you who have at least two roles out there and some of you maybe more, you will remember if you were at our webinar back in March that we recommended a rule analysis for setting up these arrangements and, essentially, if you are now reversing out, the same type of analysis is necessary. What do absence rules say? How are furloughed workers treated? How are the variations of normal contracts treated? Are they just treated as active members throughout? What does it mean in terms of returning to previous contribution levels and pensionable pay, if that will be happening? As Liz mentioned, the laws of presumption back in March that most employers would probably reverse back out to normal levels, I'm not sure that that presumption stands anymore so definitions of pensionable pay need to be examined.

And finally not a key point for trustees, but just one to be aware of, how the employer is actually going to return to its new business form and working arrangements. Are there contractual variations needed? What about consultation?

And then finally on the admin side, it is obviously key to make sure that the changes coming in were dealt with properly under the various scheme rules and now further variations changes will also need to be followed accurately to make sure that member's benefits are being provided and funded for correctly.

So that's just touching on trustees as we move in to the next phase, as I mentioned earlier, insured benefits. So alongside pensions and the variations to contract and salary sacrifice arrangements, death in service we generally found that employers were continuing to provide on the full pre-furlough or pre-reduced salary terms, but again it's necessary to check rules and of course the insurance contracts providing the benefits - what is the provider insuring and on what basis? And a similar analysis for income protection for example, it is necessary to check policy documents, how will long term variations to work operate and what do the member communications say when their salary levels change for example.

And in terms of the market more generally on insured side, we are finding that providers are being flexible in terms of premium payments, allowing for movement to annual rather than monthly, the definition of actively at work for income protection does include furlough at least for now but again it is one to watch as things develop and finally renewals, unfortunately of course renewals will need to be dealt with. It may be that there are substantial changes to the numbers being insured and also the basis for the way in which excess is applied for example and the definitions of income protection itself and salaries are defined. At the moment, generally our experience is that the providers out there are being very flexible and practical in this area, but of course they are themselves under fairly severe pressure financially.

Finally, just on the medical side so whether that's trust or insured, clearly a lot of employers are concerned about getting their returning employees tested for the virus, so that is one to build in to those discussions. In terms of the medical trust side, it's certainly preventative whilst those tests are accurate, but that would normally of course be included within the definitions of treatment.

So finally we are now on to taxation of COVID-19's support payments, as they're now called in shorthand. So that's CJRS, but also the self-employed, the SEISS Scheme, the Revenue on Friday launched a consultation which finishes on 12^th June dealing with the taxation of all these different types of grants. They're either dealt with under income tax or corporation tax and it's absolutely clear that from an employer's perspective they should be paid through PAYE, and of course national insurance contributions need to be built in and will have to be paid for again shortly as we previously pointed out. If employers are not doing as these regulations require in terms of paying over the furlough payments as Liz has described, i.e. the entire grant then there will be the possibility of penalties for non-compliance and fines from the Revenue up to 100% of the amounts that are being over-claimed, the enforcement regime is very much coming in to form as well. You need to make sure from an employer's side that you dealt with all of this correctly.

So that is my section. Thank you all very much and please do send in some more questions. Back to Ian.

Ian: Yes, thank you very much Richard and thanks to Liz. We have had a lot of questions come through. I'm going to pick by far the easiest and simplest one to go with. Can we get a copy of the slides? I can confirm that everyone who attends and also everyone who signed up will get both a copy of the slides along with a recording of the webinar that they can share with any colleagues and I am now going to have the chair's prerogative of asking some of the more difficult questions to my colleagues.

So a number of questions have come in. First one, over to Liz, if the salary sacrifice came in after the 19^th March. So, in the question, the example was a salary sacrifice that went in with effect on the 1^st April and then the furlough scheme takes the salary paid on the 19^th March rather than the actual salary paid on the 30^th April, which includes the salary sacrifice, is that a correct understanding of the position?

Liz: Thanks Ian and thanks to the person who asked the question. Yes, my understanding is that the start date of the 19^th March. If you're making subsequent changes, for example people have been brought on to salary sacrifice after that date, that's not taken into account in terms of what you claim back under the CJRS. I'm very happy to just go away and check that for you after the webinar and I think it looks to me like, though it might be a number of technical questions like that, we can look into this further and come back to you individually on it. But my take always with the CJRS has been it's a clawback mechanism that the Government has put in place to try as easier way as possible to make sure that people get loan amounts in respect of keeping people in employment ,so I'm hoping that the view that HMRC would take would be that, you know, that's the relevant date is the 19^th March and subsequent changes just aren't taken into account. But, as I say, we'll check after the webinar just to check that that's right.

Richard: I was just happy to pick one up Ian if that's OK?

Ian: Of course.

Richard: On the complicated question of, I suppose part-time furloughing is what it's being called, and at the moment clearly it is not possible to furlough someone for less than the three week period, so the most you can do as an employer is furlough for three, bring people back for three, furlough again for three. But the question is being asked if and when that changes under this new system, who is going to pay what, in terms of people who are part-furloughed and part-not-furloughed and the answer to that is, well, from the 1^st August there is, you know it's no longer possible anyway to claim for pension contributions under the furlough arrangement, under the CJRS so employers from 1^st August will be picking up all of the pensions costs. Before that date, in terms of part-time furloughing, if you look back at Ian's slides, the split in payment to the extent that anyone is furloughed then during the period where pension contributions can be claimed then that percentage, that proportion if you like, of the costs can be claimed for. As the percentages change, for example Liz mentioned some employers who have actually topped up to 100% anything outside of the CJRS, anything more generous than the furlough scheme falls to the employer, and always has fallen to the employer. So if you're topping up all the better paid workforce then those positions don't change as a result of these latest announcements. But it is one of more complex areas and of course from the 1^st November none of this is available at all in terms of the CJRS, so all of the costs fall back on the employer.

Ian: That's great and a question for Liz, someone who wanted to reduce employer pension contributions, what is the minimum consultation period?

Liz: Thanks Ian and thanks to the person who has asked the question. The questionnaire didn't say whether or not the individuals involved are on furlough or not, so I'll answer the question in both cases. So we've obviously got the Regulator, who have said that in respect of individuals who have been furloughed there is now the stability to, it's not as easy, so you don't have to consult at all. What the Regulator has said is that if you've got individuals on furlough and you've got employer contributions in excess of the statutory automatic enrolment pension contributions, the Regulator won't take action if you haven't done your full 60 day usual pensions consultation. That's only on the assumption that it's furloughed staff, at the moment it's only up until the 30^th June, although I would expect that the Regulator might extend that given that the CJRS is being extended to the end of October, and that has always been the case in terms of consistency with what the employer can claim under the CJRS. If you're looking to make a change to employer contributions that isn't specific to those circumstances, you need to comply with the existing pensions consultation requirements if you're reducing employer contributions so that's a minimum 60 day consultation period. I completely appreciate that might not be ideal in the circumstances, given that a lot of employers are very eagerly looking to save costs at the moment, but that's what the kind of general principle is and the Regulator hasn't got any easements they have generally for people in a wider situation. I think in this sort of situation the best practice is still to consult under the pensions consultation duty for as long as you can. As to the risk of pensions regulator action ,it's just also a way of noting that there's always been the fine that the Regulator's give out for failure to consult under a pensions consultation requirement, so that's a fine of up to £50,000. It doesn't make the changes void if the Regulator took action, but it's just always sitting there in the background and clearly the more radical and permanent the change, the greater the need to be pensions consultation, and of course the other missing piece of the jigsaw here is that employment contracts might be relevant, so it's always worth checking what the pensions clause is in the employment contracts, to ensure that you haven't forgotten any additional employment consultation duties that you might have here as well.

Ian: That's great, thanks for that.

Richard: Ian, just before we finish, because I know we are pretty much on time, but there was just one question which is recurring about the top-up up to 100%, and the Regulator's comment about pre-sacrifice and employee pay, but just one point to make clear is that the furlough arrangements never introduced any different relationship between an employer and its employees. The different relationship was introduced between employers and the Government and the furlough scheme is simply a funding contract, so the question for employers isn't do I have to, is it obligatory for me to top up to even 80% or 100%, and the answer is no. If you are applying for the funding on the basis that you are paying employees 80%, then as Liz has mentioned and I've said about the Revenue, that enforcement process, you have to pay across what you receive and what you've applied for. So if you've agreed that you're meeting 80% costs and you're claiming for that then that is what you're paying. There's no obligation to then top up to the 100%, but also remember that furlough and other contractual variations are by agreement. I know that in the early days a lot of employers who were urgently putting this in place simply told people what was happening, and technically there should be a consensual response from the workforce agreeing to these changes and so furlough agreements were made clear but the payment basis for most is 80%. Some have gone down to 60%, for example, but there's no legal obligation to top up to 100%. That's simply an employer and employee additional agreement as part of the changes.

Ian: Thanks for that Richard, that's really useful. There's been more questions than we have time to answer live. What I am going to do is leave the question and answer box open for a few minutes. If anyone else has any additional questions, or if you have submitted a question anonymously and you would like us to get back to you, then you can resubmit it, just with a name that we can cross-reference to the attendee list and then we'll get back to you.

I would just like to thank everyone for taking the time today to join us on this webinar and especially to thank Richard and Liz for their time. I look forward to the 12^th June when we might have some more case studies and details in the guidance that will support the announcement made by the Chancellor, and also just to note that there is a whole host of really up-to-date and relevant COVID-19 legal content on gowlingwlg.com/covid19. I think a lot of people on this webinar will find both the Pensions Team CHRS and the Employment Team's webinars and insights to be really useful at this time.

So from all of us thank you very much and goodbye and good luck until the next webinar. Thank you.