Where employers receive public funding for staff costs, and that funding is continuing, it is expected that employers will use that money to continue to pay staff in the usual way and not furlough them. This includes Trusts, GP Practices etc. who should continue to pay their staff in full. Similarly, non-public sector employers who receive public funding for staff costs should also not furlough their staff.
However, we are aware that for some Direction Body employers, where the organisations are not primarily funded by the government and whose staff can’t be redeployed, the CRJS may be appropriate for some of their staff, e.g. Hospices.
NHS Pension Scheme
Furlough earnings, including any employer top-up, are pensionable under the scheme regulations for both the 1995/2008 Scheme and the 2015 Scheme.
The employer contribution rate of 20.6%, plus the levy of 0.08%, applies to the actual furlough earnings, not the member’s normal rate of pensionable earnings.
Although the CJRS grant includes some money to help with employer pension costs it may not cover the full employer pension contribution payable.
Example: Calculating Employer Contributions
A member’s normal monthly earnings are £2,250, under CJRS they will be paid £1,800. The employer would pay £372.24 – a total of 20.68% of £1,800.
Standard member tiered contribution rates remain unchanged. The tiered contribution rate a furloughed member pays is based on their pre-furlough Whole Time Equivalent (WTE) pensionable earnings, not their actual furlough earnings.
The standard tiered contribution then applies to the actual furlough earnings, not the member’s normal rate of pensionable earnings.
If an employer tops up the furlough earnings to the member’s normal 100% pensionable earnings then for pension purposes they are treated as not being furloughed and contributions will be paid at the normal rate.
Example: Calculating Member Contributions
The member’s WTE pensionable earnings are £27,000, the tiered contribution rate is 9.3%, the member’s contribution rate is not reduced to 7.1% in respect of the lower furlough earnings.
The furloughed monthly earnings are £1,800 (£27,000 x 80% / 12), the member will pay £167.40 – 9.3% of their furlough pay of £1,800.
The amount of service accrued whilst on furlough will be less.
Full-time furloughed members will be treated as working part-time and part-time furloughed members will be treated as having reduced their part-time hours.
Example: Calculating 1995 / 2008 Scheme benefit accrual
A full-time member who receives 80% of their normal pay, who is contracted to 37.5 hours a week, will be classed as part-time and deemed to have worked 30 hours a week, 80% of the 37.5 hours during the furlough period.
A part-time member contracted to work 30 hours / 37.5 hours a week is deemed to have worked 24 hours a week, 80% of the 30 hours whilst on furlough.
The CJRS has an upper limit of £2,500 per month, equivalent to £30,000 a year. If the member’s normal pay is more than the upper limit and the employer does not pay a full top-up, pensionable membership during furlough will be calculated as a percentage of normal pay.
Example: Calculating when pay is more than the upper limit
A full-time member who has pensionable pay of £40,000 will only receive furloughed (pensionable) earnings of £2,500 per week i.e. 75% of their normal pensionable pay.
£2,500 x 12 = £30,000 / £40,000 x 100 = 75%.
Whilst on furlough the member will receive 75% of their full-time hours whilst classed as part-time i.e. 29 hours per week for standard weekly hours of 37.5 (37.5 x 75% = 28.125 hours rounded up to 29).
For a part-time member they will receive 75% of their contracted hours i.e. for a member who normally works 30 out of 37.5 hours per week is deemed to have worked 23 hours per week (30 x 75% = 22.5 hours rounded up to 23).
Updates to the members pension record:
For whole-time members, employers will have to submit the date the member went part-time (due to the furlough) when they complete the 2020/21 update and confirm the part-time hours deemed to have been worked during the furlough period. When they cease to be furloughed, they must then also submit the date they returned to full-time.
For part-time members employers will have to submit a 2020/21 update, including the deemed hours whilst on furlough. The total part-time hours will include the actual hours worked as well as the deemed (reduced) hours whilst on furlough.
These updates must be made to all members' records, regardless of whether they are in the 1995/2008 Scheme or the 2015 Scheme.
NHS Pension Scheme benefits:
In the 1995/2008 Scheme the accrual of membership will be lower during the furlough period, but retirement benefits will still be based on the normal WTE equivalent rates of pay.
In the 2015 Scheme the pension accrual will be less, as it will be based on the furloughed earnings. The accrued pension for 2020/21 will be 1/54th of actual pensionable earnings, including any furlough earnings and top-up paid by the employer.
As the CJRS is a temporary scheme, the impact on overall pension accrual in either NHS Pension Scheme at retirement should be minimal for most members.
Death in service benefits:
If a member were to die while furloughed, the death in service will be calculated according to the regulations.
For the lump sum this would be:
- 1995 Section – 2 times the best of the last three years actual pensionable earnings
- 2008 Section – 2 times actual reckonable pay in the 2008 Section
- 2015 Scheme – the higher of 2 times last 12 months actual relevant earnings or the best of the last 10 years revalued actual pensionable earnings
For surviving adult pension, the enhancement applied to the pension that the member had accrued will be unaffected as it is based on calendar length service. The pension accrued during the furlough period may be lower for the reasons explained earlier in this update.
The Government has stated that further details on ‘flexible furloughing’, being introduced from 1 July 2020, are due to be published on 12 June 2020.