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FAQs - Covid-19 salary sacrifice schemes and furlough leave in Independent schools

03 April 2020

Many independent schools are facing extremely difficult decisions in the light of the Covid-19 restrictions.

The proposal to reduce school fees next term and plans to furlough staff have raised a number of questions in circumstances where staff participate in a salary sacrifice schemes relating to school fees and pensions.

For frequently asked questions relating to furlough leave in general please see For queries relating specifically to furlough leave and salary sacrifice schemes please see below where we have set out answers to the most common questions we've been asked. For more specific advice please contact Sue King on


Yes - providing you entered into the agreement pre 6 April 2017 and the continuing arrangements relate to employment with the same employer at the same school in respect of school fees for the same child they may continue and the variation will not take the Salary Sacrifice Agreement out of the transitional arrangements.

If the member of staff is also on Furlough Leave you can still vary the Salary Sacrifice Agreement but you may have additional considerations – please see the questions relating to furlough leave below.


Yes, but if as a result of leaving the salary sacrifice at the same level as last term the sum sacrificed covers more than 85% of the school fees staff will pay tax on the marginal cost normally set at 15% of the school fees through their P11D.


We suggest you provide staff with a new schedule showing the revised value of the Benefit and Salary Sacrifice and ask them to agree the revisions by signing a new schedule in the same way as you do for fee increases each year. You may need to repeat this process at the end of the summer term in preparation for September.


Just to recap – a Lifestyle change is defined by HMRC as an unforeseen life event. This normally means events such as redundancy of partner, pregnancy of employee or partner or death of partner or child. Government guidance published on 4 April 2020 confirmed 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. This highlights the importance of obtaining written agreement from members of staff to changes to contractual arrangements including placing them on Furlough leave and varying the salary sacrifice agreement.

Whatever the impact of COVID19 on individual members of staff fees still have to be paid so it is unlikely staff will seek to leave the salary sacrifice scheme, but accepting the situation as a Lifestyle change does give options. Staff may apply to a hardship fund or apply for a bursary (if available) in which case, if successful in their application, they will seek to reduce the sum they sacrifice or leave the scheme completely. If they leave the scheme they can not re-join in September.


The original salary sacrifice policy introduced at the time when you first entered into a salary sacrifice agreement with your employee states "the salary sacrifice agreement will have to terminate if the reduction in pay means that the salary sacrifice takes the employee below the minimum level for the National Minimum Wage".

However the government guidance at states furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

In circumstances where members of staff are on furlough leave and participating in a salary sacrifice scheme the school will receive a grant for 80% of the employees' reduced (post sacrifice) salary. Therefore the school will pay this sum irrespective of whether it is below NMW and the existing rule regarding NMW will not apply because the member of staff is not working (unless they are undertaking training agreed with the school).


Yes – any tax, NIC and pension contribution will be collected from staff pay as normal. However employers must bear in mind they can only claim back the minimum automatic enrolment employer pension contributions. This means the maximum you can claim back from the government for employer pension contributions is  3% calculated on 80% of the normal salary of furloughed staff. For example  if your enhanced employer pension contributions are 10% you will not be eligible to claim the additional 7% and schools will either have to terminate the scheme in accordance with its rules or absorb the additional cost.

For frequently asked questions relating to furlough leave in general please see


If you would like to discuss any aspect of this article further, please contact Sue King by email or call 0113 204 5708.

You can also keep up to date by following Wrigleys employment team on Twitter

The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors. 


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Sue King


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