Press reports this week say that British Airways is asking its staff to volunteer for unpaid work or unpaid leave to help the airline’s “cash-saving drive”. This shows that companies are still considering ways to manage their employment costs in the uncertain economic climate.

Cost saving measures in the workforce, for example asking employees to take unpaid leave, may affect the calculation of employer and employees' pensions contributions, as well as affecting entitlement to benefits under the scheme. Companies implementing such measures in the workforce should consider how they want these changes to affect their employees’ pension benefits. Questions to consider include:will a reduction in total wages affect the amount employers and (if appropriate) employees are required to contribute under the scheme rules?  

  • will any periods of unpaid leave count towards pensionable service?
  • will members be entitled to an ill-health pension if they become ill during a period of unpaid leave?  
  • will beneficiaries be entitled to death benefits if death occurs during a period of unpaid leave?  

Some schemes may have rules that deal with temporary absence and part-time working. Employers will need to consider whether these rules are flexible enough to give effect to their intention in these circumstances. If the rules are not sufficiently flexible it may be advisable to amend them.