If you’ve been following my last couple of blogs, you’ll be starting to build up a good picture as to what is required to bring your business in line with new Auto Enrolment (AE) pension legislation reaching final compliance deadlines this autumn.
Having got your head around definitions and deadlines, one of the key facts to face is that auto enrolment may not necessarily apply to all of your workforce…
It’s up to you (and your accountant) to work out who on your payroll is eligible, and therefore what action is required for AE.
Assessing your workforce
You may not be a Jane Austen heroine earnestly weighing up the marriage eligibility of the latest bachelor to grace the county, but you do in fact need to assess similar vital statistics – namely age and salary – for each of your employees, to decide what ‘type of worker’ they are. This ‘type’ dictates whether you must auto-enrol them, or provide them with other information as to their options.
Depending on the size of your business, your assessment may be a simple headcount, or might involve complex longwinded analysis – which is where the services of a payroll provider like Cashtrak might come in handy. Whatever you do, take your time: it’s vital not to miss anyone out.
Three types of worker
Everyone who ordinarily works in the UK under a contract of employment is defined legally as one of three types of worker (and no, we’re not talking efficient workers, average workers and bone idle workers, it’s slightly more technical!) Based on age and salary, you can work out who fits where, and therefore who is eligible for auto enrolment. And just to make things fun, you may well have a mixture of the three…
The three types are:
ELIGIBLE JOBHOLDERS – who must be auto-enrolled by you into your minimum contribution pension scheme. These workers are:
- Aged between 22 and state pension age
- Working or ordinarily working in the UK
- Earning above £10,000 p.a.
NON-ELIGIBLE JOBHOLDERS – who can opt in voluntarily to your minimum contribution scheme, but are not enrolled automatically. These workers are:
- Below the age of 22 or above state pension age
- Working or ordinarily working in the UK
- Earning below £10,000 p.a. (though above £5772 p.a.)
ENTITLED WORKERS - who have a right to join a scheme, but with no obligation for minimum contributions to be made. These workers are anyone you employ on a salary of less than £5772 p.a. (regardless of age).
To summarise this for the spreadsheet-lovers amongst us:
|16-21 years||22 years - |
|State pension |
age - 75 years
|Over £10,000||Non-eligible||Eligible jobholder||Non-eligible|
|Below £5772||Entitled worker||Entitled worker||Entitled worker|
A couple of other things:
- There is a final category who may crop up in your workforce: they don’t technically count as ‘workers’ for auto enrolment purposes at all, and may need further evaluation. This might include people who don’t work normal hours in a regular place of work; casual workers; agency workers; and individuals on zero-hours contracts.
- If you employ people internationally, advice may be needed on whether an employee can be considered ‘working or ordinarily working in the UK’.
So what now?
Having neatly categorised all your workers, what do you need to do next to fulfil Auto Enrolment requirements? I’ll be covering this in my next few blogs, but essentially you’ll need to auto-enrol your eligible jobholders; contribute to the pensions of those qualifying for minimum contributions; and communicate relevant information to each type of worker.
Just as our figurative eligible bachelor might squander his fortune or grow old and cantankerous, nothing stays static in your workforce either: your workers will age, rise up earnings brackets, start working abroad or change contractual arrangements in other ways. Some might also miss opting-in or -out deadlines, at which point their eligibility changes.
It’s vital you undertake regular re-assessments of your workforce to check you are not contravening AE rules by leaving someone languishing in a category where they no longer belong.
Sensible points at which to assess and re-assess employees are:
- On your initial staging date
- On an employee’s first day of employment
- On an employee’s 16th birthday
- On an employee’s 22nd birthday
- On the date you receive an Opt-In or Joining Notice from an employee
- On your deferral date (if you have opted to defer entry to Automatic Enrolment)
- When processing each pay period.
For assistance managing your initial assessment or ongoing checks, Cashtrak can always offer a helping hand. With years of experience of payroll management and systems streamlining, get in touch to see how we can help, quicker than you can say ‘Mr Darcy’.