Henderson Loggie held a series of seminars in early November and invited the Pensions Regulator to speak.
The Regulator is the appointed guardian of ensuring employers meet the legislative requirements set out in the Pensions Act 2008, and has been given powers to enforce the legislation.
This can be via monetary penalties, and some well-known employers have already been issued with such penalty notices.
However, the Regulator is also aware that new legislation means employers have to get to grips with the complexities of the rules, and is keen to get the message across to them about how to comply.
At the end of each seminar we encouraged questions. Here are some of the most common ones asked.
Q I have zero-hour contract workers. Should they be enrolled into a pension scheme?
A In simple terms, if the worker in question has a contract of employment and is paid a wage or salary in the UK, then yes, provided they earn more than £192 per week (£833 per month) in any pay reference period.
A pay reference period is the payroll period: for example, weekly, fortnightly, monthly.
Even if there is no ‘basic’ salary, when a worker earns a wage, depending on whether it meets the minimum earnings threshold, they should be enrolled into a workplace pension scheme.
Q A similar question related to whether the employer is responsible for all of their workers: that is, are all employees workers?
A To answer this, there are several questions employers need to ask and identify within their workforce. This will show if the employer judges whether an individual has a contract to perform work or services personally, or is undertaking the work as part of the individual’s own business.
* Does the employer have control over an individual’s method of work; for example, hours worked?
* Does the employer provide any other employee benefits, and who bears any financial risk of the individual carrying out the work?
* Are any ‘tools’ provided for that worker to carry out their duties?
Q What will employers have to pay for workers enrolled into a workplace pension scheme?
A There are minimum contribution requirements based on a percentage of earnings.
These earnings can be qualifying (total earnings less the lower level of earnings), basic, total or gross.
Employers can elect to phase contributions in between their staging date and October 2018, thus gradually increasing the payments made.
Q Are there ways of budgeting for the contributions to be paid for workers enrolled into a workplace pension scheme?
A During our seminars we touched on a facility called salary exchange. This is a contractual agreement between employer and employee whereby the employee gives up a specific amount of salary in exchange for a non-cash benefit provided by the employer.
Using this in conjunction with pension contributions, this could provide National Insurance savings and help meet the cost of auto enrolment.
Q What about my business?
A Each employer knows their own business and how to run it.
Therefore, an additional layer of legislation that they have to comply with means, in the case of auto enrolment, that they also have to understand payroll, human resources and pension issues.
In our experience, no matter what size the business is, employers should look at the headline requirements and start to make plans.
Identify when your staging date is (you need your PAYE reference number, and then enter the Pension Regulator site to find this) and work back from there.
Identify if all your workers qualify to be automatically enrolled into a workplace pension scheme; that is, are they an eligible jobholder?
Are they over age 22 and under state pension age?
Do they earn more than £10,000 per annum and work in the UK?
Will any worker fall into the non-eligible jobholder category?
They can ask to join the workplace pension scheme and you must make a pension contribution for them.
Do you have entitled workers?
Your payroll will hold the information you need to identify your workers, and indeed, may already have the software installed to provide you with category reports.
Consideration of which pension scheme to use is also important, as this should tie in with the payroll functionality.
Do you want the pension scheme to be used as a tool to gain and keep employees, or simply to be the means to an end?
We invited some clients who had already enrolled to attend our seminars. This gave them the opportunity to check that what they had in place was correct, and to share their experiences with others.
Without exception, each employer confirmed that a plan was essential, and that this gave them time to make decisions and provide them with the best outcome.
With a large number of businesses due to stage in the next three years, our auto enrolment team believes that information is key for employers, and preparation is everything.
* Any references to tax and legislation are based on our understanding of law and HM Revenue & Customs practice at the date of publication. Tax and legislation are liable to change. Tax relief may be altered, and the value to the investor depends on their financial circumstances.
The purpose of this article is to provide technical and generic guidance and should not be interpreted as a personal recommendation or advice.
Investment entails risk, which means the asset values can increase or decrease and you may not get back what you put in.