Managing your workforce

Transcription

1 Automatic enrolment for employers Managing your workforce Recruitment International - Managing your contingent workforce Jeremy Leslie-Smith Industry liaison manager 28 March 2017 The information we provide is for guidance only and should not be taken as a definitive interpretation of the law. DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

2 Topics Why is automatic enrolment being introduced? What employers need to do Who is subject to the automatic enrolment duties? Staging dates and overall timetable Worker categories and the duties and rights for pension scheme enrolment Pension schemes and pensionable earnings The automatic enrolment processes Postponement Monitoring worker status and re-enrolment Opt ins and opt outs Communicating with workers Keeping records Re-enrolment Declaration of compliance DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

3 Why is automatic enrolment being introduced? There are currently four people of working age for every pensioner by 2050 there will be just two. 7 million people are under-saving Past and predicted trends in the life expectancy period of 65 year old men and women in the UK as of 2004 and 2010

4 Quarterly forecast of employers due to comply with AE We estimate that up to 750,000 employers are due to start their AE duties in 2017

5 Overview of legal duties and safeguards Automatic enrolment legislation gives employers a duty to: automatically enrol all staff who are eligible ( eligible jobholders ) other staff who have the right to ask to opt in or join a pension communicate to their staff manage opt outs and promptly refund contributions every three years, automatically re-enrol staff who are eligible complete a declaration of compliance with the regulator keep records maintain payments of pension contributions The employee safeguards mean that employers: must not induce staff to opt out or cease membership of a pension, and must not indicate, when recruiting new staff, that the decision to employ them will be influenced by whether or not they intend to opt out.

6 Duties checker

7 Duties checker: Before you begin

8 Tell us if you run a business

9 Is your business still active?

10 Do you employ anyone?

11 Who is included in the automatic enrolment duty? Staff may be subject to the automatic enrolment legislation if they are: aged 16 to 74 (inclusive), and work or ordinarily work in the UK * whether or not they are full time or part time, permanent or temporary. So, this could include: staff working overseas who are considered ordinarily working in the UK *. However, the truly self employed are not subject to automatic enrolment. * the Channel Isles and the Isle of Man are outside the UK

12 Who is excluded? Certain people are exempted from the AE duties, including: directors not working under an employment contract; a director who is working under an employment contract, where they are the only employee in the company - but only for the work they carry out for that company; office-holders who are not considered workers (eg non-executive directors, trustees, elected members) - but they are only excluded for the activities they carry out as an office holder; the (truly) self-employed. * See additional slides on Exceptions for more details

13 See your staging date 1

14 Staging The duties apply to each employer from their staging date: and the duties apply to all of the employer s workers from that date. An employer s staging date will be based on the PAYE scheme or schemes that were being used on 1 April After 1 April 2012, any change to the PAYE schemes being used will have no effect on the staging date. An employer who had workers on 1 April 2012, but was not using a PAYE, will have a staging date of 1 April New employers* will go last, from May 2017 onwards. Do not assume you know your staging date - check this on our website Large employers Medium employers Small/micro employers New * employers * Organisations that did not exist or had no workers as at 1 April Oct 2012 April 2014 June 2015 May 2017 Feb 2018

15 Staging dates for new employers (post 1 April 2012) PAYE income is first payable in respect of any worker Staging date From 1 April 2012 up to and including 31 March May 2017 From 1 April 2013 up to and including 31 March July 2017 From 1 April 2014 up to and including 31 March August 2017 From 1 April 2015 up to and including 31 December October 2017 From 1 January 2016 up to and including 30 September November 2017 From 1 October 2016 up to and including 30 June January 2018 From 1 July 2017 up to and including 30 September February 2018

16 Bringing forward staging dates For an employer with no one to automatically enrol: there is no need to have a pension scheme in place they can bring forward their staging date to any date (not just the 1 st of the month). Employers who do have workers to automatically enrol must: get consent from their pension provider to use the chosen pension scheme from the earlier staging date; AND can only choose a date which is a current standard staging date (so must be on the 1 st of the month, but cannot be on 1 June 2017, 1 September 2017 or 1 December 2017). An employer must inform us that they want to change their staging date, and must do so on, or before, their new staging date. Once an employer s staging date has been brought forward, it cannot be changed back we have no power to do this.

17 Bringing forward staging dates on our online portal Make sure you click on the Next: Declaration button and go on to the next screen to declare that you definitely want to bring the staging date forward (this is NOT a declaration of compliance)

18 To tell us you are not an employer If you do not believe you are an employer because: this is a sole director company, with no other staff, or this is a company with more than one director, where no more than one director has an employment contract and there are no other staff, or this company has ceased trading, or this company has gone into liquidation or has been dissolved, or you no longer employ people in your home (eg cleaners, nannies, personal care assistants). Tell us at: The tool is not for employers who: have no staff to enrol on their staging date, or for companies in administration or in non-terminal insolvency.

19 Your staging date

20 Do you employ anyone between 22 and SPA?

21 Worker categories Qualifying earnings Age range SPA* SPA*-74 Up to 5,824** pa Over 5,824 pa and up to 10,000** pa Non-eligible jobholders can opt in to an automatic enrolment pension scheme Entitled worker Non-eligible jobholder Can request to join a pension scheme More than 10,000** pa Non-eligible jobholder Eligible jobholder Non-eligible jobholder * SPA = State Pension Age ** Figures for 2016/17 Employer must automatically enrol eligible jobholders into an automatic enrolment pension scheme

22 AE earnings triggers Pay Reference Period/Cycle Annual Earnings trigger for automatic enrolment 10,000 pa Bi-annual 4, quarter 2, month weeks Fortnight week For other Pay Reference Period (PRP) durations, multiply the number of weeks in the PRP by the weekly amount (eg ) or number of months by the monthly amount (eg ) etc - or pro-rata if not an exact multiple of any of the above. The Secretary of State will review these figures each tax year.

23 Are joiners entitled to an employer contribution? Pay Reference Period/Cycle Those earning this or less not entitled to an employer contribution Earnings trigger for automatic enrolment Annual 5,824 pa 10,000 pa Bi-annual 2, , quarter 1, , month weeks Fortnight week N.B. The Secretary of State will review these figures each tax year.

24 Do they earn more than 833 a month?

25 Does the employer need a pension? The employer must have an automatic enrolment pension in place by their staging date - if they have someone to automatically enrol on this date. If there is no one who needs to be automatically enrolled then a pension scheme does not need to be set up... but it may be useful to decide which pension would be used if someone asks to join or meets the criteria to be automatically enrolled. The employer has the right to select the pension and can choose to decline any employee s request to contribute to a different pension scheme. If the employer wants to use a pension requested by a member of staff, they will need to check that it is qualifying and can be used for automatic enrolment.

26 Employer classification

27 I am an employer who has to provide a pension

28 What pension schemes can be used? Must be used for automatic enrolment and opt ins Automatic enrolment scheme Workers already active members of a qualifying scheme do not need to be automatically enrolled Employers will need to contribute to the pension scheme Scheme for entitled workers scheme is registered Qualifying scheme must be tax registered: and meet minimum criteria must be registered in the UK or EEA* must have no barrier to automatic enrolment must be a qualifying scheme Employers are not required to make an employer contribution Employers may also use a qualifying scheme or an automatic enrolment scheme for entitled workers *European Economic Area states

29 Minimum contributions (Defined Contributions schemes) Phase 1 Phase 2 Phase 3 * % of banded qualifying earnings Minimum DC 2% total contribution* Minimum DC 1% employer contribution* Min DC 5% total* Min DC 2% employer* Min DC 8% total* Min DC 3% employer* Large employers Medium employers Small/micro employers New employers Oct 2012 April 2014 June 2015 May 2017 Feb 2018 April 6 th 2018 April 6 th 2019 DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

30 Banded qualifying earnings Pay Reference Period/Cycle Lower Earnings Threshold (LET) Earnings trigger for automatic enrolment Upper Earnings Threshold (UET) Annual 5,824 pa 10,000 pa 43, pa Bi-annual 2, , , quarter 1, , , month , weeks , Fortnight , week For other Pay Reference Period (PRP) durations, multiply the number of weeks in the PRP by the weekly amount (eg ) or number of months by the monthly amount (eg ) etc - or pro-rata if not an exact multiple of any of the above. N.B. The Secretary of State will review these figures each tax year.

31 Pensionable earnings Pensionable earnings can be based on qualifying earnings OR another definition (eg basic pay). When qualifying earnings are used to determine pensionable pay: pension contributions are determined by the rules of the scheme, and will be based on banded earnings between the lower earnings threshold and upper earnings threshold (currently 5,824*pa and 43,000*pa). If pensionable earnings are not based on qualifying earnings, the employer can self-certify if the scheme meets certain minimum criteria: Set 1 - if basic pay from 1 is pensionable, or Set 2 - if at least 85% of total pay (scheme average) is pensionable, or Set 3 - if 100% of total pay is pensionable. for the DWP self-certification template go to Annex E page 32: * Pro-rata of annual amount used in each Pay Reference Period. These figures are for The Secretary of State will review this amount each tax year.

32 Can I use an existing pension scheme? If you have an existing scheme, it may not be suitable for automatic enrolment. 1. To be a qualifying scheme: the contributions due must be at or above the minimum criteria if it is a personal or GPP contract-based scheme, it is likely to need a jobholder agreement for each active member. If it is not a qualifying scheme, it may be possible to change the scheme rules to make it qualifying. Active members of a pension which is not qualifying would need to be assessed and, if eligible, automatically enrolled into another pension. 2. If you want to use a qualifying scheme to automatically enrol your workers: the pension must have no barrier to automatic enrolment (eg default fund). The existing pension provider may not allow it to be made a qualifying scheme or an automatic enrolment scheme - check with the pension provider. DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

33 Choosing a new pension - how to find one Pensions suitable for automatic enrolment: On our website, we list those providers that have said they have pensions available to all small employers looking for a pension for automatic enrolment: NEST - the pension set up by government Pensions regulated by the Financial Conduct Authority (FCA) Independently reviewed master trust pensions the master trust assurance framework provides an independent review against an industry-wide benchmark of quality these features in our DC code represent the standards of governance and administration that we expect trustees to attain See: DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

34 Choosing a new pension - factors to consider It is the employer s responsibility to choose a pension scheme for their workers. Employers should consider what features are important for their workers, for example: charges (there is an annual 0.75% charge cap on the default fund) choice of funds other than the default strategy (eg Sharia,ethical) options at retirement and/or from age 55 (eg drawdown options) whether they provide one pot per member and rules on transfers how tax relief is applied (eg through payroll or by the pension provider) online member services member communications (may be available in multiple languages) For help on how to select a good qualifying pension, please see:

35 Tax relief: two mechanisms Many small employers and their advisers may not realise that there are two ways that the tax relief on staff members pension contribution can be applied: Net Pay Arrangement Relief at Source ( not Net Pay Arrangement ) Many pension schemes only support one tax relief method, although some pension providers allow the employer to choose either method. It is vital to understand which system you are going to use, to avoid miscalculating the contributions and tax due. For more information look at the tax relief section at:

36 Steps for those who have to provide a pension

37 Assessing your staff Employers will need to assess all their staff on their staging date unless they choose to use postponement (described in later slides). Their qualifying earnings must be used to assess their category (ie eligible jobholder, non-eligible jobholder or entitled worker). Qualifying earnings is any component of pay that could be considered one of these pay elements (an employer should use their reasonable judgement): salary/wages, commission, bonuses, overtime and some statutory payments (excluding expenses and dividends). Eligible jobholders must be automatically enrolled into a suitable scheme unless they are already an active member of a qualifying pension scheme with that employer. After the staging date, employers will have to: assess all new staff who join them assess some staff every pay period (see slide on Monitoring eligibility ) assess some staff again every three years (see slide on Re-enrolment ).

38 Employer option not to enrol Employers may choose whether or not to automatically enrol or re-enrol certain people*, if they trigger automatic enrolment, including: directors working under an employment contract; LLP partners who are not salaried members under HMRC tax rules; people who are in their notice period; individuals who ceased active membership of a qualifying pension in the previous 12 months; those with HMRC tax protected status for their pension savings.? Only the enrolment duty is optional, all other duties remain unchanged. The individuals retain the right to ask to join or opt-in (except people working their notice), in which case the employer is obliged to enrol them. Even if the employer is able to choose not to enrol all of their staff: the employer still has to send the normal statutory letters/ s and make a declaration of compliance, at the usual time. * See additional slides on Exceptions for more details

39 Postponement Postponement does not change or delay the staging date or declaration of compliance deadline Postponement delays the duty of automatic enrolment and the need to assess and can be used: at the employer s staging date for any or all existing staff on the first day of employment for any new joiner after the staging date, and on the date a member of staff meets the criteria to be an eligible jobholder. Only one postponement per member of staff can be made at a given time. Each worker can be postponed from one day up to maximum of three months. The employer must notify any postponed member of staff within six weeks and a day of the start of postponement. The member of staff has the right to opt in or join during postponement. Employer must assess on the last day of postponement and: automatically enrol eligible jobholders, and for those staff not eligible, monitor them each future pay period.

40 Monitoring eligibility for automatic enrolment After the staging date, employers will have to assess, every pay period, any worker who: i. is not an active member of a qualifying pension scheme, and ii. is not under postponement or the transitional period, and iii. has not previously been automatically enrolled (or assessed as an eligible jobholder whilst an active member of a qualifying scheme Ϯ ). Workers assessed as an eligible jobholder would then need to be automatically enrolled (or postponed). Those workers that do not fall into the above category should be left until the next cyclical re-enrolment date (see slide on cyclical re-enrolment). Ϯ A worker who has simultaneously been an eligible jobholder and an active member of a qualifying scheme since the later of: the employer s staging date; or the date they started work for the employer; or the last day of postponement.

41 Opting in and joining Entitled workers can request to join a scheme at any time, including during postponement. Jobholders can opt in at any time, including during postponement. However, workers will not necessarily know whether they are jobholders or entitled workers and this could vary over time. All requests (whether an opt in or join request) are treated the same way. On receipt of any request to opt in or join a pension from a worker, employers need to: assess the worker, to see if they are a jobholder or entitled worker, then enrol jobholders into an automatic enrolment scheme, and enrol entitled workers into a scheme of the employer s choice. A jobholder must not be required to carry out any further action to achieve active membership (eg the pension scheme should have a default fund).

42 Opting out Workers automatically enrolled (or who have opted in) may opt out. Employer must inform staff of their right to opt out and how to opt out. The employer must not give out or send out opt out forms: requests to opt out must be handled by the scheme provider, and completed forms would normally be sent to the employer. A one calendar month opt out window starts on the later of two dates: once the worker is an active member of the pension scheme, or when the employer gives a notice of enrolment letter/ to the worker. The worker will get a full refund of all contributions. Early opt outs (before the opt out window starts) - are not allowed. After the opt out window has closed, staff may still cease active membership and normal pension scheme rules will apply (so they will not get a refund). A worker who has opted out does not need to be assessed again until the employer s next re-enrolment date (occurs approx every 3 years).

43 Communicating to staff Employers will need to communicate to their staff informing them of their rights: enrolment when using postponement and to explain a worker s right to opt in or join a scheme. The deadline for most communications is within 6 weeks*. Communications must be sent directly to the individual (eg by letter, , HR web portal). We have provided example template letters, which may be customised. Translations are available in Bulgarian, Chinese (Mandarin and Cantonese), Latvian, Lithuanian, Polish, Romanian, Spanish and Welsh * Postponement 6 weeks from the day after the assessment date

44 Record-keeping Employers must keep records about their workers and the pension scheme used to comply with the employer duties (pension providers and trustees will also have duties to keep records). An employer can use electronic or paper filing systems to keep or store any records, as long as these records can be produced in a legible way. Most records must be kept for six years. Those that relate to opting out must be kept for four years. The records must be provided to The Pensions Regulator, on request. We can conduct an inspection, if we have reasonable grounds to do so (for example, this may be as a result of a whistle-blower alert).

45 Cyclical re-enrolment Cyclical re-enrolment occurs around every 3 years. Employer should choose a re-enrolment date which can be any day, up to 3 months before or after the third anniversary of their staging date, or previous re-enrolment date (eg an employer who staged on 1 Oct 2014 may choose any day between 1 July and 31 Dec 2017). On the re-enrolment date, workers will need to be assessed and (if an eligible jobholder) automatically re-enrolled if these conditions apply: they are not already an active member of a qualifying scheme; and they are not being monitored every pay period (ie they have previously been automatically enrolled or assessed as an eligible jobholder whilst an active member of a qualifying scheme). If they opted-out or ceased membership of a qualifying scheme within the previous 12 months, the employer may choose not to automatically re-enrol them (in which case they should be left until the employer s next cyclical reenrolment). Postponement cannot be used at re-enrolment. Exceptions may be applicable (eg if in notice period or have tax protection)

46 Declaration of compliance After staging, employers must complete a declaration of compliance and it must be completed within five months of the staging date and within five months of the 3rd anniversary of the staging date (or previous automatic re-enrolment date). Employers may receive a penalty fine if they do not complete their declaration on time. Employers will need to provide certain details, for example: which pension schemes were used to comply with the duties, (after cyclical re-enrolment only) their chosen automatic re-enrolment date, the number of eligible jobholders automatically enrolled into each scheme. All postponements applied at the staging date must have come to an end before the declaration can be completed. You can start the online process early and partially complete your declaration.

47 Any questions?

48 Useful tools Planning: Nominate a point of contact: Find a letter code online: Tell us you are not an employer : Bulk declaration of compliance (file upload): Work out pension contributions: Find an employer s staging date: Bring a staging date forward:

49 Useful links Frequently asked automatic enrolment questions: The essential guide to automatic enrolment: Our detailed guides for employers and pension professionals: Information about declaration of compliance: Letter templates for employers: To register for the automatic enrolment ( 3 coins ) logo - under registration, choose I require pension automatic enrolment files Event presentations:

50 Thank you We are here to help! Request a guest speaker: Contact us at: Subscribe to our news by The information we provide is for guidance only and should not be taken as a definitive interpretation of the law. E

51 Additional slides

52 Useful links More information about pensions and automatic enrolment: Financial Advisers: Friends of Automatic Enrolment: The Pensions Regulator: Automatic enrolment - your questions answered by our experts

53 Thresholds v Pay Reference Periods (PRP) Subject to Parliamentary approval Pay Reference Period/Cycle Lower Earnings Threshold (LET) Earnings trigger for automatic enrolment Upper Earnings Threshold (UET) Annual 5, , , Bi-annual 2, , , quarter 1, , , month , weeks , Fortnight , week For other Pay Reference Period (PRP) durations, multiply the number of weeks in the PRP by the weekly amount (eg ) or number of months by the monthly amount (eg ) etc - or pro-rata if not an exact multiple of any of the above. N.B. The Secretary of State will review these figures each tax year.

54 DC self certification during phasing period Up to 5 April April 2018 to 5 April 2019 From 6 April 2019 Pensionable Salary (Basis of % Contributions) Set 1 (Tier 1) 2% Employer / 3% Total 3% Employer / 6% Total 4% Employer / 9% Total Scheme Definition (if >= basic pay from 1) Set 2 (Tier 2) 1% Employer / 2% Total 2% Employer / 5% Total 3% Employer / 8% Total 85% of Total Pay (scheme average) Set 3 (Tier 3) 1% Employer / 2% Total 2% Employer / 5% Total 3% Employer / 7% Total 100% of Total Pay For the self-certification template go to Annex E page 32 with further guidance from DWP:

55 Summary of deadlines Action/Communication Letter to workers who are not already in a qualifying pension scheme at staging Joining window, enrolment notifications and transitional period notices opt out window Postponement notices Complete declaration of compliance after staging Complete declaration of compliance after re-enrolment Normal contribution payments to scheme provider New member contribution payments to scheme provider (for all deductions made in first 3 months of membership) Deadline 6 weeks after staging 6 weeks from the assessment date (eg by 23:59 on Tuesday 12 May, if assessed Wednesday 1 April). 1 month from when both: the enrolment notification is given, and active membership is achieved. 6 weeks from the day after the assessment date (eg by 23:59 on Wednesday 13 May, if assessed on Wednesday 1 April). 5 months after staging 5 months after the 3rd anniversary of the staging date (or previous automatic re-enrolment date) 22 nd day of the month following the month of deduction (19 th day for non-electronic payments). 22 nd day (for electronic payments) of the first month, following a three month period starting the day active membership is effective (19 th day for non-electronic payments) eg enrolments 2 January to 1 February = e-payment deadline is 22 May.

56 Relief at Source ( not Net Pay Arrangement ) For this tax relief mechanism: only 80% of the calculated contribution is deducted because the member s pension contribution will be taken after tax has been deducted, and the pension provider claims 20% tax back from HM Revenue & Customs (HMRC) and adds it to their pension pot. Higher rate taxpayers will have to complete an HMRC Self Assessment tax return in order to reclaim the rest of the tax paid on their contributions. Staff who earn no more than their income tax personal allowance ( 11,000 a year in 2016/17) do not pay tax, but they would still get the 20% tax relief (even though they haven t paid any income tax on their contributions). We suggest that employers with staff who do not pay income tax, choose a pension which operates Relief at source. Group Personal Pensions, the government scheme (NEST) and some master trust pensions usually calculate tax relief this way.

57 Net Pay Arrangement For this tax relief mechanism: no tax is payable on the member of staff s pension contributions, so the employer deducts 100% of the contributions due, and pays them to the pension provider (ie gross of tax). If the member earns below their income tax allowance (personal allowance is 11,000 in 2016/17), the member will not get any tax relief benefit. Higher rate taxpayers may prefer this method, as they would immediately get full tax relief through payroll without having to complete an HMRC Self Assessment tax return. Contract based pensions, such as Group Personal Pensions (GPPs) may not use this mechanism. Some, but not all, master trust pensions calculate tax relief this way.

58 Tax relief example A weekly paid member of staff, has a basic salary of 10,400 per annum and: is a member of a pension scheme where only basic pay is pensionable, and is paying a 1% member pension contribution (ie 1% of 200 per week) [the employer will also pay a contribution, but this is not affected so is not shown]. Under Net pay arrangement: the full 2.00 per week is deducted from their gross pay and paid into their pension pot and as the individual earns under the HMRC personal tax allowance threshold, they don t pay income tax and are not able to claim any money from HMRC, so the cost to the employee of the 2.00 member s contribution is Alternatively, under Relief at source: the pension provider claims 0.40 tax relief (20% of 2.00) from HMRC, the balance ( ) is deducted from the employee s net pay, so a total of 2.00 per week member s contribution is paid into the pension and the employee has only paid 1.60 (for a 2.00 member s contribution).

59 Exceptions employed directors and LLP partners From 6 April 2016, new exceptions were introduced for employers. If the following individuals become eligible for automatic enrolment or reenrolment, then the employer may choose whether or not to automatically enrol/re-enrol them: LLP partners who are workers and are not salaried members under HMRC tax rules (duties continue to apply in full to salaried members); directors who work under a contract of employment, where there is at least one other employee working for the company (ie the sole employee/director exemption does not apply). All other duties remain, including the duty to communicate to the workers and the employer will still need to make a declaration of compliance whether or not they choose to automatically enrol these workers. The individuals do have the right to opt in or join a pension.

60 Exception - staff in notice period If notice is given or received by a member of staff (eg resignation or dismissal): before, or up to 6 weeks after, the automatic enrolment/re-enrolment date then the employer does not have to enrol them. During their notice period that member of staff does not have a right to opt in or join a pension. If notice is withdrawn, then the enrolment duty will be effective from this date.

61 Exception - workers with HMRC tax protection Where an employer has reasonable grounds to believe (eg the worker shows them documentary evidence) that a worker has HMRC tax protected status for their pension savings (eg Primary, Enhanced, Fixed or Individual protection): the employer may choose not to automatically enrol/re-enrol them. The worker would still have the right to opt in/join.

62 Exception - workers who have ceased active membership - i 1. If a worker is assessed and triggers automatic enrolment (for the first time) and they had previously contractually joined a qualifying pension scheme* (even if before the employer s staging date), then: a. if they ceased membership 12 months or less before the assessment date then the employer may choose whether or not to automatically enrol them (if the employer chooses not to automatically enrol them, the employer should leave them until the cyclical re-enrolment date); or b. if they ceased membership over 12 months before the assessment date then they should not be automatically enrolled, but should be left until the cyclical reenrolment date. 2. Workers who have previously been automatically enrolled and opted out or ceased membership of that scheme, should not be assessed until the cyclical reenrolment date. This means an employer could choose not to assess any worker who has previously been an active member of a qualifying scheme - until the cyclical re-enrolment date. * or a pension scheme that would have been a qualifying scheme if the worker had been a jobholder when they ceased

63 Exception - workers who have ceased active membership - ii On the cyclical re-enrolment date, the employer should identify workers: who previously contractually joined a qualifying pension scheme* (even if before the employer s staging date) or who have previously been automatically enrolled into a qualifying pension scheme and either opted out or ceased membership of that scheme. These workers should be assessed on the cyclical re-enrolment date and, if an eligible jobholder, automatically re-enrolled - unless: they ceased membership/opted-out within 12 months (ie 12 months or less) of the cyclical re-enrolment date - in which case, the employer may choose whether or not to automatically re-enrol them. If the employer chooses not to automatically re-enrol them, the employer will have no duty to re-enrol them until the following cyclical re-enrolment date. * or a pension scheme that would have been a qualifying scheme if the worker had been a jobholder when they ceased

64 Exception - workers with winding-up lump sums For a worker who has: i. ceased membership of an occupational defined contribution scheme, and ii. been paid a Winding-Up Lump Sum (WULS), and iii. ceased employment, and iv. is subsequently re-employed by the same employer... then: if they have an automatic enrolment / re-enrolment date which falls up to 12 months after the payment of the WULS, the employer may choose whether to enrol them or leave them until the next cyclical re-enrolment (and the re-employed worker does not have the right to opt in or join during the 12 months after a WULS payment); or, if they have an automatic enrolment date which falls more than 12 months after the payment of the WULS, then they will have no duty to re-enrol them until the next cyclical re-enrolment date

65 Using an existing contract-based pension scheme For a pension scheme to be a qualifying scheme : it needs to be tax registered it needs to satisfy the minimum criteria (ie be at or above the legal min employer and total contributions, (eg 1% and 2% before 6 April 2018) and, for a contract-based pension, the employer and pension provider must have a signed agreement, where the employer commits to pay at least the legal minimum employer contributions, and unless the employer agrees to pay at least the legal minimum total contribution (eg 2% before 6 April 2018 ) - there must be a jobholder agreement for each active member (an agreement by the member to pay the difference between the employer contributions and the legal minimum total contribution). Additional criteria apply for an automatic enrolment pension (which must also be a qualifying scheme).

66 What to communicate to workers Non-eligible jobholders and entitled workers not already in a qualifying pension scheme must be provided with information* telling them about their right to opt in or join a pension scheme. For eligible jobholders being automatically enrolled (and non-eligible jobholders being enrolled after opting in) they must be provided* with: information about their enrolment what it means for them, including the contributions, and their right to opt out. Workers subject to a postponement need to be given key information* such as the length of the postponement period and their rights to opt in or join. * See Useful links for template letters

67 Do you have AE duties for any contractors? The (truly) self-employed are excluded from automatic enrolment (AE), but how is this determined? To check if you have any automatic enrolment duties for a contractor who works for you and is not your employee, there is a 3 part test: A. If the contractor is not truly self-employed, would you be considered the employer? B. Does the contractor have to do this work themselves (a personal contract)? C. Is the individual carrying out the work as part of their own business? DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

68 A) Are you considered the employer? You are considered to be the employer of people who: are employed by you (ie you hold the contracts of employment) or are directly contracted to perform work for you and you pay the individuals (unless they are truly self-employed). Notes: or If someone working for you is employed by another company to do this work (perhaps they are employed by an agency or their own limited company), you will not be considered the employer; if someone working for you is not an employee - and is paid* for this work by another business or agent (ie you pay another person or organisation for this work), then they will be responsible for the automatic enrolment duties, if there are any, not you. *A payroll bureau that processes a payment on behalf of their client would NOT be considered the employer. DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

69 B) Does the contractor have to do the work themselves? You should not assume that a contractor working for you is exempt from automatic enrolment, even if they say they are self-employed They may not be truly self-employed for the work they do for you, even if they are truly self-employed for work they do for another client. You should consider if the contract (which could be written, verbal or implied), allows anyone to do this work. So, is the individual named in the contract and expected to do this work (unless they are unable to do the work themselves, eg they are on holiday or sick)? If the individual can freely subcontract or substitute somebody else, then you will not have any automatic enrolment duties for the individual; or, if they have to do the work, this is considered a personal contract and you will then need to judge whether the individual is doing the work as part of their own business or not. DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

70 C) Is someone working as part of their own business? If someone (who is not a director) is not an employee and has a personal contract with you (ie is contracted to do this work themselves): You will need to consider whether the individual is working as part of their own business or not. There are a number of factors that will help decide this. Do you: have control of the hours they work? provide any employee benefits (eg sickness or holiday pay)? bear all the significant financial risks in carrying out the work (eg the contractor is not financially responsible for their faulty work)? consider the individual to be part of your own organisation? provide what is required for the individual to carry out the work (eg tools)? If most or all of the above are true, it would be reasonable to consider that the individual is not undertaking the work as part of their own business and so is subject to automatic enrolment and you are considered their employer. Otherwise, they are truly self-employed and are exempt. DM v2a These slides remain the property of The Pensions Regulator and their content should not be altered on reproduction. E

71 Eddie is not an employee, but is he subject to AE? Eddie is a self employed graphic designer who regularly works for Acme Workshops Ltd, but works for other clients too. Eddie s contract with Acme does not permit him to send a replacement. Eddie designs all of Acme s flyers and magazine ads and also designs and updates their website. Eddie generally works from home, but sometimes he works in Acme s offices. He uses his own equipment to print the flyers and if something goes wrong with the printing he produces a replacement batch at his own expense. When he is given a project to do, Acme set a deadline, but leave it up to him to plan when, where and how the work will be done. Eddie invoices Acme at the end of each project that he works on. Question - Should Acme Workshops consider Eddie to be subject to AE?

72 Eddie is not an employee, but is he subject to AE? Eddie is a self employed graphic designer who regularly works for Acme Workshops Ltd, but works for other clients too. Eddie s contract with Acme does not permit him to send a replacement. Eddie designs all of Acme s flyers and magazine ads and also designs and updates their website. Eddie generally works from home, but sometimes he works in Acme s offices. He uses his own equipment to print the flyers and if something goes wrong with the printing he produces a replacement batch at his own expense. When he is given a project to do, Acme set a deadline, but leave it up to him to plan when, where and how the work will be done. Eddie invoices Acme at the end of each project that he works on. Eddie cannot reasonably be considered a worker, so is not subject to AE, as: i) he markets his services to other clients, ii) he uses his own equipment iii) he works unsupervised and iv) he guarantees the quality of his work.

73 Karen is not an employee, but is she subject to AE? Karen is a self employed IT professional who works full time for Acme Workshops Ltd, supporting their in house payroll system. She works in a team alongside Acme s own employees and, when she meets external contacts, uses business cards identifying her as a member of Acme s staff. Although Karen usually works in Acme s offices, she can work from home if she gets permission in advance. Whether she s in the office or at home she uses a laptop and software provided by Acme. Karen is paid at the end of each month based on the number of days she has worked. She bears no financial responsibility if she misses a deadline or makes a mistake in her work. Question - Should Acme Workshops consider Karen to be subject to AE?

74 Karen is not an employee, but is she subject to AE? Karen is a self employed IT professional who works full time for Acme Workshops Ltd, supporting their in house payroll system. She works in a team alongside Acme s own employees and, when she meets external contacts, uses business cards identifying her as a member of Acme s staff. Although Karen usually works in Acme s offices, she can work from home if she gets permission in advance. Whether she s in the office or at home she uses a laptop and software provided by Acme. Karen is paid at the end of each month based on the number of days she has worked. She bears no financial responsibility if she misses a deadline or makes a mistake in her work. Karen can reasonably be considered a worker and subject to AE, because: i) she is integrated into Acme s operation ii) she is subject to a degree of control by Acme iii) she uses their equipment and supplies, and iv) she does not guarantee her work.

75 What services will you offer your clients? Decide what services you will offer and what services you will not offer - and inform your clients. Checking your clients start (staging) date Being a secondary point of contact Checking who to put into a pension scheme Creating your clients action plan and working out your clients costs Checking records and payroll processes Choosing a pension Assessing and enrolling staff Writing to your clients staff Completing the declaration of compliance Explaining your clients ongoing duties

76 The FCA regulations and choosing a pension Employers have the responsibility to choose a pension (or pensions) for automatic enrolment. Investment advice to an employer (in their capacity as an employer) is not a regulated activity. Investment advice to an individual is regulated and should only be provided if an adviser has the appropriate Financial Conduct Authority authorisation. It may not always be easy to tell whether an employer is seeking advice as an employer or as an individual (eg where the client might join the pension themselves). Consider the ethical standards set by your professional body and the scope of your professional indemnity insurance. You may like to specify in the letter of engagement that any advice to an employer is provided to them in their capacity as an employer and not as an individual.