by Mark Hamilton
In an industry where working hours often vary for staff on flexible employment arrangements, the advent of pension auto enrolment has left many retail businesses unsure as to who has to be included in the company scheme. Mark Hamilton of Dentons offers practical advice
Are employers required to auto enrol all employees in a pension scheme?
No, employers need only auto enrol “eligible jobholders”. An eligible jobholder is: an employee or worker working in the UK; who is at least 22 years old but is under State Pension age; and earns at least £10,000 per annum.
Some other workers or jobholders may have the right to be enrolled on request but do not need to be automatically enrolled.
What about part time employees?
The above test applies to both full-time and part-time employees. However, for part-time employees the earnings element of the test will be of particular relevance. Employees will meet the earnings threshold if they are paid at least £833 per month (for those paid monthly) or £192 per week (for those paid weekly).
What about workers on flexible hours?
Not all part-time employees will work regular hours, or have a steady income. This can make it difficult for employers to work out whether or not an employee meets the earnings threshold, so it is important that their earnings are carefully monitored by employers.
Part-time employees should be enrolled into a pension scheme the first time they earn over the earnings threshold of £192 per week, or £833 per month, depending on how they are paid.
However, employers may choose to postpone auto enrolment, provided they give notice to employees. This delays the obligation to enrol by up to three months from the first day an employee becomes eligible. If the employee is no longer eligible at the end of the postponement period, there is no need to auto enrol them.
If the same worker earns over the threshold again at a later date, the employer can impose a further period of postponement. This can be a practical option for employers whose employees fluctuate above and below the threshold and can minimise disruption for staff, especially those who only occasionally earn more than the threshold.
What level of contributions are required to be made?
As with full time staff members, auto enrolment contributions must be at least 5% of qualifying earnings, with a minimum of 2% being paid by the employer. Employers should remember that as of 6 April 2019 this will increase to 8%, with a minimum employer contribution of 3%.
Can an employer stop making contributions if earnings fall below the threshold?
For those who work irregular hours, it is possible that in certain periods their wages will drop below the earnings threshold after they have been enrolled in a pension scheme.
Despite such a drop, an employer will continue to be liable for contributions until their earnings fall below the Lower Earnings Limit (£116 per week, or £503 per month). Even if this happens it will be necessary to review the rules of the particular pension scheme: employers are advised to take advice on this prior to any decision to stop contributions.
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