The view of the Pension Regulator's views on auto enrolment
The Pensions Regulator has run a series of seminars to update certain industries on how auto enrolment will affect them, including the construction, recruitment and entertainment industries.
Having attended one of the seminars, we have obtained an insight into how the Regulator believes auto enrolment will impact on employers in practice and note a few practical points that may not be apparent; in particular:-
- Employers should not estimate their staging dates as they are determined by HMRC's record rather than each employer's record of the number of individuals on its PAYE scheme as at 1 April 2012. HMRC's records may differ slightly for a number of reasons (e.g. if an individual leaves employment but does not join another employer, he may remain on HMRC's record for the employer's PAYE scheme). Employers should therefore refer to the staging date notified to them by the Regulator or use the toolkit available on the Regulator's website to calculate the correct date.
- Employers must start preparing for auto enrolment well in advance of their staging dates to ensure their chosen pension provider has enough time to implement arrangements. This is particularly important for medium size employers, who will be reaching their staging dates next April, May or July, when there will be on average another 10,000 of them doing so.
- An individual considered by HMRC as self-employed for tax purposes may still be a worker for the purposes of auto enrolment if working under a personal services contract. It is not always clear if an individual is considered as a personal service worker, but the Regulator expects employers to use their "reasonable judgement".
- It is not always clear who the employer is, particularly in the recruitment sector, where both an agent and end user client may engage with an individual. The employer will therefore be whoever is responsible for paying the worker, and if that is not clear, whoever actually pays him. That said, an employer cannot pass on its responsibilities under auto enrolment, so if it delegates payment of its workforce to a payroll provider, the delegating employer remains responsible as the employer.
- Unless an employer is going to self-certify contributions payable into a qualifying scheme on an alternative basis, it must be careful to ensure all "qualifying earnings" are pensionable. Whilst a company car may not count as qualifying earnings as it is a benefit in kind, any cash received for travel allowance would be included.
- The Regulator will be monitoring compliance, and may impose a range of sanctions on an employer found not to be meeting its duties, such as an informal warning or an escalating penalty of up to £10,000 per day. The Regulator has indicated it will monitor compliance by focusing on areas where it considers a breach is most likely to happen or where a breach will cause the greatest loss.
The Regulator has given an insight into how it expects auto enrolment will affect employers, but it accepts this is a new area of law and we are yet to see exactly how it will run in practice. For now, it is important employers make sure they are compliant when they reach their staging date, and if they are yet to do so, may find the auto enrolment planner helpful to calculate when they need to act such as to assess the workforce and communicate with staff.