The countdown has started to the auto enrolment roll out in October 2012. This month we look at which workers you must auto enrol into a qualifying pension scheme. The first step is to decide who are your workers. These are split into three categories: eligible jobholders, non-eligible jobholders and entitled workers. Next month we will look at qualifying pension schemes for auto enrolment.
Decide who are your workers
Who is a worker?
The first step is to identify whether a person is a worker. This includes an individual who is an employee or who has a contract to perform work or services personally (e.g. a PAYE temporary worker) and is not undertaking the work as part of their own business (e.g. a limited company contractor). This could include someone working under a personal services contract even though, for tax purposes, they may be classed as self-employed.
Who is not a worker?
Office holders, including non-executive directors, company secretaries, board members of statutory bodies and trustees.
What about overseas workers?
A worker based in the UK who comes from overseas is still a worker for the requirements of auto enrolment.
What about employers based overseas?
An employer based overseas is not exempt from the auto enrolment requirements.
Who is exempt?
One-person companies (e.g. a limited company contractor), office holders (e.g. company secretaries, non-executive directors, trustees and board members of statutory bodies), the armed forces including cadet forces.
What about seafarers and offshore workers?
Seafarers and offshore workers are included if they can be classed as workers. Although not yet confirmed, determining factors in deciding whether they are workers are expected to include whether the seafarer begins and ends a tour of duty in the UK and whether income tax and National Insurance is paid in the UK. Factors that are not anticipated to be relevant include the nationality of the seafarer and where the ship is registered.
Any other types of workers to consider?
You should look carefully at casuals and individuals on zero-hours contracts to decide whether they fall within the definition of worker. Personal service consultants and the self-employed may be workers if they are required under their contract to perform the services personally (e.g. if they cannot send a substitute). Volunteers are unlikely to be workers, unless they receive a payment or non-financial benefit. An employer who has seconded an employee is likely to have to auto enrol the secondee.
What about temps and agency workers?
The first step is to check who is responsible for paying temporary workers and agency workers or who actually pays them. If it is the hiring company, then they will have to auto enrol the worker. If not, the agency will have to auto enrol them into a qualifying pension scheme.
Work out the type of worker
There are three types of workers: eligible jobholders, non-eligible jobholders and entitled workers.
Who is an eligible jobholder?
These are workers who must be automatically enrolled into a pension scheme. These workers:
Who is a non-eligible jobholder?
A worker who meets most of the requirements for automatic enrolment, but not all of them e.g. someone under age 22, or over state pension age but under age 75, earning above £5,564pa. They can choose to opt into auto enrolment and join the pension scheme.
Who is an entitled worker?
They are aged 16 – 74 but have earnings of less than £5,564pa. They have a right to join a pension scheme, including a scheme that is not an auto enrolment scheme, but are not eligible for auto enrolment.
Who do I have to auto enrol?
You have to auto enrol eligible jobholders and any non-eligible jobholder who asks to be auto enrolled.
Who do I have to make contributions for?
You have to make contributions for eligible jobholders and non-eligible jobholders who ask to be auto enrolled. You do not have to make contributions for entitled workers but can choose to do so if you wish.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2012. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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