In anticipation of the large numbers of employers who will have to start automatically enrolling in 2014 this is the second in a series of FAQs relating to the who, what, when and how of automatic enrolment. Our aim is to explore some more difficult questions that have arisen out of automatic enrolment and to focus on the key employer duties. What information needs to be given to relevant workers?
Employers must write to or email eligible jobholders, non-eligible jobholder and entitled workers to tell them how automatic enrolment affects them and to provide them with certain information about their rights.
In essence, information to eligible jobholders should cover their right to opt out, non-eligible jobholders should be told they have a right to opt in and entitled workers must be informed of their right to join a pension scheme. All workers must be notified if the employer postpones assessing the workforce. Standard template letters are available from the Pension Regulator's website in respect of each category of worker.What is self certification?
Self-certification is the process by which an employer formally certifies that the scheme it is using for auto-enrolment meets the relevant quality requirements of a 'qualifying scheme'. Only qualifying schemes can be used to automatically enrol employees.
If a scheme does not meet the relevant quality requirement (usually because the contributions are not based on qualifying earnings) then an employer is able to certify that the scheme complies with one of the three tiers under the alternative quality requirement.What is the difference between contractual enrolment and automatic enrolment?
Contractual enrolment is where workers are enrolled into a qualifying scheme under the terms of their employment. A jobholder that is already a member of a qualifying scheme at the date he becomes eligible for auto-enrolment does not have to be auto-enrolled. Some employers are using this method as an alternative to having to automatically enrol their jobholders.
If an employee who has been contractually enrolled opts out, an employer will have to check whether he is an eligible jobholder and, if so, auto enrol him into a qualifying scheme as soon as possible.What is a pay reference period?
There are two methods for pay reference periods. One way is to assess whether a jobholder needs to be automatically enrolled, the annual earnings trigger (£9,440 a year 2013/14) is pro-rated in line with an individual's pay reference period. For a person paid weekly, this is one week and for a person paid by reference to a period longer than a week, that period.
The alternative method is to define a pay reference period based on pay frequency. That is, the usual interval between regular payments of wages or salary. Where jobholders are paid by reference to a period that is a multiple of weeks or months, the pay reference period will always align with a cycle starting on 6 April to mirror tax and NIC processing.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2014. 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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